A trade or an investment?

If a counter we'd bought into moved up within the first three days, should we do a contra and sell off or should we hold on? The answer would depend on many things. One is whether we'd bought into the counter as a trade or as an investment.

If it was meant to be a trade, we should sell and, actually, what we would receive is free money! We did not pay a single cent and we would just receive an angpao for buying the right stock at the right time.

If it was meant to be an investment, then, it usually means we should be prepared for a longer holding period. It usually means that we saw value in a stock (i.e. it was a bargain). Usually, we would form a fair value for the stock in our minds and would not liquidate (not 100% anyway) unless the fair value was hit.

So, if we sort out our motivations each time we buy into a counter, our strategy would become clearer.

Be a pragmatist and prosper in 2010.

Many people are still waiting on the side, people who do not quite believe in the rally, who might even be getting angry with the optimism, should just make use of this optimism to make some money. I don't believe in being overly bearish or bullish. I believe in being a pragmatist.

If you have missed the earlier river taxis, it's ok. Maybe you don't feel ok about it but it's really ok because there are other river taxis.

Position your money for growth that's going to happen over the next 2 to 3 years. Don't leave it in the bank or in a pillow or in a biscuit tin. I say 2 to 3 years because I believe that we will see another dip in 2012/2013. Until then, I am going to put my money to work.

Given the increased stability and clarity in the global economies, we could benefit a lot more if we adopt a longer time frame in our investments. Don't be too bothered with short term fluctuations in prices as the technical indicators are all pointing up and all the fundamentals have improved significantly.

I have seen so many instances of people who bought a good stock only to grow scared or impatient, letting go of their investments only to see the price forming a new high soon after. I should confess that it has happened to me too. If the trend has not changed, there is no reason to fear. A correction using price or a correction using time shakes out the weaker holders and once all the sellers are out of the way, the price is free to form a new high. In an uptrend, buying during corrections is the way to go. Of course, this is easy to say but might be hard to do. Conquering one's emotions is probably the hardest thing to master as an investor.

The STI moved sideways from August to November before moving higher. This is a correction using time. A sideways movement during an uptrend is more bullish than bearish in nature. We will see the STI moving higher in 2010, I'm sure.
Three portfolios and three counters: future gains and passive income