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Friday, August 10, 2012

How to measure success in stock market?

How to measure success in stock market?
There are many ways to measure success in stock market. Success here means gain from trading in stock market or gain from shares or share price movement. Someone made $2 million, may not be more successful than someone who made $1.5 million. Refer to the list below and you will have more understanding.

In measuring success in stock making, it can be measured based on the following:

Total money made
Someone who made $2 million is more successful than someone who made $1.5mil.

Percentage return
The higher the percentage gain, the more successful. Example if Mr A invested $10 million and made $2 million (20%), compare with Mr B invested $0.5 million and made $ 1.5 million (300%), Mr B is more successful.

Mr C made 30% per year for two years and then never touches stock market anymore. Mr D makes average 25% every year for the past 15 years, then Mr D is more successful where Mr C’s track record is not proven yet.

Portfolio Performance (stock and cash) rather than just Stock Performance.
Mr E’s stocks value increased from $50,000 to $80,000. Cash $5 million.
Mr F’s stocks value increased from $50,000 to $70,000. Cash $10,000 only.
Mr F is more successful because with total portfolio of $60,000 ($50,000 stocks and $10,000 cash) he managed to increase $20,000 or 33%.
Mr E with portfolio of $5.05 million, only managed to increase $30,000 or 0.59% only.

Total Profit in comparison to Personal Total Net Worth
Mr G is a rich man with $100 million net worth, he made only $100,000 from stock market.
Mr H is an average working class worker with $200,000 net worth, he managed to make $80,000.
Mr H is more successful in stock market.

Time needed.
Mr I made $100,000 within 10 years. Mr J made $100,000 within 5 years only.
Mr J is more successful.

Effort Needed
Mr S just look at some simple research figures and made $50,000 within 5 years.
Mr T made deatailed study, attended seminar, do detailed analysis, buy and sell many times, and made the same $50,000 within 5 years.
Mr S is more successful.

Mr K made $100,000 within 10 years, Mr K now is 35 year-old.
Mr L made $100,000 within 10 years, Mr L now is 34 year-old.
Mr L is more successful.

Mr M’s tips are more accurate than Mr N.
Mr M is more successful.

Actions and Result
Mr O’s tips are more accurate than Mr P, but Mr P made more money than Mr O because Mr O talk only, no action, he himself seldom buy. Mr P is more successful.

Economy and Stock Market Index
Mr Q made 200% from year 1992 to 1996.
Mr R made 200% from 2007 to 2011.
Mr R is more successful because from 1992 to 1996 the economy and stock market index perform better than from 2007 to 2011. More easy to make money from 1992 to 1996 than from 2007 to 2011.


The list can actually goes on and on.

You can see that it is very difficult to measure who is more successful.

If I tell you now that I have made $5,000, it does not mean that I am less successful than someone who made $6,000. It does not mean that I am more successful than someone who made only $4,000. Many factors need to be considered.

Some people may make less from stock market because they use their money to invest in other investments which make more money than stock market, example in their own business, property, or gold, and some may want to invest more in their children by giving them better education, food, care, etc.

I’m not saying that we cannot compare. If we want to compare, please bear in mind that there are many factors involved, and direct comparison is almost impossible.

Articles you may like:

Reason Why Squash is Not in Olympic

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Sunday, August 5, 2012

Reason Why Squash is Not in Olympic

Which sports will be in the Olympics are determined by the International Olympic Committee (IOC). Factors to consider include whether it is widely practiced around the world. Many sports are in and out of Olympics since the Games started.
The 2012 Summer Olympics in London have 26 sports and two additional sports will be added to the 2016 Summer Olympics in Rio.

One sport, can further divided into several disciplines, sometimes being commonly refereed to separate sports. For example Aquatics has five disciplines, 1) Swimming, 2) synchronized swimming, 3) Diving, 4) water polo, 5) open water swimming

A Discipline can further divided into several events, and each event a gold medal is actually awarded.

The two sports that will be added into the 2016 Olympics are Golf and Ruby Seven.

Bowling, Squash, Snooker, Karate, etc will not be in the 2016 Games.

Why Squash is Not in Olympics?
The committees are mostly concerned about the difficulties in televising the sport. Camera angles are difficult and hard for audience to see the ball. Also, the argument between referee and players.

The Squash Committee has made some changes and hopefully the sport will be in the 2020 Olympics games.

1) Glass Floors and wall
2) New scoring system
3) Extra referees
4) Video replays inside venue

Now that with High Definition (HD) camera/ TV, it overcomes the concern that TV viewers unable to see the ball.

With World Champion Nicol David from Malaysia, I think most Malaysian will want Squash to be in the Olympic Games.

I want to say that Datuk Lee Chong Wei did a very good job, so close. I think we should not have the mentality that we can only win our first Olympic Gold Metal via Squash. With so many countries managed to do it, I think Malaysia Boleh.

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Thursday, August 2, 2012

How to use Growth-share matrix to invest in Stock Market

How to know what stocks to buy. Boston Consulting Group (BCG) Growth-share matrix may help. Let me explain.

I learned this BCG Growth-share matrix during my college days. It is to be applied in Business but I came out with an idea and started to use it in stock market since early 2010. I think it may be helpful to some people in stock market.

Basically the Growth-share matrix is a chart divided into four sections:
2)Cash Cow
3)Dogs (Pet)
4)Questions marks

This is where the stock that we bought is performing or has very great potential and recommended by many analysts. The company is announcing growth in profit. The share price is increasing. We all are very happy. Although sometimes due to poor market sentiment, the share price may drop, but because the company is achieving growth in profit, we know sooner or later, the share price will increase.

This is where the stock that we bought is paying very high dividend. Many prefer to buy Stars stock, but Cash Cow has its own advantage.
Stars stock price increase may take time, but as for Cash Cow stock, we receive good dividend very fast.
Some people may use Share Margin Financing to buy shares. Therefore, we need some cash to service the interest. If we buy all Stars stocks, if the price drop temporary due to poor market sentiment, we may be subject to margin call or foreselling.

Cash Cow also provides us with the cash flow to buy stocks that we have newly identified. If we had bought all Stars, we may not have the necessary cash flow when opportunity arises.

Sometimes, during poor economy the Stars may be hit and may suddenly make much lower profit or even loss. Cash Cow stocks are in business that are quite stable. Also, the Cash Cow stocks generally the prices are quite stable, even during poor market sentiment.

Therefore, we buy many Stars stocks and buy some Cash Cow stocks as a defensive strategy, and reinvest the dividend we receive.

This is the kind of stocks that is very risky, but if successful the reward can be extremely good.
You just don't know whether to buy or not. Example many trouble penny stocks if successfully turnaround, the stock price will shot up sharply. But if not, then it may be delisted.

Another example is where the Company may be having some risky project and if successful, the profit can be very great.

Many may want to buy some of these stocks due to the potential great profit. But due to the high risk involved, you may just buy smaller amount because you cannot risk losing most of your money.

Other examples are takeover, pending restructuring, new company, small company, new projects or venture, penny stocks, call warrant, etc.

Dogs are the stock that you know probably you will lose money if you buy it, but you still want to buy. Based on past experience, you know that if you trade speculative stocks, chances of making money is lower than making losses.

But due to emotion, you have no choice and you still buy. You saw other friends are buying and you want to follow. You heard tips and rumours.

Many people will tell you don't buy and just focus on fundamental stocks. Do you think is easy to control our emotions? That is why so many people make losses in the stock marker. Especially remisiers and dealers who sit in front of the stock prices screen very day, it is not easy to control their emotion.

Can buy, but use very small amount to trade.
In business, Dogs are for examples, doing charity, continue loss making business for the overall Company Group image, etc.

If you lose money in stock market by buying Dogs shares, consider it as learning, charity, and playing games. By the way, not all the times you lose. Sometimes dogs share price can increase sharply and you can make very good profit.

If we buy all Stars, sometimes we may have some problem.
If we buy all Cash Cows, profits are not so great.
If we buy all Question Marks, and if not successful we will lose a lot of money.
If we buy all Dogs, chances of making losses are high.

In my view, I think for non-expert investors, we can allocate our portfolio into the four BCG Growth-share matrix . Buy many Stars, then some Cash Cows and Question Marks. And finally, use very small amount of money to buy/trade or speculate dogs. If you can control your emotion, then no need to buy Dogs.

Sometimes it is very hard to differentiate between Stars and Question Marks. Dogs and Questions Marks. If in doubt, put them in Question Marks because you are having a question on where to put and the name is already being called "question marks".

BCG Growth-share matrix in stock market is something that I came out with and I have been applying it for few years and has been successful so far. Hope it can help non-professional or non-expert investors in stock market.

Please note that the above is just my opinion and a case study for myself and is not an advice. Please read the disclaimer clause in my blog. Please consult your investment financial adviser.

Two years ago I already have plan to write this article. The reason of waited for two years is because I normally post short article and I considrer this is long. I was quite lazy to start writing. I really hope there is at least one person who like this article.

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