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Q: How can investors avoid being shocked, or at least reduce the risk of overreacting to a surprise?
A: Understanding that we do not know the future is such a simple statement, but it's so important. Investors do better where risk management is a conscious part of the process. Maximizing return is a strategy that makes sense only in very specific circumstances. In general, survival is the only road to riches. Let me say that again: Survival is the only road to riches. You should try to maximize return only if losses would not threaten your survival and if you have a compelling future need for the extra gains you might earn.
The riskiest moment is when you're right. That's when you're in the most trouble, because you tend to overstay the good decisions. So, in many ways, it's better not to be so right. That's what diversification is for. It's an explicit recognition of ignorance. And I view diversification not only as a survival strategy but as an aggressive strategy, because the next windfall might come from a surprising place. I want to make sure I'm exposed to it. Somebody once said that if you're comfortable with everything you own, you're not diversified. I think you should have a small allocation to gold, to foreign currency, to TIPS [Treasury Inflation-Protected Securities].
Can you manage yourself in a bubble, and can you manage yourself on the other side? It's very easy to say yes when you haven't been there. But it's very hot in that oven. And can you save your ego, as well as your wealth? I think I might have just said something important. Your wealth is like your children -- the primary link between your present and the future. You should try to think about it in the same way. You want your children to have freedom but you also want them to be good people who can take care of themselves. You don't want to blow it, because you don't get a second chance. When you invest, it's not your wealth today, but it's your future that you're really managing.
Unquote:-
Who said above?
Definitely won't be WB.
Yet he had done quite well too.
Means what?
WB:-
1) Rule # 1, do not lose money.
2) Rule # 2, refer to # 1.
3) Not until you can manage your emotions, you can manage your money.
Truism of Investments.
A) Buying a security is buying RISK not Return
B) You can control RISK (to a certain level, hopefully only.) But definitely not the outcome of the Return.
NB:-
My signature is meant for psychoing myself. No offence to anyone. i am trying not to lose money unnecessary anymore.
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(28-07-2017, 03:40 PM)Temperament Wrote: Q: How can investors avoid being shocked, or at least reduce the risk of overreacting to a surprise?
A: Understanding that we do not know the future is such a simple statement, but it's so important. Investors do better where risk management is a conscious part of the process. Maximizing return is a strategy that makes sense only in very specific circumstances. In general, survival is the only road to riches. Let me say that again: Survival is the only road to riches. You should try to maximize return only if losses would not threaten your survival and if you have a compelling future need for the extra gains you might earn.
The riskiest moment is when you're right. That's when you're in the most trouble, because you tend to overstay the good decisions. So, in many ways, it's better not to be so right. That's what diversification is for. It's an explicit recognition of ignorance. And I view diversification not only as a survival strategy but as an aggressive strategy, because the next windfall might come from a surprising place. I want to make sure I'm exposed to it. Somebody once said that if you're comfortable with everything you own, you're not diversified. I think you should have a small allocation to gold, to foreign currency, to TIPS [Treasury Inflation-Protected Securities].
Can you manage yourself in a bubble, and can you manage yourself on the other side? It's very easy to say yes when you haven't been there. But it's very hot in that oven. And can you save your ego, as well as your wealth? I think I might have just said something important. Your wealth is like your children -- the primary link between your present and the future. You should try to think about it in the same way. You want your children to have freedom but you also want them to be good people who can take care of themselves. You don't want to blow it, because you don't get a second chance. When you invest, it's not your wealth today, but it's your future that you're really managing.
Unquote:-
Who said above?
Definitely won't be WB.
Yet he had done quite well too.
Means what? A short paragraph but alot of wisdom & good advice embedded. Thanks for sharing. If I may add my 2 cents on risk management, " Buy slowly, sell slowly"... 
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(29-07-2017, 10:23 AM)MINX Wrote: (28-07-2017, 03:40 PM)Temperament Wrote: Q: How can investors avoid being shocked, or at least reduce the risk of overreacting to a surprise?
A: Understanding that we do not know the future is such a simple statement, but it's so important. Investors do better where risk management is a conscious part of the process. Maximizing return is a strategy that makes sense only in very specific circumstances. In general, survival is the only road to riches. Let me say that again: Survival is the only road to riches. You should try to maximize return only if losses would not threaten your survival and if you have a compelling future need for the extra gains you might earn.
The riskiest moment is when you're right. That's when you're in the most trouble, because you tend to overstay the good decisions. So, in many ways, it's better not to be so right. That's what diversification is for. It's an explicit recognition of ignorance. And I view diversification not only as a survival strategy but as an aggressive strategy, because the next windfall might come from a surprising place. I want to make sure I'm exposed to it. Somebody once said that if you're comfortable with everything you own, you're not diversified. I think you should have a small allocation to gold, to foreign currency, to TIPS [Treasury Inflation-Protected Securities].
Can you manage yourself in a bubble, and can you manage yourself on the other side? It's very easy to say yes when you haven't been there. But it's very hot in that oven. And can you save your ego, as well as your wealth? I think I might have just said something important. Your wealth is like your children -- the primary link between your present and the future. You should try to think about it in the same way. You want your children to have freedom but you also want them to be good people who can take care of themselves. You don't want to blow it, because you don't get a second chance. When you invest, it's not your wealth today, but it's your future that you're really managing.
Unquote:-
Who said above?
Definitely won't be WB.
Yet he had done quite well too.
Means what? A short paragraph but alot of wisdom & good advice embedded. Thanks for sharing. If I may add my 2 cents on risk management, " Buy slowly, sell slowly"... Ya loh.
i always not happy with the way i buy or sell.
Too fast one like birds mating (in the sky?)
When will i be happy?
i am happy as long as i don't lose money.
WB:-
1) Rule # 1, do not lose money.
2) Rule # 2, refer to # 1.
3) Not until you can manage your emotions, you can manage your money.
Truism of Investments.
A) Buying a security is buying RISK not Return
B) You can control RISK (to a certain level, hopefully only.) But definitely not the outcome of the Return.
NB:-
My signature is meant for psychoing myself. No offence to anyone. i am trying not to lose money unnecessary anymore.
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Since this is emotional question.
It's a question of your confidence in your analysis and value of the stock.
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most of the time, I feel it's the unplanned need for cash that make people lose money... 
too much self-expectation to perform/come up with cash, end up... take unnecessary/speculative risks...
Realistic returns for steady investment products,
1) FD - 1%
2) SGS Bonds - 2-3%
3) Stock - 5 to 7%
always remember we are not Warren Buffet... 
Sometimes we get exceptional returns (buy back offers..etc), that's not normal...
Plan your cash around the investment products, setting reasonable returns, then you will be fine..
some of cos practise no risk no gain! that's another story!
1) Try NOT to LOSE money!
2) Do NOT SELL in BEAR, BUY-BUY-BUY! invest in managements/companies that does the same!
3) CASH in hand is KING in BEAR!
4) In BULL, SELL-SELL-SELL!
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(18-08-2017, 02:09 PM)choya Wrote: (18-08-2017, 01:29 PM)brattzz Wrote: most of the time, I feel it's the unplanned need for cash that make people lose money...
too much self-expectation to perform/come up with cash, end up... take unnecessary/speculative risks...
Realistic returns for steady investment products,
1) FD - 1%
2) SGS Bonds - 2-3%
3) Stock - 5 to 7%
always remember we are not Warren Buffet...
Sometimes we get exceptional returns (buy back offers..etc), that's not normal...
Plan your cash around the investment products, setting reasonable returns, then you will be fine..
some of cos practise no risk no gain! that's another story!
AIA Wholelife policy = 0.75% though there is terminal bonus (hope they don't remove that like what they do to earlier policies).
AIA Financial Guardian = 0.9%, no terminal bonus
Wish I learn about "buy term invest the rest" during my younger days
Well its never too late to start! I started at 17 and it took me a quarter of a century to really figure out what I should be doing. Thankfully the market kept me alive, though I won small ones and lost once big-time 😊
Now being into my 26th year of investing, I can hopefully say that I have learnt a little; and maybe I shall make some money over the later half of my life!!!
"You are right not because the world agrees or disagrees with you, rather you are right because your facts & reasoning are right."
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(19-08-2017, 07:44 AM)sgmystique Wrote: Well its never too late to start! I started at 17 and it took me a quarter of a century to really figure out what I should be doing. Thankfully the market kept me alive, though I won small ones and lost once big-time 😊
Now being into my 26th year of investing, I can hopefully say that I have learnt a little; and maybe I shall make some money over the later half of my life!!!
Although WB was already an astute young boy (he started to audit his own "investment returns' when he was barely ~12years old and it was also installed in folklore that he used his first birthday gift money to buy a pinball machine to put into a bar), but 99% of his money was earned after he was 50years old. So he wasn't exactly a late bloomer but a clear evidence of the effects of compounding knowledge/wealth.
http://www.businessinsider.com/how-rich-...15-8/?IR=T
Sometimes, the typical late bloomer has his/her share of hardship events - it makes them grounded to reality and resistant to hubris. I guess that still brings HOPE to some of us here.
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