Lesson in a Declining Market

Ok back on my previous pick , Gallant, it went haywire as the support line was broken and naturally/immediately become a resistance. I was forecasting on a possiblilty of a technical rebound but it failed to close above the support line and thus went to the other direction. Nevertheless, I will keep on learning and find my system to follow.

In the course of reading, I have come across a valuable article and decided to blog it down so that next time I can refer back:

======Lesson in a Declining Market=========

1. EXPERIENCED INVESTORS USE FEAR TO THEIR ADVANTAGE. Only in markets where people are scared can you buy stocks cheap.

This is extremely true and majority of us have witnessed it. Typical example in 2007 is during march, august, november when panic are seen across the street, and rumours of traders recieving margin calls --->This will be the best time to enter the market as the market is over-reacting to the news and heavily beaten down offering the best margin of safety.

2. I own a private company. If I wanted to buy out my biggest competitor, I would want to pay as little as I could. Investing in stocks is the same thing. Why would I be upset if I could buy them cheaper? Shouldn't I be happy?

Ok, the above is quite irrevenlant.

3. You should enjoy declining markets. Declining stock prices... nervous investors... predictions of impending doom. It's during times like these that you have to keep your head.

BE A CONTRANIAN!!! In order to be one, Cash is IMPORTANT. This bring me to think about Capital Management where one need to keep reservation for such times in order to enjoy declining markets. I have been a victim of not managing my capital wisely and is suffereing now.

4. SCARED MARKETS ARE THE ONLY KIND OF MARKETS THAT CAN MAKE SAVVY INVESTORS VERY RICH.

Facts: Investor Guru Warren Buffet brought Kraft in January. An opportunity to buy severely undervalued blue chips or companies (Household Brands on food and neccessities) that will still have constant earnings through recession and depression.

5. The creeping anxiety most investors feel in a bad market is like a human’s internal "flight or fight" signal. But if you keep your emotions in check, it could make you a lot of money. Most people don't know how to interpret the signal correctly.

This is considered the deepest art for all newbies like me. Generally, noobs will tend to have the herd instinct where we follow the general crowd to buy and alas brought at high and suffer as shrewd traders are selling to us as we buy.

The Five Rules above has emphasis on the psychology aspects on investing and highlight the key aspects on how we should handle our emotions during price shocks in order to benefit it. I will definately keep this in mind and try to applied it in future when I am cash rich!

Hope this article helps you in your investing curve!!!