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Investing Questions from a newbie
RichVee
#1 Posted : Wednesday, January 27, 2010 8:40:10 AM
Rank: Member


Joined: 1/26/2010
Posts: 124
Hello there...
I have been visiting the forum as a guest but finally decided to dive in ...

Even though i have been investing in the NSE for a while, it was not with vigour. I did not apply any wisdom to my deals. Yet I was lucky in most cases. e.g. I bought Athi River at 15 bob, and still have them.

Long story short, i want to get educated and I promise to share any wisdom that i have along the way.

My first question is..What is the relationship btn the price of a share and the date a company announces results. I have noticed that the share price tends to go very high up just before results are announced followed by a sharp decline immediately after. Somebody pls shed some light.
Pls forgive any ignorance that my spew out of me.
Tired of mediocrity. Am going to the very top!
muganda
#2 Posted : Wednesday, January 27, 2010 9:45:04 AM
Rank: Elder


Joined: 9/15/2006
Posts: 3,905
Karibu @RichVee. In my opinion share price is determined by both emotions and fundamentals. As such, when a company is about to announce it's results:
--heightened emotion rears its head in the form of expectation of good results (dividend, bonus, rumours etc)
--looking at fundamentals good performance will show the company as being undervalued and hence reclassification as a good stock by analysts among us

Why the stock falls after announcement is because life can often be an anticlimax; or perhaps after announcement good news is already factored in.

On another note, I've often wondered whether one is a better trader if they are a better analyst or understand human emotions better? IQ vs EQ once again...
RichVee
#3 Posted : Wednesday, January 27, 2010 10:33:24 AM
Rank: Member


Joined: 1/26/2010
Posts: 124
Thanks Muganda.
Interesting, very interesting. I guess we all need a good doze of IQ and EQ. I have wondering when's the the best times to buy, then I realized there is no quick answer. A stock could fall in price due to poor performance, but if one is not aware(not following in press) and they go ahead and buy then they are kind of stuck for a (long)while...
Tired of mediocrity. Am going to the very top!
guru267
#4 Posted : Thursday, January 28, 2010 6:01:26 AM
Rank: Elder


Joined: 1/21/2010
Posts: 6,675
Location: Nairobi
@rich vee i think the better advice would be to go with IQ rather than the EQ approach because its too hard anticipate where emotions will run to next but with proper and educated analysis on counters one can never go wrong one because the price is usually supported or undervalued(emotional counters tend to be overvalued) and the other is that all the emotional investors do still run to these at some point


My point... IQ investing is always one step ahead of EQ investing
Mark 12:29
Deuteronomy 4:16
RichVee
#5 Posted : Thursday, January 28, 2010 7:23:31 AM
Rank: Member


Joined: 1/26/2010
Posts: 124
@guru - i am the analystical type, but i must admit there are instances i have purchased based on EQ...
Tired of mediocrity. Am going to the very top!
VituVingiSana
#6 Posted : Thursday, January 28, 2010 7:44:01 AM
Rank: Chief


Joined: 1/3/2007
Posts: 18,118
Location: Nairobi
What does world's greatest investor do?
Greedy when others are fearful. Very fearful when others are greedy - to paraphrase Warren Buffett
guru267
#7 Posted : Thursday, January 28, 2010 8:06:19 AM
Rank: Elder


Joined: 1/21/2010
Posts: 6,675
Location: Nairobi
he uses IQ and focuses
Mark 12:29
Deuteronomy 4:16
VituVingiSana
#8 Posted : Thursday, January 28, 2010 8:41:28 AM
Rank: Chief


Joined: 1/3/2007
Posts: 18,118
Location: Nairobi
IMHO...
EQ is for traders lakini IQ (numbers) is for buy & hold...

BTW, 'buy & hold' is not a 'buy & shut your eyes' game... It means you continue monitoring the health of the firm, economy/ies, sectors, trends... but the focus is on value (future value)...
Greedy when others are fearful. Very fearful when others are greedy - to paraphrase Warren Buffett
muganda
#9 Posted : Thursday, January 28, 2010 8:58:13 AM
Rank: Elder


Joined: 9/15/2006
Posts: 3,905
Indeed the world's greatest investor has an answer for many quagmires.

1. Answer to @RichVee on when to buy:
The only time to buy these is on a day with no "y" in it.


2. Answer to @guru267 on IQ:
To invest successfully over a lifetime does not require a stratospheric IQ, unusual business insights, or inside information. What's needed is a sound intellectual framework for making decisions and the ability to keep emotions from corroding that framework.
Beware of geeks bearing formulas.


3. Suggestion to @VituVingi on how long to hold:
We believe that according the name 'investors' to institutions that trade actively is like calling someone who repeatedly engages in one-night stands a 'romantic.'
Only buy something that you'd be perfectly happy to hold if the market shut down for 10 years.

RichVee
#10 Posted : Thursday, January 28, 2010 9:02:52 AM
Rank: Member


Joined: 1/26/2010
Posts: 124
@VVS - does it mean that you never sell, you only buy and hold?

Isn't it more logical to buy - hold till price accelerates- sell some and hold some for later selling after price is up up again - wait for price to fall down then buy again and repeat the cycle?


Tired of mediocrity. Am going to the very top!
guru267
#11 Posted : Thursday, January 28, 2010 9:03:21 AM
Rank: Elder


Joined: 1/21/2010
Posts: 6,675
Location: Nairobi
trading in a bull market where the number of sellers is going down can get you seriously burned.. i think its best to look for a perfect stock pick(there are many out there) and ride the market momentum with it...

you may be willing to jump of one boat to another and the passengers of the latter boat dont have any space for you..
Mark 12:29
Deuteronomy 4:16
muganda
#12 Posted : Thursday, January 28, 2010 9:07:55 AM
Rank: Elder


Joined: 9/15/2006
Posts: 3,905
Alas @RichVee, one more answer about fluctuations:

Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it.

Why not invest your assets in the companies you really like? As Mae West said, "Too much of a good thing can be wonderful".
guru267
#13 Posted : Thursday, January 28, 2010 9:13:17 AM
Rank: Elder


Joined: 1/21/2010
Posts: 6,675
Location: Nairobi
@Rich Vee
if thats your strategy then i suggest you set specific target in terms of percentage rise for the counter to sell and stick to it.. the only problem with that strategy is that bull market can last for a very long time(the last one lasted five years)so you may never see your price fall again...

let me suggest that if your stock rises and you decide to sell some you should use the money to look for more oppurtunities in the market rather than waiting for the price of your current holdings to fall
Mark 12:29
Deuteronomy 4:16
VituVingiSana
#14 Posted : Thursday, January 28, 2010 10:34:52 AM
Rank: Chief


Joined: 1/3/2007
Posts: 18,118
Location: Nairobi
RichVee wrote:
@VVS - does it mean that you never sell, you only buy and hold?

Isn't it more logical to buy - hold till price accelerates- sell some and hold some for later selling after price is up up again - wait for price to fall down then buy again and repeat the cycle?


Read my earlier post...

'Buy & Hold'is NOT equal to 'Buy & Shut Your Eyes'

If the price outruns the fundamentals... then sell by all means... and when it returns to sanity, you should buy...

What Warren Buffett believes in is BUY using value as the yardstick not emotions... If you buy 'right' then you do not have to worry about selling...
Greedy when others are fearful. Very fearful when others are greedy - to paraphrase Warren Buffett
QD
#15 Posted : Friday, January 29, 2010 6:02:12 AM
Rank: Member


Joined: 8/5/2009
Posts: 597
really can we chose our investment stocks by the use of earnings quality, and how sustainable those earnings can go still being strong?
The problem with the world is that the intelligent people are full of doubts while the stupid ones are full of confidence
RichVee
#16 Posted : Friday, January 29, 2010 6:50:57 AM
Rank: Member


Joined: 1/26/2010
Posts: 124
I have found this very helpful resource.

http://www.investmentguide.co.uk/shares1.htm

and the best bit so far (still reading..) was this and i quote from the source

*****Gerald M Leob, who made a fortune on Wall Street some 40 years ago, wrote: 'There is no rule about anything in the stock exchange save perhaps the one that the key to market tops and bottoms or the key to market advances or declines will never work more than once. The lock, so to speak, is always changed*********

And another *******Nathan Rothschild, when asked how he made his fortune, replied: 'By selling too soon.' ********

So for the other newbies (in investing) like myself, take heart. We will get there.
Tired of mediocrity. Am going to the very top!
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