Upside & Downside

[ailing]

Hi everyone,

I attended the Stock Seminar in May and have the privilege to have lunch on the same table as Dennis.

He mentioned something which I keep in my mind till now.
The concept of upside verse downside, apparently this "power" of thid concept is underestimated by many.

I shall share how I apply this concept in my situation.

I'm still holding back my shares, still waiting for QE3.

But no matter if it happens or what, I've a clear mind to support my decision.

So I was thinking should I sell off everything despite making a loss or hold them and buy more when market bottoms to average?

1. If I sell off Hyflux at $1.60, I make a loss of 20%. (I bought at $2)
2. If I hold Hyflux and buy in at $1 (based on lowest in 2008), average is $1.50, which I sell off say at $2, I make a profit of 33%.
3. If I buy Hyflux in at $1 and sell off at $2, I make 100% profit. (net: 80%)

I'm not sure if I'm correct to conclude in this manner but it seems like when I apply the same way for every of my stock, I get the same outcome which is sell off everything now and pick up more valued stocks when the market bottoms.

The few stocks I'm holding are all in red so it's a little 心跳跳 to let go but thinking of how much more I could possible make calms me down slightly.

[Dennis Ng]

Hi everyone,

I attended the Stock Seminar in May and have the privilege to have lunch on the same table as Dennis.

He mentioned something which I keep in my mind till now.
The concept of upside verse downside, apparently this "power" of thid concept is underestimated by many.

I shall share how I apply this concept in my situation.

I'm still holding back my shares, still waiting for QE3.

But no matter if it happens or what, I've a clear mind to support my decision.

So I was thinking should I sell off everything despite making a loss or hold them and buy more when market bottoms to average?

1. If I sell off Hyflux at $1.60, I make a loss of 20%. (I bought at $2)
2. If I hold Hyflux and buy in at $1 (based on lowest in 2008), average is $1.50, which I sell off say at $2, I make a profit of 33%.
3. If I buy Hyflux in at $1 and sell off at $2, I make 100% profit. (net: 80%)

I'm not sure if I'm correct to conclude in this manner but it seems like when I apply the same way for every of my stock, I get the same outcome which is sell off everything now and pick up more valued stocks when the market bottoms.

The few stocks I'm holding are all in red so it's a little 心跳跳 to let go but thinking of how much more I could possible make calms me down slightly.

Hi ailing,
some additional information to help you in thinking:

1. most Bear markets last 1 to 2 years, so far we only had 1 month of market fall.

2. Most Bear Markets stock markets fall by 50% while most stocks fell by 50% to 90%.

Yes, anyone who do some simple calculations would know that it is BETTER to sell off first and buying back at lower prices after Stock Market Bottoms...I learned such lessons the "hard way" by losing half of my Wealth in 1998...let me share here my personal story.

The first time I encountered a Stock Market Crash was in 1998's Asian Financial Crisis.....STI fell from a high of 2,500 to a low of 800, or dropping by 68%...it was the Worst Stock Market Crash Singapore Stock Market ever experienced and it was the first time I experienced it personally (having money invested in the stock market).

That time I didn't learn anything about analysing company's Financial Statements, nor do I know anything about how to Read and Analyse stock charts...I remember that as stock prices go lower, I kept averaging down, thinking that prices are already low, how much lower can it go....

From 1993 to 1996 when stock markets were going up, I kept making money...so when the market started crashing in 1996, I just used some of my earlier Capital Gains to average down...

Then all the 3 years of gains I made were all wiped out as the stock markets went lower....I started deploying Fresh Capital into the market to average down...the rest is history...

All in all, I not only gave back all the gains I made in the prior 3 years (1993 to 1996) but I lost half of ALL of my wealth then, (amounted to S$100,000) or I lost S$50,000....for a person who saved S$300 to S$600 a month, it not only so-called wiped out my years of saving since starting work in 1993, but I also lost part of my childhood savings (saving accumulated over 20 plus years)...it was a very, very, very painful experience for me...

I finally realised that I don't know how to invest. I started reading books, attending seminars, seeking out Mentors to learn from (I would try to get to know other seminar attendees and would try to make friends with them once I know they have made money from investing)...in year 1999, I joined a new share investment portal as a forumer (shareinvestor.com) and that's how I met 2 of my "sifus", Mossie and Warren...I learned alot from them, including "how to see Invisible Hands in the markets"...

So when the next stock market Crash in year 2000, I didn't lose as much this round as I had learned from past mistake...I waited for markets to Crash and started deploying most of my capital in year 2002....alas, I was 1 year too early...the stock market only bottoms in Mar 2003 (fell another 20% due to the SARS Crisis)...

Nonetheless, with some knowledge of TA and FA, I managed to buy low during year 2002...and with FA and TA, I didn't sell out for small gains, such as 10% to 20% gains...this round I really make money...the best performing stock I invested in, I reaped over 500% returns and the Total returns from this Bull Market from year 2003 to year 2007 was over 200%....I turned S$200,000 to more than S$600,000....then I sold 80% of my stocks and invested about S$200,000 and bought and sold 2 properties, making 55% and over 100% returns in 8 short months...plus savings from year 2003 to year 2007...that's how I reached my first million dollars in year 2008.

Becos of my knowledge in FA and TA, this round when the Global Financial Crisis hits in year 2008, I managed to avoid the Stock Market Crash and only started investing from Oct 2008 after Lehman Brothers' Crash...

Last 2 years alone, I already cashed out over 50% Realised Capital Gains.

As mentioned, the 2 Simple Questions that guide ALL my decisions, yes, all my decisions in life, NOT just investment decisions are :

1. What if I'm wrong, will I be financially ok?"
2. What is the upside, what is the downside? Only decide to go ahead when Upside is at least twice the Downside.

Many seminar graduates do NOT grasp the Power of these 2 questions. As I mentioned, I have learned from many, many multi-millionaires, including Singapore, Malaysia and other countries, and I realise that these are the 2 fundamental questions they ask themselves...and some of them have personal sad story to tell (just as I do) of how becos they forget to ask themselves "What if I'm wrong, will I be financially ok?" that led to huge losses for them. For instance, one of my sifu lost S$5 million when he forgot to ask this question when investing in a "shrimp business".

Just ask Mr Oei Hong Leong, I bet he forgot to ask himself this question when he was making billion dollar investment, he must be feeling very confident that he would be right, that he would make money instead of lose money.... that's how he ended up losing S$1 billion and owing to CITIBANK...

Mr Oei might find it unbelieveable that he can learn this Valuable lesson and avoid a Billion Dollar Loss from Dennis Ng's How to Save and Accumulate One Million Dollars Seminar...I know that whenever I say this during seminar, some would thought I'm boasting, some would thought I was just trying to be funny and joke, NO, I mean it very seriously.