Dow crashing 250 points, after rallying 200 points the day before.

As you can see, market is unpredictable. One day can rally up by 200 points, the next day will crash down by 250 points. If you are an investor, will you have a peace of mind when you see dow crashes after the day you had bought your stock? Will you be panic in selling your stock in the next trading day at a loss? What if dow goes up by 300 points in the next trading day?

In the past, I definitely will not have a peace of mind when I see dow crashes. One of the reasons why I cannot have a peace of mind is because I invested too much at one go, hoping the markets will go up from the day I invested. This is a wrong thinking. Two days ago, I have added 2 lots of STI ETF in my portfolio, and I am not afraid of losing that money.

In another thought, I really hope that STI will drop below 2400 again so that I can buy some more. I have my own winning plan, so I just follow it without any fear. My advice to all the investor is to stop trying to guess the markets. Plan for your strategy and follow it strictly and fearlessly.

Do you have a peace of mind after buying shares?

Do you have a peace of mind after buying shares? If you don't, it is possibly due to one or more of the following reason?

1) You are speculating. You buy because the shares keep going up without reasons, hoping that the shares price will go up somemore.

2) You are buying shares of the companies, without even knowing the fundamental of the companies. You buy just because of the influence of the analyst, your friends or colleagues.

3) You are using someone else money.

4) You are using money that you cannot afford to lose.

5) You invest too much money at one time, and left no more money to invest when market goes down again.

6) You are leveraging. There is a possibility to lose more than your initial investment amount.

Bought 2 lots of STI ETF on 29 Oct 09

Today market gapped down again. I quickly use this opportunities to buy 2 lots of STI ETF using OA CPF.I don't care whether the market will go up or down as long as the dividends keep coming in.

Why I prefered to become a investor rather than trader?

Sun Tzu said, "If you know yourself and your enemy, you fight hundred battles with hundred victories." Knowing yourself is important when it comes to investment.

I preferred to be a investor due to the following reason:

1) I am not a TA expert for short term (I try to learn for one year, but the chances of success is still 50%). I don't think I can predict stock price movement better than a kid who is just merely guessing.

2) I want to have a stress free mentality when it comes to buying stock. I prefer to buy and hold for good stocks for dividend rather than trading speculative stocks for short term gain. Receiving constant dividend is a source of passive income. Trading for short term gain is a type of gambling. The more stocks I buy, the more dividends I get, that's why my passive income is increasing. With this in mind, I can sleep well every night.

3) I rather spend more time to do other thing that can increase my active or passive income, than mindlessly looking at the prices of the stock jumping during trading hours. Reminder time is money. There is no need to keep track of other thing like the Dow Jones future.

4) Trading need to pay a lot of commission for buying and selling. If one trade is $30, ten trade per month already $300. That money can be better used for long term investment.

5) I have constantly saving part of my income for investment. Together with my passive income, I can buy any time when there is any correction from the market.

Lastly Sun Tzu said, "The best outcome for war is to win without fighting". I am currently following my winning plan with ease and stress free.

3rd quarter 2009 residential price index

URA has released the 3rd quarter 2009 real estate statistics. Click here to go to the URA website. I have done a snapshot of the chart on the residential price index. I draw a blue line to see whether there is any trend. Will the index goes up some more? Is now the best time to buy property?

STI Index movement Prediction (Oct 2009 to 2011)

I always believe in long term trend rather than short term trend. In this post, I am making two predictions for the STI Index from now to 2011. Here are two possibilities pattern that might be slowing forming.

The first pattern is head and shoulder pattern. The diagram below suggested that STI may be reaching 3000 before the next big correction. The correction might send STI back to 1600 again. This is what most of the people will expect now. Remember, if a lot of people have the same thinking, the chances that they are wrong are very high.

Prediction 2: Double Top Pattern

The second pattern is double top pattern. The diagram below suggested that STI may be reaching 4000 before the next big correction. Yes, a lot of people might say I am crazy, but see the two blue highlighted circles; they might be similar points for past and current bear market. EXPECT THE UNEXPECTED. The next major correction might also send STI back to 2000 again.

So after seeing these two patterns, what are your views? Which pattern will be forming? Or do you have another pattern in your mind? No one can be sure what will happen next. It is your planning and strategy that will determine whether you are the winner or loser for this game.

STI INDEX (Comparison between 1998-2000 and 2008-2009)

I have done a comparison for STI index between 1998-2000 and 2008-2009 period. You can see that there are a lot of similarities in it. By looking at the picture above, we are in the last phase of the bear rally?

S&P(2007 to 2009) VS NIKKEI (1990 to 1992)

I have tried to align the chart for S&P500 (2007 to 2009) and NIKKEI(1990 to 1992) chart. Can you see the similarity? Guess what will happen to S&P500 in the next few months.

China A-Share exchange-traded fund

I am very glad that UOB and SGX are launching the China A-Share exchange-traded fund. This ETF is a must to have in my opinion. The reason is there are a lot of potentials in the development of China and the expected growth rate is 8%. I expect in 10 to 15 year, this ETF will grow at least 3-5 times the value. Currently SSE is only about 3000 point, the previous peak is 6000. So it is still cheap to invest in China. I hope that this ETF will give good dividend which serve as a passive income.

US Dollar Index down & S&P down (21 Oct 09)

This is probably the worse scenario you can have with the market. S&P was down by about 0.9% and dollar index was down about 0.5%(with EURUSD breaking 1.5). This may signifified that reducing the dollar may have little effect on pushing up at the market at this point. So what will happen next when this happen?

US Dollar Index analysis (21 Oct 09)

By looking at the weekly chart of the dollar index, there might be some rebound from now. Question is will the dollar index in the start of the new bull run? We shall see in the next few week.

Why I use S&P500 to find out market direction?

I always use S&P500 to find out the market direction. The reason is S&P500 is based on 500 large-cap common stocks actively traded in the United States. If you study statistics, you will know that the more samples that you have collected, the more accurate is your result. Dow and STI index only has 30 components. So if one or two stocks go up or down by big margin, the index will be affected greatly even though the rest of the stock are unchanged.

EUR/USD 10 years chart

Happen to see this 10 years EUR/USD chart. After looking at it, there might be a possibility that head and shoulder pattern may be forming. The right shoulder is in the midway of completion. Will the pattern play out? If so, what will happen to the equity market?

S&P 500 daily chart (Nov 08 to Oct 09)

The above S&P 500 shows that we might be hitting on the resistance line (blue line). The index keeps increasing from Sep 09 till now, but the volume keeps decreasing. So is it dued for a correction soon?


Let us looks at the weekly chart, S&P 500 is going to hit the major resistance line (blue straight line). You can see that the index is increasing with volume decreasing(see red line).

With these two charts, do you think the index will still go up without any major correction? I remembered what Sun Tzu say, if the odd of winning is low, don't bother to fight. So do you want to risk by buying up now?

True value of S&P 500 based on dollar index (1988 - 2009)

I have drawn up the chart to see the effect of multiplying the S&P500 and dollar index. My purpose is to show why non US investor must know the Dollar Index if they are buying US shares. US Dollar Index is the measurement of US Dollar value compared to other major currencies.

To simplify the chart, I am using one value for each year taken from the beginning of the year. Please note that I have used Oct 09 value for year 2010. Let make a assumption that the movement of your share price is tied to S&P500.

We can see that during year 2001, the product of S&P500 and dollar index is the highest. It means that if you are a non US investor, you will buy or sell US shares at the peak. In 2007, we can see the S&P500 have reach 1438 which is higher than 2001, but the product of S&P500 and dollar index is lower than that in year 2001. It means that if you buy US shares in year 2001 and sell share in 2007, you are in fact making a loss.

The chart also shows that the value of US shares is getting weaker since 2001. The recent bear rally has only reached the value during year 2003. So don't you think US shares are still considered very cheap now? The question now is will it get cheaper or it is worth to buy US shares?

Taiji Symbol VS S&P 500 (25 years chart)

The above is the 25 year chart for S&P 500
Based on my Taiji Symbol analysis:
Red portion: Body of white fish
Blue portion: Eye of white fish
Green portion: Head of white fish
Yellow portion: Tail of black fish.
So what is next? Will body of black fish come next? If that happen, the index may break 600, and that is terrible.

There is a Technical Term called "M pattern" which is showing in the chart and that is a very bearish pattern. After "M pattern" it will be followed by a "V" pattern up (Currently forming), and next will be a "A pattern" down.

Taiji Symbol VS US Dollar Index

In the last post, I have said that Taiji Symbol is my favorite symbol. For this post, I am using Taiji Symbol to analyse US Dollar Index. US Dollar Index is the measurement of US Dollar value compared to other major currencies. It is important for non-US investors to know this index when they invest in US stock markets. Why? If their stock goes up 10%, but dollar index goes down 10%, basically they are not making money.

Red highlighted portion of both charts represents the tail of the black fish in Taiji symbol. The index started to weaken slowly at this stage.

Blue highlighted portion of both charts represents the body of the black fish in Taiji symbol. The index falls a lot at this stage.

Green highlighted portion of both charts represents the eye of the black fish in Taiji symbol. The index starts to rebound strongly at this stage.

Grey highlighted portion of both charts represents the head of the black fish in Taiji symbol. The index will again fall at this stage. It is hard to tell whether will it break new low but the fall is significant.

The two charts above show my two predictions. The first prediction shows that Dollar index will go up very soon (starting the tail of the white fish). The second prediction shows that Dollar index will still go down (continue the head of the black fish) and break new low before it will go up.

Taiji Symbol VS S&P 500 Chart (Sep 07 - Oct 09)

The above shows the S&P chart from the start of current bear market to now. For Oct 07 to May 08, signified the start of the bear market(tail of the black fish of the Taiji Symbol). For May 08 to Mar 09, signified the bear market is in the mid stage(body of the black fish). For Mar 09 to now, signified that some recovery on the way(Eye of the black fish). My guess the last stage will be a downtrend that will bring the index lower than Mar 09(Head of the black fish). This is just my own interpretation, so there is no right or wrong for it.

This symbol tells me that everything will have a slow start, accelerated growth and peak. Remember the important point is slow start, whether it is a bear or bull market. If you can identify the start points, you will be slowly be rich. For market that goes up or down too quickly, there will be a reverse in direction in no time. If you see that, it is important to clear your postion(whether long or short) before the reverse in direction.

GOLD VS SGD Chart. Why Gold might be a good investment in Singapore?

In my last post on gold, I mentioned that gold might provide a good hedge to the dollar. I am using SPDR GOLD SHARES for this example. Gold are traded in USD. I will combine the USD/SGD and GLD/SGD so as to see whether is gold stills a good hedge. Instead of taking all individual values from both charts, I just take values from beginning of each year. Please note that the 2010 values are estimated values from OCT 09.



I multipled USD/SGD and GLD/USD values together to get GLD/SGD. You can see that gold price keeps going up from 2005 to 2009 Oct. Even though market crash from 2008 to 2009, the value of gold in term of SGD still go up. Isn't it a safe haven investment? From $70 to $140, is about 15% compound annually.

Click here if you are interesting in how to buy gold.

Update: GOLD VS SGD (20 Nov 09)

What are Shares, Unit Trust and ETF?

SHARES:
The most commonly investment instrument is shares. Shares are normally distributed by companies to raise fund for their operation or expansion. You can buy and sell shares within the trading time provided by the exchange.

You earn money when your share price goes up, and you lost money when your share price go down. You will be given dividend if the companies make money and decide to give part of the profit to the share holders.

You will be charged commission when you buy or sell your shares, usually less than 0.5% of the total cost of your shares.

UNIT TRUST:
Unit trust is a form of pooled investment where a fund manager invests funds on different shares on behalf of a group of investors.

You earn money only when your unit trust price goes up, and lose money when your unit trust price goes down. Please take note, most of the unit trust do not give out dividends.

There are sale charges when you buy unit trust. Normally is about 1 to 5% of the total cost of the unit trust you buy. There will also be management fees which normally range from 0% to 5% per annual.

Please take note, the updated price of the unit trust is done in daily basis. Normally you do not know the exact price when you buy or sell the unit trust because it will be based on the next day price.

ETF:
Exchange-traded funds hold a basket of securities like unit trust but they trade like a stock which means that they can be purchased at any time of the day.

You earn money when your ETF price goes up, and you lost money when your ETF price go down. Please note that not all ETFs will give dividends.

You will be charged commission when you buy or sell your ETF, usually less than 0.5% of the total cost of your ETF. Like unit trust, there will be management fees which normally range from 0% to 1% per annual.

Taiji Symbol is my favorite symbol

One of my favorite symbol is the Taiji Symbol. The symbol is make up of two fish, one with white body and black eyes and another with black body and white eyes. The white body fish or yang fish represents brightness, strength, life. The black body fish or yin fish represents darkness, weakness and death. The eyes of each fish has the opposite colours as their body. This shows that within a yang there is yin, within a yin fish is yang. The symbol shows that thing move in cycle over and over again.

A lot of things can be related with this symobl, and one of it is life. The tail of the yang fish represents new life is borned. The head of the yang fish represents the strongest point of life. The tail of the yin fish represents weakness in life started to show out. The head of the yin fish represents death. The cycle continues when new life is borned.

If you apply the symbol to show the strength or weakness of a country, you can see that a country cannot be strong or weak forever. You can look into history book, there is no country that can dominate the world forever. There are times when a country is strong, and after that it will become weak.

For economy or stock market, the yang portion represents bull markets, and the yin portion represents bear markets. If you expose to stock markets, you will know that after a bull run, bear market will come eventually. After a bear run, bull markets will come eventually.

Remember the eye of the fish are of opposite colours than the body. It means there will be a strong signal telling us that the cycle is about to change. After the signal, the yang will become "yanger" intially and then slowly go toward the yin side. For the yin, it will become "yiner" intially and then slow go toward yang side.

How to buy gold in Singapore?

If you have decided to hedge your money by buying gold, you must know what types of gold are available in the markets. There are three ways you can buy gold.

1) Buying gold from jewellery shop.
Well, the first thing in your mind is to buy gold from jewellery shop. This type of gold might not be a good hedging as firstly you will be charge on the workmanship for the design, and secondly you will be charge GST(currently at 7% as of today). When you intend to sell it next time, you may be charge GST again. With all these, your value of gold will go down a lot.

2) Buying gold bullion.
What is gold bullion. It is commonly known as gold bar. Yes the one you always see in movies showing a safe room which a lot of gold bars inside. It also comes in term of coins. Again this types of gold may not be good for hedging too. Firstly, you will be charge GST, secondly you must find a safe place to store it. If you keep in the bank safe, you need to pay an amount every year.

3) Buying paper gold.
In SGX, there is a ETF called GLD 10US$ which is a form of paper gold. Like shares, you can buy it if you have a investment trading account. The only extra cost is commission when you buy or sell your paper gold. This commission is generally less than 1% which is much lower than GST. One thing to note, this ETF is traded in US$. Before you start buying (or selling), you must take the exchange rate between USD and your currency (singapore dollar).

You can also invest in paper gold using the UOB Gold Savings Account. However please take note on its monthly charges.