Investing in Stocks: Overview

More useful writings:

• Business cycle
• A game of wisdom
• Investing in Singapore Stocks

Stock watch:

• AEON Co

There are five areas in stocks investing:

• Paradigms
• Objectives
• Strategies
• Skills
• Execution

Paradigms

"We interpret everything we experience through these mental maps. We seldom question their accuracy; we're usually even unaware that we have them. We simply assume that the way we see things is the way they really are or the way they should be. And our attitudes and behaviours grow out of those assumptions. The way we see things is the source of the way we think and the way we act." --Stephen R. Covey.

"...All of my clients had bought the same stock. Some had made money, and some had lost it...Over the years I started to notice that the people who lost money in either of these ways were always the same ones. They'd sell too soon or too late, but they always lost money..." --Suze Orman.

Her clients acted consistently based on their own paradigms. Those with winning paradigms acted consistently to win. Those with losing paradigms always acted consistently to lose.

These are the right paradigms on the natural law of market, risks and knowledge for effective stock investing.

1. The natural law of market
2. Selective stock prices and market movement
3. Understanding risks
4. Elimination of risks
5. Consistent and accurate prediction of market timing
6. Seeing stock investing through these perceptions turns successful stock investing into exact science. In short, we should seek knowledge and information before we invest and we should not base on market timing that is based on chance or probability.

Objectives

The objectives to invest in stocks are set to meet our financial planning objectives, i.e. to acquire and to grow income generating assets(i). From stock investing objectives we can establish our broad criteria in stocks selection.

Strategies:

Successful stock investing involves two main area, i.e. good stocks selection AND good cash management.

Stocks selection

• Establish stocks pick criteria to fit into the objectives
• Stock selection checklists
• Stock selection criteria of various gurus, i.e. Warren Buffett, Philip A Fisher, Benjamin Graham, Fool.com, Peter Lynch, etc.
• Choice between price growth and dividends growth

Cash management

• Understand market reality and one's cash flow situation and invest accordingly
• When to buy
• When to sell
• Cash inflow in bad time

Skills

• Reading financial statements
• Detecting accounting manipulation in financial statements
• Finding financial information from the net

Executions

• Setup trading accounts
• Basic online trading process
• Finding stockbrokers, i.e. a list of stockbrokers
• Choose and get a bank account
• Share margin financing
• Executions of trade
• Basic trading techniques: order, settlement and contra
• IPO
• Rules and regulations
• Counting gain & loss
• Tax issues
• Credit control