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Mental Preparation For Stocks Investing ( 股票投資的心理準備 )

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Presentation on theme: "Mental Preparation For Stocks Investing ( 股票投資的心理準備 )"— Presentation transcript:

1 Mental Preparation For Stocks Investing ( 股票投資的心理準備 )

2 Greed and Fear are detrimental to investor's return

3 After he finished college, Buffett invested $100 in a Dale Carnegie course: “… not to prevent my knees from knocking when public speaking but to do public speaking while my knees were knocking.” --Buffett

4 The purpose of this presentation: Not to prevent one from greed and fear when investing in stocks but to investing in stocks successfully while in greed and fear

5 股票投資的心理準備 Prepare to Accept Reasonable Greed Prepare to Abandon Market Timing Prepare to Benefit from Market Volatility Prepare to Do Independent Research Prepare to KISS (Keep It Simple, Stupid) Stock Investing Prepare to Do Performance Record & Company Story Check-up Q&A

6 I've heard people say they'd be satisfied with a 25 or 30 percent annual return from the stock market! -- Lynch Prepare to Accept Reasonable Greed

7 Comparison index % Funds Beaten By Index 12/01-12/0612/06-12/11 large cap core fundsSP5007568 mid cap core fundsSP Midcap 4007587 small cap core fundsSP Smallcap 6007671 Source: S&P

8 Prepare to Accept Reasonable Greed TIMEFUND INVESTOR PERIODNAMERETURN Difference 1991-2011Legg Mason 9.2%6.1% - 3.1%/Yr Vanguard 500 8.7%6.6%-2.1%/Yr Source: Morningstar

9 Prepare to Accept Reasonable Greed Over the past 20 years through December, the average individual stock mutual fund investor earned 4.25% per year, while the S&P 500 returned 8.21%, -- The New York Times recently reported, citing data from Dalbar Inc.

10 Prepare to Accept Reasonable Greed I'm delighted if I beat SP500 by 2-3%/Yr I'm happy if I match SP500 I'm average if I am beaten by SP500 by 2-4%/yr

11 Prepare to Accept Reasonable Greed Return (%/Yr) Vs. SP500 Buffett Partnership (1956-1969)32.0%before fees Peter Lynch (5/1977-5/1990)29.2%after fees+13% John Neff (6/1964-12/1995)10.6%+3.1% Bill Miller (1/1991-2005)16.4%+5% Bill Miller (1/1991-10/2011)9.2%+0.5%

12 NJL Stock Investment Newsletter Performance Record CompanyBuy Date%PG GENC7/11/2012-8.1%asset play PRLS7/11/2012-8.8%asset play AFL7/11/201238.6%Consistent Gr DOV7/11/201253.0%Consistent Gr WFC7/24/201226.2%Consistent Gr LSI7/24/201217.6%Cyclical Gr MNDO9/10/20125.9%asset play FISV8/17/201222.2%Consistent Gr TSRA11/5/201244.2%asset play ESRX11/19/201218.2%Consistent Gr QCOR3/28/1339.4%Consistent Gr AFL3/28/1312.5%Consistent Gr WFC3/28/1312.5%Consistent Gr BGCP4/4/139.6%asset play COH4/24/131.8%Consistent Gr CAT4/24/13-1.6%Cyclical Gr KSWsold29%asset play Dead Catsold15%11 stocks

13 NJL Stock Investment Newsletter Performance Record Initial Date: 7/11/12 Share Price Change % DateNewsletterVFINXDifference 10/31/201210%5%+5% 12/31/201216%7%+9% 4/24/201322%19%+3% 6/28/201332.7%22.0%+10.7% Jim Cramer's Mad Money performance (tracked by Marketocracy.com) SP500 last 12 months25%23.4%+1.6% since inception (3/14/05)4.3%/Yr5.7%/Yr-1.4%/Yr

14 Prepare to Abandon Market Timing Peter Lynch’s Cocktail Theory

15 NJ Lin’s Seminar Attendance Index

16 Prepare to Abandon Market Timing *The small investors tend to be pessimistic and optimistic at precisely the wrong times, so it's self-defeating to try to invest in good markets and get out of bad ones. –Lynch *The only buy signal I need is to find a company I like. In that case, it's never too soon nor too late to buy shares -- Lynch

17 Prepare to Abandon Market Timing As Stock market close to top, less companies meet the buy criteria, and as market close to bottom, more companies meet the buy criteria

18 17.545% Valueline Median of estimated PE ratioVL Median of 3-5 Yrs Appreciation Potential 26 weeksmarket lowmarket high26 weeksmarket lowmarket high ago3/9/20097/13/2007ago3/9/20097/13/2007 15.410.319.755%185%35%

19 Prepare to Benefit from Market Volatility A history of DJ30 declines (1990-2012) Source: Capital Research and Management Company Type of decline Average frequencyAverage length † Last occurence Routine About 3 times a year47 daysNov-12 (-5% or more) Moderate About once a year115 daysOct-11 (-10% or more) Severe About once every 2 years216 daysOct-11 (-15% or more) Bear Market About once every 3-1/2 years338 daysMar-09 (-20% or more)

20 Prepare to Benefit from Market Volatility Severe Bear Markets (-40% or more): 9/3/29-7/8/32-89%DJ 3/10/37-3/31/38-49%DJ 12/12/39-4/28/42-40%DJ 1/11/73-10/3/74-48%SP500 9/1/00-3/11/03-47%SP500 2/20/07-3/9/09-54%SP500

21 Prepare to Benefit from Market Volatility EG/PE Club went through 5 market cycles: Stocks Bought Near Top (+/- 3 months) Stocks Bought Near Bottom (+/- 3 months) SP500 from top to bottomAverage %P&L 9/1/00- 3/11/03-47%-12%N=955%N=15 7/19/07- 3/9/09-56%-1% N=15 116%N=13 4/15/10- 7/2/10-16%-1%N=77%N=8 4/29/11-10/3/11-19%16%N=641%N=9 4/2/12-6/1/12-10%14%N=422%N=4

22 Prepare to Benefit from Market Volatility Prepare your courage to buy more stocks when everyone has extreme fear about the market

23 Prepare to Do Independent Research Ultimately, it is not the stock market nor even the companies that determine an investor's fate. It is the investor -- Lynch The same couple that spends the weekend searching for the best deal on airfares to London buy 500 shares of KLM without having spent five minutes --Lynch The only thing anyone wants to know is, ‘what are you buying today?’ -- Buffett

24 Prepare to Do Independent Research If you turn over 10 rocks, you may get 1 gem You probably will spend about 1 hour to research 1 company

25 Prepare to KISS (Keep It Simple, Stupid) Stock Investing Investing is not a game where the guy with the 160 IQ beats the guy with a 130 IQ. – Buffett IQ fall somewhere above the bottom ten percent but also below the top three percent -- Lynch

26 Prepare to KISS (Keep It Simple, Stupid) Stock Investing KISS Stock Investing: * Buy Growth Companies (high EGp) (Consistent Growth, Cyclical Growth, Turnaround Growth) at Reasonable Price (low PE) * Buy Asset Play Companies: Stock Price { "@context": "http://schema.org", "@type": "ImageObject", "contentUrl": "http://images.slideplayer.com/12/3530993/slides/slide_26.jpg", "name": "Prepare to KISS (Keep It Simple, Stupid) Stock Investing KISS Stock Investing: * Buy Growth Companies (high EGp) (Consistent Growth, Cyclical Growth, Turnaround Growth) at Reasonable Price (low PE) * Buy Asset Play Companies: Stock Price

27 Earning, Earning, Earning!

28

29 KISS Stock Investing: (EGp+%D)/PE >1 >2 >3 Margin of Safety OK Excellent Chance of lifetime He (Graham) said that the three most important words of investing: ‘margin of safety.’ –Buffett

30 KISS Stock Investing: (EGp+%D)/PE < 0.5 May consider to sell

31 *Like Wayne Gretzky says, go where the puck is going, not where it is. -- Buffett More on EGp: EGp: (projected earning growth rate, %/Yr) *Of course, the investor of today does not profit from yesterday’s growth -- Buffett *Earnings, or a promise of future earnings, give stocks their value -- Buffett

32 More on EGp: EGp is hard to predict, because Stocks Information Include: You Know You Know You Don’t Know You Don’t Know You Should Know You Don't Know You Don't Know GIGO (Garbage In Garbage Out)

33 Prepare to Do Performance Record & Company Story Check-up Are you cutting the flowers and watering the weed? The point is that fortunes change, there's no assurance that major companies won't become minor, and there's no such thing as a can't miss blue chip -- Lynch If a stock is down but the fundamentals are positive, it's best to hold on and even better to buy more -- Lynch

34 Prepare to Do Performance Record & Company Story Check-up WFC (Wells Fargo): This US 4th largest bank made money during the 2008 financial crisis; it rank No.1 among 10 large and regional bank peers for 5-yr compounding annual earning growth rate (CAGR) (1) It has the lowest cost of deposit and the lowest residential mortgage foreclosure rate. (2) It achieves the highest return on asset. (3) Warren Buffett's company owns 6.5% of WFC. (4) WFC is expected to grow EPS at 10%/Yr, and with its dividend yield of 2.7%, (5) the (EG+%D)/PE ratio of 1.2 is respectable.

35 股市有時升有時落 升起免太歡喜 是賣 Hot Stocks 的好時機 May Sell When (EGp+%D)/PE < 0.5 落下免太驚懍 是買 Quality Stocks 的好時刻 買 Consistent Growth, Cyclical Growth & Turnaround Growth (EGp+%D)/PE >1 (OK) >2 (Excellent) >3 (Chance of Lifetime) 買 Asset Play 不理股市升股市落 繼續投資 兩三個 Market Cycles 看輸贏

36 股票投資的心理準備 * To receive the content of the presentation or the Complimentary NJ Lin's Stock Investment Newsletter, please send your request to: nanjae@yahoo.com


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