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Monday, February 16, 2009

Some Thoughts on Stock Calls

In general, I feel stock calls are over-rated.

There is often too much vested interest to emphasise "what to buy" than "when to buy".

To me, the WHEN is far more important than the What, although both are important. We have all seen the "anomalies" that:
- One can buy a good fundamental stock at the wrong time and lose money.
- One can buy a lousy crappy stock at the right time (usually, for a short time) and make an insane amount of money.
- And then, there is the trader who only trades one stock and lose money, and another trader who trades the same stock and made money.

The vested interest - when viewed over a fresh lens - is surprisingly prevalent.

Nearly everyone in the industry does it. They might do it with different intentions and extent. Some of the intentions are innocent (e.g. they just want to share), some as a service to their readers (e.g. with analysis of pros and cons), and they generally add some value although at a vastly different extent.

But the ones you have to watch out for are the one-sided recommendations that only tells you all the good stuff and none of the bad stuff. We all know that human beings are never perfect, and the same goes for organizations and stocks. Needless to say, the ones that employs manipulative tactics that rejoices in their new BMW, new house, shark fin soup and abalone and have dozens of fake supporters are best not touched even with a 10-foot pole *grin*

The skeptic's view (or is it the Wise View?) is that the only reason someone makes a stock call is because -- they already own the stock, and they want to sell it to YOU at a higher price. *grin*

This statement contains far more truth than you might think. *grin*

There are many types of stock calls. From a Net retailer perspective, you probably have seen
- "independent" professional stock calls like the S&P in Bursa
- "independent" stock broker reports like OSK, etc.
- personal advice from your broker/remisier
- bloggers from a wide range which includes remisiers, ex-analysts, etc.
- various websites and bloggers who explicitly recommend stocks especially during bull runs, but have rightly quieten during bear markets (partly, a reflection that timing or WHEN to buy is far more important than what stock to buy)
- And then, various blogs that shares with you publicly what they do, what stocks they buy, and of course, not to be left out ....
- the very dependent manipulator's stock calls whose primary objective is to make money at your expense (again, bring out the 10 foot pole please ... *grin*)

The best ones I find are the ones that explains his/her reasonings, and lay out the risks for all to see.

The reasonings are important - you want to know why the author thinks that the stock price will go up, the catalysts, the key drivers, and whether this is something important that the Market has mispriced.

The risks are important - you'll want to know why things will not pan out the way the author thinks it might.

Often, by reading widely (in the Net, it's very easy to Google for example), we will come across a broader range of ideas than what we might have if we were to only think things out by ourselves.

Viewed from this angle, reading widely and discussing with others have its merits, only so that we can form our own considered opinion later.

But even then -- with all its merits - even if you think you have gathered enough reasons to think that the stock price will eventually go up - my personal view is that it is still not enough.

There is still the issue of actual entry and exit timing which is so critical before you can actually bring home the profit.

And that is still - at the end of the day - the KEY issue. And entry and exits are something that you have to learn for yourself if you wish to be independent and successful in the long term. And as a trader, knowing what to do when things turns out wrong is equally, if not more important than knowing what to do when things turns out to be right. Make no mistake - the journey to financial independence through trading/investing in the stock market is not as easy as you might think for the vast majority. The only time it looks easy is during bull market runs when everyone makes money. *grin*


Samgoss said...

Ho ho ho seng, uncle going to make fun on u later >>

BTW, ...ah seng latest posting telling u he knows when to buy shares..ha ha..really ? y not u explain to us y u bought citigroup @ 6.50 , proton @ 2.00 n parkson @ 7.50 ? where is yr timing ? how much they worth now seng ?

I will blog this up later..see yah ^_^

okating said...

Ho ho ho seng, my sifu will make fun on u in his new posting >

BTW, ...ah seng latest posting telling u he knows when to buy shares..ha ha..really ? y not u explain to us y u bought citigroup @ 6.50 , proton @ 2.00 n parkson @ 7.50 ? where is yr timing ? how much they worth now seng ?

I will blog this up later..see yah ^_^

Seng said...

Geeee ....

Why is it that I can't tell the difference between Samgoss and okating's comments?

Are you both twins?

Look. If you don't like my blog, don't read. It's that simple.

When you insist to visit here and keep leaving comments that clearly shows to everyone how silly you are, that's your problem. Not mine.

Anyway, why do you insist in reading my blog?

Are you financially hurt by my comments that a certain blogger is manipulative?

Is that it?

Or is it because your regulars no longer contribute as much as they did before, and your own pocket is hurting?

Look. If your regulars are buying your stock calls off you, then, GREAT! No need to act like a child and come here and whine.

Do I, Moolah, Dali, nexttrade, and every other blogger need to go to your blog and whine? LOL! Grow up please!

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