MUDAJYA PE??

latest 1st qe= 3.77 , 3.77 x 4 = 15cts , current price 3.34 . PE = 23+- !

IJMLAND!!!

Rugi lagiii!!

Total loss about RM 2001.82 vs Gain only.... RM805.26

Must Learn from this or else stop playing in stock market.....

Start from today...... New way of tradingg........

Hopefully can recover all losess.....

SEALINK

KSL

How 2 pick a good warrant ?

B4 i show u how 2 pick good warrant, i must oso show u my proven track records in warrants ( as per attached)

First , YTL-wb bot in year 2002 , cost 0.52 for 213 lots

sold all @ avg 1.60+ , Profit 200K+

Second Ijm-wb bot in year 2006 , cost 0.38 for 278 lots ,

sold all @ avg 1.20+- , Profit 220K +

Third , d latest one , YTLpwr-wb bot in 2008 , cost 0.49 for 100 lots.

sold all @ avg 0.76 , Profit 25K+

Total profit made from warrant = 450K+.. ^_^ how u like that ?

What is good warrant ?

3 criterias

1) Must be in money , what is in money warrant ? in money warrant is premium that u get after u minus out yr cost n conversion from its mom.

Example : Tgoff-wa

As at 8 May 09

Mom = 1.25

Tgoff-wa= 0.69

Conversion = 0.55

Hence, 0.69 + 0.55= 1.24

1.25 - 1.24 = 1cts , premium = 0.01/1.24 = 0.8%

Due 2 cost n time factor, any premium below 30% is still consider as in money warrant .what is premium 30% for Tgoff @1.25 ? d answer is 1.08 .

1.08 + 0.55 =1.63

1.63 - 1.25 /1.25 x 100%= premium 30%

In another word means d FV 4 tgoff-wa is 1.08 $$$$$$$

2) Future earning of its mom , take a look at my previous warrant purchase , all r bluechips , such as YTL n Ijm..d latest one is Tanjong offshore.. with its status of political link darling + orders in hand , I forsee its future earning shld be a good one.

3) Expiry date , expiry date must be at least 3 years n above , y ? simple.. cos u dun know what will happen 2molo , what if another 911 happen tonite ? once its mom dive from d sky, yr premium could gone with d wind oso, hence , longer expiry date is essential.

example:-

mom =1.00

son = 0.50

conversion 0.30

hence 1.00-0.50-0.30 = 0.20 premium ..this one i think u guys know it very well...

what about mom 1.00

som 1.00

conversion 0.30 ?

in money ?

yes is in money

cos 1.00 - ( 1.00 +.0.30)/ 1.00 x 100% = 30%

still in money.

if>>

Mom = 1.00

son 1.00

conversion 0.31

1.00- ) 1.00+0.31)/100%=31%

this is out of money !

anything below 30% is still consider as in money !

Tgoff-wa @0.69 for 50 lots..

conversion 0.55 , expiry date +2016

mom 1.25...very much in money

how 2 define a good warrant ?

1) in money

2) its expiry date must be more than 3 years n above

3) Mom 's future earning must be promising.

let look at tgoffwa , does it fall under d above ?

Tgoff = 1.25

1.25 -0.55= 0.70

Tgoff-wa =0.69... 1cts premium. (very much In money)

dun 4get .. 4 warrant , anything below 30% is still consider as in money...hence , theoritically...fv 4 tgoff-wa shld be traded at 0.91 now ^_^

expiry date 4 tgoffwa = 2016

Tgoff order in hand worth more than 2 bil + political link stock.

PE =9+-

See d gem ?

U can take this wa as long term hold as well as short term swing ^_^
From samgoss blogg

RCECAP

PANTECH

LCL

LEADER

KFIMA

"the worst mistake is not to learn from mistake"
"if you don't want to help yourself, no one can help u already"

The best time for a non-holder to buy that stock is when HOLDERS feel it is not good. They run out of patience waiting too long >>> Once they dispose it will move >>> Isn't THAT the oldest story in BURSA?

Latex!!

Dah dua kali tertipu!!!!!1

Kesilapan Lagi

Hari ini aku dengan tergesa-gesa telah menjual axiata-cc dengan harga 19 sen sahaja. Mengapa aku jual hari ni... Kalau dengan harga itu.. rasanya ramai orang akan beli.... kena hold lah dulu...skarang dah naik semula ke 20.5 sen.... aaaa rugi lagiii......

Yang Penting sekali.....

Plan Your Trade and Trade Your Plan

Kesilapan besar telah berlaku semasa membeli axiata-cc di mana telah ramai pelabur membeli di bawah paras 20 sen dan saya telah membeli dengan harga tertinggi hari itu iaitu 20 sen... Diharap dapat menjual 20 sen keatas pada hari esok memandangkan Index perusahaan Dow Jones telah naik 100 mata lebih.... Diharapkan juga kesilapan seperti ini tidak akan berlaku lagi............

Sebelum membuat keputusan untuk membeli, trade plan perlulah disediakan terlebih dahulu........

07 August 2009

Plan Your Trade and Trade Your Plan

After the recent market fall traders will take time to evaluate their success or failure. The answers help to develop quality experience. There are five features.

*Creating quality experience starts with a Trading Plan. Start by specializing in one or two strategies. There are many different strategies in the market. Many of them are successful, but you must select the strategy that you feel most comfortable with. This strategy will suit your personality so it is easy to apply effectively.

*Keep a Trading diary. This is a record of every trade. The notes include the reasons for the trade. It includes the trade plan. It includes the trade development and also the reason for the exit. These are brief notes. They help you to find the common features of success and the common features of failure. It is a record of how your experience is developing

*At the end of each trading day print the chart of every trade. Make notes about the trade. This improves your learning experience because it teaches you to recognize price and market patterns. It reminds you of what happens when the patterns are successful , or when the patterns fail.

*At the end of every three months evaluate the information you have collected. This will help you recognize your strong and weak points. Are you more successful with momentum trades or trend trades? Is your entry point effective? Is the stop loss method effective? Do you wait too long to exit a losing trade? The answers will help you develop the quality experience necessary to become a better trader.

*If you find common and repeated mistakes, then you may need to make changes to your trading plan. First check to make sure all your trades follow your trading plan. If you have many trades which do not exactly follow your plan then go back to step one and develop the discipline to trade your exact trading plan.. If you consistently and exactly follow the correct trading plan then you will develop the quality experience necessary for successful trading.

PLAN YOUR TRADE AND TRADE YOUR PLAN

190% Portfolio Growth in 9 months

Written by Leremy

Friday, 02 November 2007

You are a successful man when you can make 25% growth in a year with the money you invested. Earlier this week, I accidentally heard from RL and Jensen conversation that RL has made 190% in the past 9 months. I was amazed. I immediately requested RL to write an article about his experience in the stock market, and the secret that lies in his achievement. He was humble and refused to write because the actual capital he invested was small. Still, I believe that whatever he had gone through will be a good guide for the beginners in the stock market. I insisted RL to write us an article about it, and here it is. I hope everyone can share his opinions and thoughts about it in the comment box below. Is making 190% in 9 months an impossible dream? Well, here is the story. This is a true story and it is written with all the sincerity and gratitude. Looking back, I have been in the stock market of about 9 months now. I started getting into stocks around February this year. Having the euphoria that I have what it takes to make money. Well, the drop after the Chinese New Year gave me a shock that things were not as easy as it seems. I started to look for help. Looking around the internet for guidance. Maybe it was fate and luck that brought me to Ben's blog. It was like love at first sight. It is also the place where I get to know two most important people in my journey as a trader. One is Ben, and the other is Max. Let us start with Ben. From his articles, I could tell that Ben is a very experienced person and the right one to seek help. So I emailed him, seeking for advice on what books I should read. I still remember the reply Ben gave me even till today. He said, " you say you are an investor, but do you know what is the difference between an investor and a trader?" It was a simple sentence, but it woke me up and introduced me to the terms that I have never heard before in my life. It was almost the same time that I came across another one of the most important people in on my journey, Max. He was the one that showed me the right path to walk in order to be a trader. He also showed me to one of the best material to build my foundation. The book,"Trading For A Living" by Dr Alexander Elder. With Max's guidance, I was able to learn and absorb more from the book. That was how it began, lets continue the journey... After I was shown the way, the next step is to accumulate the knowledge. I started with the book, "Trading For A Living". It was the most important book that showed me a whole different perspective to what trading and stocks are all about. And I would recommend anyone who is serious about trading, to read the book. And please do read to understand. While slowly accumulating the knowledge, I started to test the different theories and methods of play. And another important milestone came up. It was my trade on Nextnat. It was a huge loss because I lacked of discipline. I knew the most important rule in trading is to "keep the loss as small as possible and let the profit run as far as possible". I was stupid, ignorant, arrogant and worst of all, lack of discipline. This trade was so important because it stabbed me hard, and it taught me the important lesson of having a plan and stick to the plan, with DISCIPLINE. After that, there are still many ups and downs in my trades, but I never gave up and there is always something new to learn from every trade. Slowly, I learn to adapt to the market and I always put learning as my main priority. Because I believe that if I am able to learn and adapt well to the market, money will follow by itself. This is also the reason why I don't follow tips or recommendations. I always pick my own stocks. It is because I always put learning as my top priority. I look at charts everyday to learn about there price and volume movements and relationships. I spend at least an hour a day just to do that. It is hard work and I always believe there is no gain if you are not willing to work hard for it. To sum up, 1) The Chinese New Year dip showed me that money don't drop from the sky, even in stock market. 2) Ben showed me how "naked" I was in knowlege and he gave me a place to find what i needed... (the blog and now, the site). 3) Max showed me the right path and how to walk as a trader. 4) Trading For A Living gave me a solid foundation. 5) Discipline is the determining factor of how well your plan will work. 6) Continuous learning and adapting is the key to keep yourself fit so that you can survive. 7) Learning is topmost priority. Which is also why I don't follow tips and recommendations. Lastly, stock market is an everchanging condition, which is why we need to continue to learn and adapt. Nothing is free and good things don't come without hardwork. Regards & good luck RL

There is a Time For Everything

Written by Ben

Friday, 09 November 2007

There is a time to reap There is a time to sow There is a time to buy and keep There is a time stocks must be sold Timing is crucial. In a bull market, buy on dips. In a bear market, sell on rallies. The difficulty is to ascertain that a correction is a correction and not a reversal. If you read it wrongly, you are in trouble. Worse still, you may compound your error by averaging down. And that may end you up with a catastrophe loss that could be disastrous. A simple stop-loss could have saved the situation. People say, “Buy low, sell high; or buy high and sell higher”. But I say it is better to buy high and sell low. Buy high and sell low! You must be mad. Rest assured that I am not. Bear with me for awhile and I shall explain. Smart monies accumulate at the bottom. Their accumulation may last from a few weeks to a few months or even a few years. Once they have got enough, they will push up the price. So the best time to buy is when there is an upside breakout at low level after the forming of a good base. That is what I mean by ‘to buy high’. At the top, they (smart monies) will start their distributions. Once their distributions are over, there will be a downside breakout. It is very difficult to know whether a lateral movement is a distribution or further accumulation. That’s why you have to wait. When there is a downside breakout, it means that the distributions are over. And the downtrend has commenced. It is here that you must sell. This is what I mean when I say ‘to sell low”. Actually, it is to sell low at high level. Got it? The moral: Follow smart money, but be one step ahead of the pack. Bye now folks, good luck and all the best.

Charts are Useful

Written by Ben

Wednesday, 05 March 2008

Charts are only useful to those who have the patience to wait, the knowledge to choose and the wisdom to strategize. Most people, especially beginners, do not have the patience to wait. They must buy and sell, just to be in action. This may be good for their brokers but is not good for their bank accounts. A smart trader will not buy if he does not see a buy signal. Likewise, he will not sell until he sees a sell signal. It is during the base formation that you must make your plan. Wait and watch for a buy signal before you buy. If you do not have the patience to wait and the discipline to implement your plans, charts are useless to you. To succeed in the stock market, you must know who you are temperamentally. Can you take a loss? Can you "cut your fingers" and bear the pain? If you can’t, stock trading is probably not for you. The first loss is the best loss. Never compound your error by averaging down, especially when your first purchase is at extremely high level. No one has the ability to win all the time. Winning and losing are part of the game. You can’t make cakes without breaking eggs. If you want to win, be prepared to lose. The important thing is to keep your losses small. Not only must you know how to use a stop-loss. You must know how to use a trailing stop-loss to lock in your profits. The beauty of the stock market is that you can either invest or speculate or do a combination of both. For me I am more of an investor than a trader. Most of my funds are tied up with small-cap sound solid companies. I call them baby blue chips. These companies will appreciate the most over time.

Twenty golden rules from Traders Wheel

Written by Ben

Sunday, 27 April 2008

1. Forget the news, remember the chart. You're not smart enough to know how news will affect the price. The chart already knows the news is coming. 2. Buy the first pullback from a new high. Sell the first pullback from a new low. There's always a crowd that missed the first boat. 3. Buy at support, sell at resistance. Everyone sees the same thing and they're all just waiting to jump in the pool. 4. Short rallies not selloffs. When markets drop, shorts finally turn a profit and get ready to cover. 5. Don't buy up into a major moving average or sell down into one. See #3. 6. Don't chase momentum if you can't find the exit. Assume the market will reverse the minute you get in. If it's a long way to the door, you're in big trouble. 7. Exhaustion gaps get filled. Breakaway and continuation gaps don't. The old traders' wisdom is a lie. Trade in the direction of gap support whenever you can. 8. Trends test the point of last support/resistance. Enter here even if it hurts. 9. Trade with the TICK not against it. Don't be a hero. Go with the money flow. 10. If you have to look, it isn't there. Forget your college degree and trust your instincts. 11. Sell the second high, buy the second low. After sharp pullbacks, the first test of any high or low always runs into resistance. Look for the break on the third or fourth try. 12. The trend is your friend in the last hour. As volume cranks up at 3:00pm don't expect anyone to change the channel. 13. Avoid the open. They see YOU coming sucker 14. 1-2-3-Drop-Up. Look for downtrends to reverse after a top, two lower highs and a double bottom. 15. Bulls live above the 200 day, bears live below. Sellers eat up rallies below this key moving average line and buyers to come to the rescue above it. 16. Price has memory. What did price do the last time it hit a certain level? Chances are it will do it again. 17. Big volume kills moves. Climax blow-offs take both buyers and sellers out of the market and lead to sideways action. 18. Trends never turn on a dime. Reversals build slowly. The first sharp dip always finds buyers and the first sharp rise always finds sellers. 19. Bottoms take longer to form than tops. Fear acts more quickly than greed and causes stocks to drop from their own weight. 20. Beat the crowd in and out the door. You have to take their money before they take yours, period.

Cost Averaging - Is this a good strategy?

Written by Ben

Sunday, 20 January 2008

After you have bought a stock and its share price drops, you buy more at a lower price. This brings the average price per share down. This is called averaging down. The exact opposite is averaging up. Most people like to average down. Is this a good strategy? It all depends on who you are financially and your personal traits. If you are a value investor, that is, an investor who buys sound solid companies at undervalued prices for the long term, you should certainly average down. Buy low and sell high is your way. But, if you are a speculator or trader, your strategy would be to buy high and sell higher. Your tactic is to ride with the waves. You don’t want to wait. So you have to time your purchases. That means you wait for the stock to move first before you buy. A trend can reverse direction at any time. As soon as you buy, the price drops. Your positive expectancy vanished. In this case, you must quickly sell to keep your losses small. Don’t compound your error by averaging down. If you are right, you can average up. There is no way you can win all the time. The important thing is not to get the best of cards but in knowing when to leave the table. In other words, you must know where to correctly place your stop-loss. That’s the difficult part of the problem. To win, keep you losses small and profits big.

The market is always right

Written by Ben

Sunday, 15 March 2009

When you buy and the market drops, the market is right and you are wrong.When you sell and the market goes up, you are wrong and the market is right again. So whichever way you look at it, the market is always right. That’s why you have to follow the market. If the market is trending up, don’t make the mistake of telling it that it is too high. When the game has turned into one of emotion and not of logic, it will continue to be too high and going higher with the trend. Likewise, when the market is trending down in spite of good result and good news, don’t argue, sell your shares and get out.

Short-Term Gain is Long-Term Pain

Written by Ben

Wednesday, 26 March 2008

Short-term gain is long-term pain Short-term pain is long-term gain Pain is very useful. No pain, no gain; so goes the saying. Pain flags us that something is wrong. When we are physically or mentally hurt we feel the pain. Physical pain and mental pain are quite different from each other. The latter is much more difficult to heal than the former. Anyone with a broken romance will feel the mental pain. When you take a small profit, you feel elated. As the stock which you sold goes up and up, your short-term gain becomes a long-term pain. On the contrary, if you cut your losses quickly, and the share price comes down and down, your short-term pain becomes your long-term gain. A trend in motion is likely to continue in the same direction. This is important. You will do well to commit it to memory. Let your profits run. Never kill the golden goose when you have one. People say, “don’t be greedy�. What’s the use of making pennies? You’ll never grow rich making pennies. Think big and plan big and someday you will be rich. Money for value you must insist. Invest wisely. Good luck and all the best.

The Importance of Investing

Written by Ben

Wednesday, 30 July 2008

Benjamin Graham, the father of value investing, taught Warren Buffett that “Investment is most intelligent when it is most businesslike�. Buffett acted on this philosophy and today he is the second richest man in the world. You too can become rich by following this wisdom. “Investment is most intelligent when it is most businesslike�. Commit this to your memory; it will do you a world of good. It is extremely important to know the difference between “to invest� and “to trade�. While the former is the road to riches, the latter is the way to ruin... To invest in the stock market means to exchange your money for equities that promise safety of principal and a good dividend yield, after careful investigation. To trade is more akin to gambling. It goes after the price instead of the value. Buying and selling in short period of time (usually within a month), traders hope to make quick gains by riding with the trend. Many have failed and many more will find that trading does not pay in the long run. The stock market is a marathon, not a sprint event. Safety of principal is your first priority. If you cannot cut losses quickly, follow the rules of Warren Buffet. His number one rule is: Never lose money. And his number two rule is: Always remember rule number one. If you do not want to lose money, you must make absolutely sure that every buy of yours is a value buy. That means buying sound, solid and well-managed companies, after through research, at rock-bottom prices at all times. Think intelligently and buy wisely. You need to be smart from the start. Good luck and all the best.

An Investor’s Manifesto: 20 Guiding Principles for Investment Success

An Investor’s Manifesto: 20 Guiding Principles for Investment Success

Thursday, 18th June 2009 (by J.D.)
This article is about Gurus, Investing - 34 comments

Knight Kiplinger is the editor-in-chief and a columnist for Kiplinger’s Personal Finance, one of the “big three” money magazines. In the June issue, Kiplinger offered an investor’s manifesto, a list of twenty guiding principles for making smart investment decisions.

Kiplinger’s manifesto is a great list, effectively summarizing mainstream investment theory on a single page. I liked it so much that I obtained permission to reprint it in its entirety. Here are the twenty points in Knight Kiplinger’s investor’s manifesto:

1. I am an investor. I do not trade my assets frequently. That’s speculation, not investing.
2. I am also a saver, fueling my investments with continuous savings from current income.
3. I know that every kind of asset entails risk — even cash, which can be eroded by inflation.
4. I know that higher returns entail higher risk, in every kind of asset.
5. I accept those risks, but I mitigate them by owning a diversity of assets.
6. I regard my home as a place to live, not as an investment. It is not a substitute for retirement savings.
7. I have an investment plan and a plan for asset allocation, in consultation with a financial adviser.
8. I invest regular amounts every month, in both rising and falling markets. I know I cannot gauge market tops and bottoms. If I receive a windfall — a bonus, bequest or gift — I gradually feed it into my regular investment mix.
9. I don’t pour more money into hot markets nor completely cash out of plunging markets.
10. I spread my investments among several asset classes, in a mix fitting my age and risk tolerance.
11. My share of bonds roughly equals my age. I will allocate to stocks a declining portion of my financial assets as I get older.
12. I rebalance my portfolio every quarter. If the stock market plunges, pushing my stock allocation way below its target percentage, I sell bonds and use my cash to buy stocks.
13. I force myself to sell high and buy low by periodic rebalancing — just what is temperamentally difficult for most investors to do.
14. I know that stocks are risky in the short run, so I hold in equities no money for which I have a likely need in the next three years.
15. But stocks are not too risky in the long run. They have outperformed all other commonly-traded assets over periods of 15 years and longer.
16. Foreign stocks account for at least 15% of my stock allocation. I believe that developing economies will enjoy much higher growth than the U.S. in the decades ahead.
17. I never borrow against my stocks. Margin calls could force me to sell good assets at a bad time.
18. I stick with my game plan. I do not check the value of my investments every day or even every week.
19. I try to keep my cool when other folks are losing theirs.
20. I remind myself often: I am an investor.

Do you disagree with any of Kiplinger’s mantras? Are there others you’d add to the list? (For example, I might include: “I buy low-cost index funds. I know that over the long-term, indexing beats the returns offered by most other investment options.”) Do you hold a set of principles that guide your investment decisions?

In April, I shared a similar document from billionaire John Templeton, who described his 16 rules for investment success.

[Kiplinger's Personal Finance: An investor's manifesto, reprinted with permission]

The Extraordinary Power of Compound Interest

The Extraordinary Power of Compound Interest

Wednesday, 2nd April 2008 (by J.D.)
This article is about Basics, Investing

If you’re young, you may not think you need to open a retirement account. You probably think it’s easier to worry about it five years from now. Or ten. You’re wrong. No matter what your age, now is the time to begin saving for retirement. In The Automatic Millionaire, David Bach writes, “The single biggest investment mistake you can make [is] not using your [retirement] plan and not maxing it out.”

Saving is the key to wealth
If you do not spend less than you earn, and if you do not save the difference, you cannot build the wealth you desire. The rich are not rich because they earn a lot of money; the rich are rich because they save a lot of money.

You may be skeptical — I was once skeptical, too. But over the past three years I’ve read a lot on the subject of wealth-building. Books like Stanley and Danko’s The Millionaire Next Door make it abundantly clear that it’s not a high income that leads to wealth — though obviously a high income does not hurt — but the ability to save. Those who become wealthy do so by spending less than they earn.

If saving is the key to wealth, then time is the hand that turns the key to unlock the door. There is no reliable method to quick riches. There are, however, proven methods to get rich slowly. If you are patient, and if you are disciplined, you can produce a golden nest egg that will hatch later in life.

The power of compounding
The best way to ensure your future financial success is to start saving today.

“The amount of capital you start with is not nearly as important as getting started early,” writes Burton Malkiel in The Random Walk Guide to Investing. “Procrastination is the natural assassin of opportunity. Every year you put off investing makes your ultimate retirement goals more difficult to achieve.”

The secret to getting rich slowly, he says, is the miracle of compound interest. Even modest returns can generate real wealth given enough time and dedication.

On its surface, compounding is innocuous, even boring. “So what if my money earns 3.85% in a high-yield savings account?” you may ask. “What does it matter if it averages 8% annual growth in a mutual fund? Why is it important to start investing now?”

In the short-term, it doesn’t make a huge difference, but on the slow, sure path to wealth, we take the long view. Short-term results are not as important as what will happen over the course of twenty or thirty years.

For example, if 20-year-old Britney makes a one-time $5,000 contribution to her Roth IRA and earns an average 8% annual return, and if she never touches the money, that $5,000 will grow to $160,000 by the time she retires at age 65. But if she waits until she’s my age (39) to make her single investment, that $5,000 would only grow to $40,000. Time is the primary ingredient to the magic that is compounding.

Compounding can be made more powerful through regular investments. It’s great that a single $5,000 IRA contribution can grow to $160,000 in 45 years, but it’s even more exciting to see what happens when Britney makes saving a habit. If she contributes $5,000 annually to her Roth IRA for 45 years, and if she leaves the money to earn an average 8% return, her retirement savings will total over $1.93 million. A golden nest egg indeed! She will have more than eight times the amount she contributed. This is the power of compound returns.

The cost of waiting one year
It’s human nature to procrastinate. “I can start saving next year,” you tell yourself. “I don’t have time to open a Roth IRA — I’ll do it later.” But the costs of delaying are enormous. Even one year makes a difference. Here’s a chart to illustrate the cost of procrastination. Again, we’re using 20-year-old Britney as a basis.

If Britney makes $5,000 annual contributions to her Roth IRA, and she earns an 8% return, she’ll have $1,932,528.09 saved at retirement. But if she waits even five years, her annual contributions would have to increase to nearly $7,500 to save that same amount by age 65. And if she were to wait until she was my age, she’d have to contribute nearly $25,000 a year!

To make compounding work for you:

• Start early. The younger you start, the more time compounding has to work in your favor, and the wealthier you can become. The next best thing to starting early is starting now.
• Make regular investments. Don’t be haphazard. Remain disciplined, and make saving for retirement a priority. Do whatever it takes to maximize your contributions.
• Be patient. Do not touch the money. Compounding only works if you allow your investment to grow. The results will seem slow at first, but persevere. Most of the magic of compounding returns comes at the very end.

Compounding creates a snowball of money. At first your returns may seem small, but if you’re patient, they’ll become enormous.

This article is part of Financial Literacy Month. Look for a companion guest post on compounding later today.

Keep your balance as markets plunge

Keep your balance as markets plunge

Keep your balance as markets plunge
A mix of different assets will keep your portfolio in positive territory amid the crunch.

By Rosie Murray-West
Published: 1:57PM BST 22 Sep 2008

Attitudes to risk and reward remain individual Photo: PA
For some people an unacceptable risk might be bungee jumping off the Empire State Building, while others might find it too frightening to board a plane.

But while attitudes to risk and reward remain individual, there are things you can do to make sure your investment portfolio is not overexposed to risky markets - and that it is not too safe to be making you any money. While no investment is entirely without risk, some are perceived as safer than others, but may produce lower returns.


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Recent market volatility has encouraged some people to unbalance their portfolios by pulling out of areas that have not performed well, such as equities, according to Christopher Traulsen of Morningstar, the investment analyst. "Panic is never a good thing,'' he says. "Market timing is a difficult thing to get right. There is a tendency to think you need to remake your portfolio, but what you really need to do is look at your risk tolerance, and only maybe tilt your portfolio a little depending on the markets.''

Most investment managers recommend a balanced portfolio, unless you have large amounts of other wealth you can fall back on. "We ask how much can you afford to see your portfolio move and still sleep at night, and what is your time horizon,'' says Nigel Parsons of Bestinvest, the financial adviser.

Stockbrokers and financial advisers will offer at least three basic types of portfolio - high, low and medium risk - depending on how much time you have before you might need the money you are investing and your attitude towards risk.

The current market is completely different from others we have seen before, Parsons says, because the lack of interbank lending has "caused its lifeblood to dry up''. It is more important than ever that your portfolio is able to withstand this volatility.

Reducing the risk in your portfolio without losing its potential is a case of ensuring that you have your money invested in several different types of asset that tend to move at different times. For example, commodities are extremely volatile, but often rise as equities fall. "What you need to do is pair things that move in different ways,'' says Traulsen.

Carl Cross of Rensburg Sheppard, the investment manager, suggests splitting your money between British shares, overseas equities, fixed-income products and hedge funds. "It is the old adage - you need to juggle fear and greed,'' he says. "Some people are too reluctant to accept any volatility, and others cannot see that in the long term they will get superior returns from it.''

Even within the equities component of your portfolio, it is important not to rely too heavily on one part of the market. In order to properly balance your portfolio, says Traulsen, you need to know how the funds you are buying are managed.

"You need to understand how a manager positions his fund so you can take the right types of risk at the right time,'' he says. "For example, if you had bought all of the best-performing funds of 2006, you would be very heavily exposed to mid-cap stocks.'' He advises buying several funds that invest in different areas of the equity market.

When buying overseas funds, he suggests not being too narrow in your choice. "Steer clear of very focused funds - so don't just buy a fund focusing on Russia,'' he says. "Nobody knows what that will do in the next 10 years. Why pay a fund manager and then tie his hands behind his back by allowing him only one country to invest in? Buy an emerging market fund instead.''

A good fund manager will sell and buy stocks to reduce risk. For instance, the City of London investment trust, which has increased its share price by 55 per cent over five years, currently has a bias towards defensive and larger-cap stocks because of economic uncertainty.

To counteract your equities, it is important to invest in both government and corporate bonds, which involve different levels of risk. Government bonds, or gilts, are very low-risk, because the Government is unlikely to default on them, but they do not produce spectacular returns. "Gilts are gilts, so just buy the cheapest,'' says Cross.

Corporate bonds, another useful part of a balanced portfolio, are far riskier than government bonds because of the risk of default. However, Parsons points out that highly rated bonds that are unlikely to default are now available with very high yields. "The market is pricing in Armageddon,'' he says. "There are yields of 7 to 8 per cent on good corporate debt.'' Corporate bonds can be bought outright, but it may be easier to hold a corporate bond fund.

Meanwhile, Cross suggests that between 5 and 7 per cent of a portfolio should be held in hedge funds. "This is one area that most people don't understand,'' says Parsons. However, holding hedge funds may help protect you against falls in the equity market. He recommends funds run by Brevan Howard, including BH Global, which is now listed on the London Stock Exchange.

A combination of all of these asset classes ought to give you a safety net in a market like this, without minimising your returns. In fact, being well balanced is the only way to survive the storms.