About Investments

last SG · 2006-01-16T03:11:53+00:00

Hi there! I thought they are both the same and are usually they are known as mutual trust funds or unit trust funds. Correct me if im wrong.

dinky1409 SG

Hi there! I'm new to the world of investments and business which I am getting interested in. I'm in my early twenties and my savings in bank is not too much. The thing is how do I start?

Buying of stocks? I have read a bit and there a lot of terms and jargons I don't really quite understand. Mutual funds, fund managers, options and all those nonsense. What is the difference? What is good and what is not? What is advisable and what is not? How do I know which to buy or invest in? How do one choose a stock or fund to invest in? Land banking? Property investments?

Business? F&B business? How easy or who difficult can having a F&B business be? Is it worth it?

It would be good to hear replies cos I would certainly want to be enlightened. Hope to hear from you guys soon.. =)

KumSioJui SG

If you are really passionate then you shud join an F&B business to find out for yourself. There you can learn the ropes abt everything there is to learn abt F&B more than anybody or any book can ever teach you then later on when you gained enuf "reality experience" decide if you want to invest in such a business or do it on your own. Laughing

shade343 SG

Hmm...lets see, I would recommend that you go attend seminars and speak to a financial planner to learn about the basics. Or you can borrow some books in the library on Finance to learn the financial terms.

You might also like to obtain annual reports of companies and read them. That was how I learn my financial stuff.

Master -_- SG

or you can always engage my services Mr. Green

i will be glad to give a Risk Profile Analysis for you....

for a fee of course

Li Ka Shing SG

Depends what kind of investor you want to be...

You want to be active....or you want to just find someone/ some institution/ fund manager to let them make the decisions for you.

Because it depends...not everybody is interested in the nitty gritty details of investing, they are more interested in their own jobs or activities. And they can be happy just by knowing although they dont understand much on investments, they have experts who manage their money. They are happy, not worried by this at all.

BUT seeing your post and your age, I bet you are not this kind of personality, right? You want action, right? hehe.....

OK you want the fastest game in town? Trade derivatives. Options and futures. It will suit your personality the best. Exciting. Im sure you will love it.

Firstly if you want to be active that means you invest short term. If you invest short term you need to know technical analysis. Basically reading charts.

After that, you can learn the derivatives, options and futures.

So for now I recommend to start studying technical analysis. You can start from the web, books, join online forums, etc.

Approx.....uhhh...I dont know, maybe 1 year. 2 years or more is better. Then study derivatives for further 1 or 2 years. After 3 or 4 years you will get the grasp.

Don't worry as long as you keep studying it, you will definitely get good. Don't let the time put you off. But Im just saying patience is required.

dinky1409 SG

I'm currently working part-time in a cafe to actually experience how a F&B business actually runs. Not sure if this is a good idea to gain 'experience'.

I actually borrowed a few books and read up a bit but the problem is I get confused along the way and like I said, I don't understand some of the jargons used. Also, most of the books are based on non-local markets so it adds to my confusion. Hehe.. Maybe you guys have any recommendation of any good books to read to learn the basics? Or websites?

Its not exactly action, but I just want to make sure I know what is happening to the money I'm going to put in thats all hehe..

This is the problem. I have read and heard about trade derivatives, options and futures but I don't know what they exactly mean. Patient enough to explain to a noobie? Embarassed

Thanks a lot for the replies guys.. And girls if theres any here.. Smile

dragg SG

the worst thing is to ask for advice here.

if we are good we will be busy making money and not answering your questions.

Gazelle SG

Since oyu are young, my advice you is to work for others first. Let your employer pay for your mistakes and gain your experience and build your NETWORK.

Before you jump into any business you must first have a good business model, and please dont try to reinvent the will just because you want to do it.

Li Ka Shing SG

Hi....

If you dont understand the books you read, then maybe those books are intermediate. You might want to try getting a basic book first to gain a better understanding.

I dont know which basic books are good, but maybe you can search and borrow from libraries.

If the books talk about overseas markets, that's better. Dont worry about local or overseas, markets need to be big and the bigger the better. Right now the biggest markets are US, Japan. It doesn't matter really.

Ill tell you why big markets are good.....whether u are talking about stock market, or meat market at my local wet market, or housing market, or online market like Ebay, same thing....

Big markets are good because that means there are many buyers and sellers. If you buy, there is likely a seller willing to match your price. If you sell, there is likely a buyer willing to match the price. You can get in and out quickly.

Small markets have less liquidity, meaning less money and fewer buyers or sellers.

When you trade in small markets, tipically the buy/sell price difference is big. It's because when u want to buy, nobody is there willing to match your price, so you increase your buy price until you meet a willing seller. Conversely with selling too. The buy/sell price spread is therefore bigger than in more liquid markets.

Big liquid market like US is therefore much better for tighter spreads and faster transaction.

Secondly, small markets tend to be more volatile. Because the market is small, a big seller or a big buyer can shake the price balance suddenly. Big markets are better and more 'sturdy' and less volatile.

Thirdly, Big markets have more information and resources. It makes your life easier.

Just wanted you not to get concerned about local/ overseas. With the internet, we can just click here click there, it doesnt matter. The reason why many investors/ traders from all around the world tend to invest more domestically in their own countries is psychological. They think they have more intimate knowledge of their own home countries. Like a comfort zone. It's a psychological thing.

dinky1409 SG

I disagree. The forum is here for a reason.

Thanks I'll keep that in mind.. Smile

Right.. So you mean in future I should invest in companies or funds or properties in overseas markets right? As in its a better choice is it?

Anyway you still haven't explained to me whats derivatives, options and futures and their differences.. That is if you don't mind explaining it to me.. Thanks! Smile

dinky1409 SG

By the way, what exactly is short selling?
Stocks or funds?

alexkusu SG

F&B? is a growing sector.. perhaps the next fastest growing industry would be hospitality.

if u wan overseas opportunities, try dubai or vietnam

Li Ka Shing SG

Originally posted by dinky1409:

Right.. So you mean in future I should invest in companies or funds or properties in overseas markets right? As in its a better choice is it?

Anyway you still haven't explained to me whats [b]derivatives, options and futures and their differences.. That is if you don't mind explaining it to me.. Thanks! Smile [/b]

Im just saying widen your choices and get to bigger markets, as they have better opportunities.

Derivaties comes from the word 'derive' which means to get something from something. Put in other words, to draw something from the parent substance.

Options and Futures are derivaties as they are entities drawn from parent entities, which can be stocks, currencies, etc.

What are these options and futures exactly?

They are basically leveraged instruments (meaning faster moving than their parent entity). If the parent move a bit, the child move with a magnified degree.

For more detailed explanation, is something you might want to learn later. Now you have to learn the basics first or it'll just confuse you. (wrong order of learning)

Green Leaves SG

Hello....Im 'Li Ka Shing' above....

When you look at an entity, such as a stock for example, and you think it's going to go up, you buy this entity with the hope when it goes up later, you sell at a higher price and get a profit.

Just common logic, right?

This is called 'long' . Buying low with the hope of selling higher later.

But an entity can go down too. When you think it's going downwards, you can still get a profit by doing the opposite of long, which is short.

Short selling means you borrow a stock (or whatever, a stock is the example here) and you sell it at the market price. When the market price drops, you buy it back, and return the stock to your lender. The difference of higher sell price and lower buy-back price is your profit.

It's the same like the 'long' principle of buy low sell high. Except it's reversed in order, it becomes sell high buy low.

Basically it's for participating in market downward movement.

dinky1409 SG

Oh ok ok then.. Thanks for explaining the short selling thing, but there’s gotta be a fee for ‘borrowing’ the stock or something right? Ok then thanks guys.. I’ll go and read up more at the library. Be back if I have things I don’t understand. Thanks..

dinky1409 SG

I’m sorry if this sounds like a stupid question but here it goes anyway.. What are the factors that changes the prices on the market? How exactly does it affect the ups and downs?

Li Ka Shing SG

Dont worry there's no stupid questions in this world.

The factors which will affect the price...supply and demand, but if we talk more specifically about the general stock market, that would be the general economic and political conditions where that stock market is in.

That would be, for economic conditions......GDP growth, inflation rate, central bank interest rate, average earnings growth, and some more minor datas like unemployment data, housing data, consumer spending data, etc.

Also price of oil. Important nowaways.

For political conditions....basically whether it's politically condusive and stable. For example when a new president comes in, and during campaign he already promised some measures the market like, the stock market will go up, in anticipation of more condusive environment. That's an example of a politically motivated price movement.

A politically motivated price movement can be caused by election results, scandals, etc.

Another important mover is 'unexpected events' such as disasters or terrorist attacks.

If you talk about specific stock/ company, apart from the general conditions above which also apply to them, additional factors include: news, earnings growth, new product launches, FDA approvals, mergers and acquisitions, analysts ratings (downgrade/ upgrade), etc.

But....how to keep up with all these, right? So many of them.

That's why people say the market is already pricing in everything that it knows currently as well as what it expects to happen in the future.

So to know how the market price will behave, we need to study charts.

By studying charts, we are studying what the market thinks. We are free riding on other people who study more detailed datas like above.

It's nice to be a free rider, isn't it?

Studying charts basically mean drawing graphs and predicting the future based on the chart. That's usually for the near and medium term.

shade343 SG

Thanks people for helping answer his queries. Laughing

dinky1409 SG

Mmm okay then, but for example I have stocks in company A and B which deal with real estates. How exactly would prices of, for example, oil affect the ups and downs of my stocks? How do inflation and interest rates affect?

If I buy stock A at $1.00 each, and all of a sudden people start selling it. $1.00 goes up or down? As long as the company does not go bankrupt or close down, the stocks that I hold are 'safe' right? I mean even if it goes down all the way to a temporary low of $0.10, I don't have to come out extra money to maintain the number of stocks I had right?

How exactly do good news for company A, for example, "a better board of directors going to take over the current ones", or "sales for company A are going to go up this period of time" affect the rise of the share price of company A on the market? Does that mean I can just call up the newspaper and spread good rumours about company A, and when it appears in the newspaper, everyone will start buying the stock of company A thinking its good news for company A and it will prosper, the price goes up, and I sell for a profit? Is it this simple as I think or no?

What I gave are basically examples of the logics/systems/theories in the stock market that I don't exactly understand so hopefully someone can help me here because I doubt books can help me understand this part. Thanks for the previous replies guys I appreciate it.. ^_^

Li Ka Shing SG

A stock price reflects a company's valuation. And it is affected by its specific factors as well as the overall economic, and political condition, where that stock is in.

Therefore a stock price is affected by the price of oil, inflation rate, GDP growth, average earnings growth, central bank interest rate, etc, as these are indicative of the overall economy.

How closely a specific stock follow the general move of the broader market as affected by these factors, depends on the nature of each company. Some companies are more sensitive, while others are less sensitive. This difference could be caused by its size, or its sector(s) where it's in.

If you want to interpret the datas..... = means same move, >< means opposite.

GDP growth =
Inflation rate ><
Central bank interest rate ><
Average earnings growth =
Oil price ><
Some more minor datas:
Unemployment ><
Consumer spending =
Housing data =
Etc...

Example, up in GDP growth, means better overall economic conditions, the stock market goes up as well. Up in inflation rate, means worse overall economic conditions, the stock market goes down (opposite).

When all these datas come up, you are confused how to interpret them as a whole. Like if it's 3 up, 3 down, so what does that mean?

Even the best economists miss their forecasts. We don't try to be an economist. We look at the overall market price. The overall market price has already priced in everything it knows including the overall economic and political conditions.

So like I said, we just be a free rider. Just look at the INDEX.

The index reflects the overall market price, which means it reflects the market digestion of overall economic and political condition as a whole.

Since a specific stock is always affected by its specific factors as well as general economic and political factors, the index will always affect a specific stock price. How much so, look at the Beta (correlation of the 2). If you want to break it down, like oil price, also find the Beta for that component.

Your second question. If people sell, price drop of course. If it drops from $1 to $0.10 like you said, you don't need to pay for any maintenance and it's safe, but theoretically you got a massive loss. This should worry you more than any maintenance. Such massive lost will not happen in real life though, since you have risk management like placing stop-loss.

Your third question. You can spread rumours of course and if the stock is cheap and small, your rumour can move the stock, and you can con them all. However if the stock is big, your rumour will have very little impact.