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My Stock Investment Mindset

5:04 PM  Pisstol Aer   Labels:
Have you ever wonder how many people you know are really making money in stock market?  I bet there are only just a few, if it is not none.  Sometime, you may see your friend claimed that he had make handsome profit in one day but his face turned sour in the other.  Why there are only a few manage to have profit from stock investment?  I believe the main reason is that those who loss money in stock investment do not have a correct mindset.  So, what should the correct mindset be in order to be success in stock investment?  Here, I would like to share some of my thoughts.



Firstly, do not ever think of making quick bucks.  If you do not have this mindset, you may gain some fast profit if you are lucky, and loss it all fast as well.  This is because you are actually betting the price difference between your buying and selling price but not the fundamental of the company.  That is, your destiny is depending on your luck and unpredictable market forces but not a company's fundamental and its profitability.  If you have a mindset of buying a company's stock which is actually asking a company to use your investment to earn more bucks for you, what will you think then?  If the company is really making money for you, will you still think about the difference between buying and selling price of its stock?

Secondly, if you really care about the difference between your buying and selling price, the chances of buying an over-priced lousy stock is high.  This is because you do not evaluate the fundamental of the stock but follow what other people or the market are telling you blindly.  You do not think that studying the fundamental of the company is necessary and is a waste of time.  So, you loss again at the end.

In short, my stock investment mindset is very simple: 

  1. I will search for my favorite stocks.  Those stocks are involving in businesses and markets that I fully understand.  These stocks might not be necessary be a blue chip but must be in the market for at least 5 years.  The longer the better.  Normally, any lousy business will get out of the market within the first 5 years of the operation.  Those who can survive should have its surviving methods (competitive advantages).  Also, a company might also experience at least once on market or sector cycle upturn and downturn.  Should a company able to survive in this cycle with stable or even better profitability, this company is having solid fundamental.
  2. I will study its fundamental of the company thoroughly by using my Process #1.  Fundamental analysis will further convince me that I am making a right choice.  
  3. Next, I will is to wait for the buying opportunity.  I will use my Process #2 here.  The best investment timing is when the market starts to revive after the market crash.  I personally increase my stock holding in 1st quarter of 2009 after the market crash in 4th quarter of 2008.  I hold all of them until now and they are giving me paper gain and dividend gain handsomely.
You may wonder when do I sell then.  Well, I only sell when the fundamental of the company change.  If the fundamental of those companies I invest in remain strong, I will not sell even there is another market crash during my holding.  Instead, I will buy more to further average down my holding cost.  As a matter of fact, my holding cost has been reducing during my holding due to the dividend received.  To me, any declaration of dividend is effectively reduce my holding cost.  When the next market crash comes, my holding cost is low enough which, psychologically speaking, almost no impact to me.  In other words, next market crash is another shopping spree for me.

I do hope my mindset could help you on successful stock investment.
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My Stock Investment Mindset
My Stock Investment Mindset
Reviewed by Pisstol Aer
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