Tuesday, October 12, 2010

Investment Rule # 1 and Rule # 2

We all have heard that rule # 1 in investment is do not lose money. We all have heard and understand the rule # 1, no more reminders please. We all also know rule # 2, don't forget rule # 1. The begging question is HOW and not WHY.

Here is a list of my humble suggestions:

(1) If have been poor before, swear to yourself that you will never allow yourself to be poor again. Remind yourself the second hand clothes that you wear during Chinese New Year. You are on your Japanese slippers going around the whole kampung. You get your chicken meals only 3 - 4 times a year. Remind yourself that how you have to count how much money in your pocket before you enter an eatery shop so that you don't have to end up washing plates or got thrown when you have insufficient fund.

(2) If you are born and grew up comfortably in your whole life. Go and visit old folks home or orphanage at least once/year. Remind of yourself that you will never want to be in that position and appreciate and protect everything you have.

(3) Once a while, put only RM 10 in your wallet and take public transport. You will know how is it feel like when you lose your freedom of movement and down to last few pennies.

(4) Avoid socializing in high society. They will extract all the inferior complex juice from you -- your ego will grow exponentially and eventually swallow you alive.

(5) Practice solitude. Learn to be alone. Stay away from the crowd - turn-off that damn TV, newspaper and Internet.

(6) Tell yourself that you don't need to beat the market index especially when the market have moved up substantially.

(7) Tell yourself that you don't have to play by the rules the pros are playing -- you can stay 100% cash. You will receive 3% risk free interest. Remind yourself that you are not a fund manager.

(8) Don't buy a stock after reading a 40 pages research report.

(9) Don't pick up that damn phone to buy stock when you feel that you have 90% confidence that a stock will move by 20% in 3 months and 20% below an analyst fair value estimate.

(10) Whenever you feel that you have achieved Superinvestor status.

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