Where did I go wrong? Reply from AK71.

Hi JB,

Thanks for taking the time to write everything in such great detail. I will have to tell you that I am not qualified to give advice or guidance. I can only share my opinions.

Regarding "high could go higher" and "cut loss", these are things we hear people who trade the market using TA might say. They are not wrong but if we choose to learn the techniques of any school, we must learn them well.

I am not well versed in this school but I know that what the school teaches has worked for many people. Just have to follow the rules. For one thing, a stop loss is probably activated when prices fall 10% and not 50%. So, I guess you maybe didn't have enough practice and you didn't master the techniques. Perhaps, you did not have the discipline to follow the methods taught by this school.

As for China Taisun, it is easy to simply generalise S-Chips as untrustworthy and to avoid them at all cost. Indeed, that is the easiest approach to S-Chips. If we cannot trust what they show us in their books, then, how do we do any FA on them?

However, I am not saying that all S-Chips are bad and I have invested in some as well with good results. What I have done that is crucial in my S-Chip investments is that I limit their size. Combined, they are never bigger than 10% of my entire portfolio.

FA is important but it is also equally important not to put all our eggs in one basket. Things could go wrong even in the best companies. Even blue chip companies are not invincible. Think Chartered Semicon. I believe that if your exposure to China Taisun had been smaller, it might have been less traumatising for you.

You might actually have thought of the things I have shared here. Nothing mystical. Just a bit of common sense. :)

All of us are made differently. Some of us have the temperament to be traders and some to be investors. So, we must know ourselves.

As for FA, learn from an expert. Go to my blog's right sidebar and you will find a section labelled "Food for Thought". There are many good options but you might want to zoom in on "5 rules for successful stock investing" for starters. :)

Read JB's letter to me: here.

Related posts:
1. What should I do? A letter from a 64 year old retiree.
2. 5 rules for successful stock investing.

Where did I go wrong? A letter from a reader.

Hi AK,

This is JB here. I hope I am not too much to ask for your guidance and pointers. In terms of TA and FA , I am far from you and hope you can 'unknot' some of the questions I have in my mind for the last few years.
 

A little background of my stock investment journey.

 

 

I started off as an ignorant stock investor or so call punters in 2006 with some motivation from a friend that Mr market  is like Fortune God who gave out money every other days. In hindsight , it was the crazy euphoric market then. Subsequently, I attended a course that taught us about trend is your friend and when stock break resistance is a good sign. Buy high, sell higher. And when market drop, must cut loss. Again, I only cut after the stock has plunged like 50%. :(

 

 

Of course, this whole episode ended sadly with losses that pain me till today.

But I am not a gambler, I know I have to learn so i went back to books to learn. After reading numerous books, and looking at charts, I realised there were so much to learn about Mr Market than just the 2 day course. The course is just a tip of the ice berg. (felt so cheated)

Nevertheless, I learnt about FA and TA. First to use FA to choose the company to invest , then use TA to enter. That started part 2 of my stock investment journey in 2009. Looking back, I guess most stocks you buy then can make money if hold till today.

 

 

But sometime in nov2010, instead of diversifying into a few blue stocks, I thought if I can do some due diligence in FA, I can channel all funds and buy a good stock that is cheaper and hold. After some research then, I found this company China Taisan.

 

 

FA China Taisan in Nov 2010:

1) Continuous growth for the last 3years. with QoQ 10-25%. EPS also grow. P/E4 or less ,  dividend 2%

2) Textile industry start to rebound with asian games in guangzhou in the pipeline

3) Just had TDR listings , alot of cash

4) Managment buy in and company share buy back.

5) broker AM fraser indicated TP25cents

6) Singapore adviser to management- DR Felix Ong (who was the boss of Enporis )

 

 

I bought alot at 0.195 and continue to average down to 0.17 till the scandal for China Gaoxian happened. It affected the general sentiments.

Attended AGM meeting in April2011. They assured us company will be profitable for the year amid unforseen circumstances.

 

But the share got shot down further until i got to admit defeat that perhaps I have spotted the wrong one. Hence, I sold off at 0.10. I have loss money and my confidence too.

 

 

Even until today, given the same circumstances, I always ask myself what would  I do differently? Or are there some areas I need to improve myself.

 

From the checklists that I have mentioned above, Ak, are you able to help me identify where I go wrong?

 

 

Your insights are greatly appreciated.

Thank you.

Await your reply.

Warm regards,

JB

The next blog post will be my reply to JB: read it here.