TO HAVE A PROFIT, FIRST YOU NEED TO ACCEPT MAKING LOSSES

By Chew Hock Beng

It may sound bizarre but the first step to making a profit in the stock market is to accept making a loss. Not a real loss, but what’s called a paper-loss i.e. mark-to-market valuation showing losses. This means that you must expect any investment you make to go down over the short-medium period, but in the long term it will very likely generate a profit. All this is not just some fancy theory, but based on what is commonly observed and involves investors’ psychology.

You may do a great amount of research work and put in hours to come up with an investment strategy and the investment-based financial planner whom you engaged may offer you the best investment advice. While this is good discipline, the reality is it by no means guaranteed success.

long-term-investingMaking sustainable profits from investment depends on endless factors, some predictable and others totally unforeseen. So, how do you ensure a good investment growth over long-term?

When you make an investment, you should be prepared not to expect any positive returns for the short to medium term. In such a case of uncertainty, expectation is what is considered the most likely to happen. Expectation is a belief centered to the future and it might or might not happen. More often than not, investors tend to feel disappointed when they do not expect the unexpected.

So expecting loss before gain will go a long way. Investors have to accept the fact that 99.9% of the time they will be unable to pick the bottom of market. But to ensure the odds are in their favor, investors must obtain good advice and acquire time. According to Newton’s law of gravity, what goes up must come down, what goes down must come up (except for one’s age!).

Expecting loss is an important psychological step to cross a bear market, when things are less rosy and negative market sentiment overrule. Bull markets can sometimes send you the wrong signals and lead you to think that the markets will never disappoint you. And, often investors get into without asking the right questions hoping to make quick profits. Then psychological expectations grow out of proportion and greed gets the better of them.

Investors would end up holding onto investment assets but with increasing and unnecessary risks. And when the markets crash without warning, it may be too late to exit (The Lehman Brothers) without getting burnt. One way is to adopt the “ERP” approach when various investment opportunities are evaluated. As an intelligent and informed investor you should not only be motivated by (P)erformances, but also be aware of taking calculated (R)isks and the cost of maintaining the investment or the (E)xpenses incurred.

Buying into an overly bullish market is clearly not based on taking calculated risks. On the other hand, when the market is more bearish, you could be able to identify the potential value in the capital market. Due to the less optimistic investing environment, you need to adopt a more practical return growth path and accept more realistic returns.

Your main focus is on the recovery and how you can ride on it. What we want is the return and not to be stuck with those funds that is not performing. Hence, the most important strategy is to buy only fundamentally sound diversified investments across asset classes, geographical regions and funds of reputable fund managers with strong investment ratings.

Getting over a negative state of mind through loss expectation is very important in a bear market. You should hold on to fundamentally strong investment assets on a long term basis and be prepared to take in the “paper loss” arising in the short term and mid term. Keep in mind, successful investors are in control of their emotions and are more likely to act on facts as opposed to feelings.

Patience and perseverance are two essential traits during a bearish market. If you are able to handle losses emotionally and come out of it, you would have more flexibility and adaptability to handle future uncertainty better. Even the best investment selection system would lose money if you do not have the right attitude, so develop a positive one. Always have a long term view, this is a sound investment strategy and has been proven to be successful towards building and preserving your core wealth.

So be prepared and expect incurring small loss to gain BIG profit!

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I have the privilege to invite Mr Chew Hock Beng as guest speaker in my next seminar “How to Construct your investment retirement portfolio without losing sleep“. You sign up at the following link:

https://www.eventbrite.sg/e/construct-your-investment-retirement-portfolio-without-losing-sleep-tickets-27918095776

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Chew Hock Beng is a Director in Financial Alliance. He is a Chartered Financial Consultant (ChFC), Certified Life Underwriter (CLU), Certified Financial Planner (CFP) and holds a Bachelor of Engineering from NTU. Hock Beng entered the Financial Services industry upon graduation from NTU and has since received numerous accolades and achievements in the industry. He believes in adopting a balanced approach to carry out the financial touch together with his client to move away from the path of financial darkness and achieve Financial Enlightenment. He is inspired to keep things simple and ensure the delivery of sound and effective advice from someone who cares.

Weekly Inter Market Analysis Oct 2-2016

See previous week Weekly Inter Market Analysis.

Original post from http://mystocksinvesting.com

SPY (SPDR S&P500 ETF)

SPY rebounded from the resistance turned support zone. SPY is still trading in a Rising Wedge pattern and on uptrend after forming “higher high, higher low” chart pattern. Keep an eye on on key supports:

  • Resistance turned support zone: 211-213
  • Rising Wedge immediate support: about 210
  • Previous Head and Shoulders neckline support: about 204.
  • Rising Wedge next support: about 200

spy-oct2-2016

 

The following is the S&P500 Q2 2016 Earning Dashboard.

  • Close to 100% has released earning.
  • 71% have reported earnings above analyst expectations, 11% reported earnings in line with analyst expectations and 18% reported earnings below analyst expectations.
  • 53% have reported Q2 2016 revenue above analyst expectations, 0% reported earnings in line with analyst expectations and 47% reported earnings below analyst expectations.
  • S&P 500 Earnings Dashboard | Sep. 27, 2016

    2016q2_sp500_earningsdashboard_160927

 

VIX

VIX stays below 15 – a complacent zone.

vix-oct2-2016

 

 

Sector Performance (SPDR Sector ETF)

  • Best Sectors: Energy (XLE)
  • Worst Sector: Utility (XLU)

sector-performance-oct2-2016

 

 

SUDX (S&P US Dollar Futures Index)

SUDX is still trading within a Symmetrical Triangle and likely to be trading in a tight range until a breakout. No rate hike from last FOMC statement. Next FOMC statement on Nov 1/2.

sudx-oct2-2016

 

 

FXE (Currency Shares Euro ETF)

FXE is curently trading sideway and range bound. No rate hike from last FOMC statement. Have to wait till next FOMC statement on Nov 1/2 before we can see the next big move.

fxe-oct2-2016

 

 

XLE (SPDR Energy Sector ETF)

Uptrend channel redrawn. XLE moves above 69.31. Critical support at 64.74 which has been tested for 5 times.

xle-oct2-2016

 

 

USO (United States Oil Fund)

USO is still trading in a Symmetrical Triangle. Currently testing the triangle resistance at about 11.00. Watch for the breakout.

uso-oct2-2016

 

 

TLT (iShares 20+ Years Treasury Bond ETF)

TLT is just resting on the 137.51 support. If the support is broken, TLT may continue to move downward.

tlt-oct2-2016

 

 

GLD (SPDR Gold Shares)

GLD looks like forming a Descending Triangle (in green). Expect GLD to trade in a range until breakout.

gld-oct2-2016

 

 

Next Week Economic Calendar

Key events:

  • US releases ISM Manufacturing PMI on Oct 3 (Monday)
  • Crude Oil Inventory on Oct 5 (Wednesday)
  • Non Farm Payroll & Unemployment Rate on Oct 7 (Friday)

economic-calendar-oct2-oct-8-2016

 

 

Weekly Inter Market Analysis Sept 25-2016

See previous week Weekly Inter Market Analysis.

Original post from http://mystocksinvesting.com

SPY (SPDR S&P500 ETF)

SPY rebounded from the resistance turned support zone. SPY is still trading in a Rising Wedge pattern and on uptrend after forming “higher high, higher low” chart pattern. Keep an eye on on key supports:

  • Resistance turned support zone: 211-213
  • Rising Wedge immediate support: about 210
  • Previous Head and Shoulders neckline support: about 204.
  • Rising Wedge next support: about 200

spy-sept-25-2016

VIX

VIX retraces back to 12.3 – a complacent zone.

vix-sept-25-2016

Sector Performance (SPDR Sector ETF)

  • Best Sectors: Utility (XLU)
  • Worst Sector: None
  • Note: Defensive sectors still lead the aggressive sectors.

sector-sept-25-2016

SUDX (S&P US Dollar Futures Index)

SUDX is still trading within a Symmetrical Triangle and likely to be trading in a tight range until a breakout. No rate hike from last week’s FOMC statement. Next FOMC statement on Nov 1/2.

 

sudx-sept-25-2016

FXE (Currency Shares Euro ETF)

FXE is curently trading sideway and range bound. No rate hike from last week’s FOMC statement. Have to wait till next FOMC statement on Nov 1/2 before we can see the next big move.

fxe-sept-25-2016

XLE (SPDR Energy Sector ETF)

XLE broke down from the uptrend channel, rebounded and rejected at the 69.31 resistance. Short term XLE is bearish. Next support to watch is 64.74. This support is quite strong as it has been tested for 5 times.

 

xle-sept-25-2016

USO (United States Oil Fund)

USO is still trading in a Symmetrical Triangle. Keep an eye on the next move when USO is trading closer to the apex of the triangle. Watch next Wednesday Sept 28 Crude Oil inventories report.

uso-sept-25-2016

 

TLT (iShares 20+ Years Treasury Bond ETF)

TLT rebounded and currently testing support turned resistance at 137.51. If TLT is rejected as this level, it is a confirmation of trend reversal.

tlt-sept-25-2016

 

GLD (SPDR Gold Shares)

GLD rebounded from the support at about 125. This support has been tested 4 times previously. As the next FOMC statement only releases on Nov 1/2, there may be a potential for GLD to breakout from this rectangle consolidation to head towards 140.

gld-sept-25-2016

 

Next Week Economic Calendar

Key events:

  • ECB President Draghi Speaks on Sept 26 Monday and Sept 28 Wednesday.
  • Fed Chair Yellen Testifies on Sept 28 Wednesday and Sept 29 Thursday.
  • China releases Manufacturing PMI on Sept 29 and Sept 30.

economic-calander-sept25-oct-1-2016