KLSE: What should an amateur investor expects from stock market?

Most of the times, small time retail investors always think that they are not good enough to manage their fund, they are not good enough to do their own research or analysis, they are indecision in buying or selling a stock, or they simply have no confident on their thinking and etc. With that, they entrusted their money to fund manager, they took advises from their brokers, they listen and act on rumors regardless where the sources from, they read the research report conducted by professional analyst and so on. Non of the method mentioned are bad at all as i believe some people indeed earning a huge bulk of money too. However, the message that i wish to bring out is, amateur investor like us can actually earn from the market too without going through the above mentioned methods. We can be more self-dependent and still earning from the market. So, what is wrong when one put in their money into unit trust or mutual fund? Or what is wrong when we over rely on our brokers?

1. For many people, buying into a mutual funds or unit trust is easy as their money are managed by all the professional fund managers who has ample experience and knowledge in the stock market. It might be good to those people who wishes to grow their money but too busy to do some homework before buying any shares. However, little do they know that buying a unit trust or a mutual funds need a lot of homework too! It is good if you know all the particulars of the fund that you invested, it is good if you pick a fund with sound performance over some years as investing into a fund are meant to be long term. Homework needs to be done too, there is no free lunch. 

2. More often than not we received calls from our brokers for tips or rumors. Sometimes we able to reap some profit but sometimes we loss as there is no guarantee return. My advises on you when your brokers call for stock tips, don't be shy on asking questions below:

a) What is the business of the company? What makes you think that it is a good buy now?

b) Is the company making money now? How about past few years? What is the growth rate?

c)How is the balance sheet of the company? If it is in debt situation, how heavy is it? 

d) How is the management teams? Are they being kind to pay out dividend? Or have the company call up for cash from shareholders for many times? 

Basically this is the general idea of what questions to ask, you can always raised your queries to your brokers as i believe if they want to do your business, they will try to answer you. 

3. Whenever you heard some rumors, and you feel that it is promising, try to ask yourself

a) Who are the rumors teller? What is your last experience when you heard and react into a rumor?

b)How long the rumors have been passed through, will you possibly be the last one who get to know it? 

c) What is the percentage of you strike a lottery? 

Well i deeply understand that most of the people have the same experiences of earning huge gain nor losing big money from rumors. Most of the times the experience must be pain. If you try to buy a stock by listening to rumors, you are trying to time the market as for me. If you are fast or lucky enough to sell off your shares, you are safe and happy. However, not all people are so lucky especially when they bought into a highly speculated stock, their funds will be stuck as their entry level is high and they dare not to realize the losses. Worst still they kept a hope that the rumors will come back and the shares will up again, and thus becoming an involuntary long term investors. By that, not to mention about growing your money, you have problem to retain the value of your money now. 

So now, 

What should an amateur investor expects from stock market?

First of all, i do not wish to mislead you. I am not here to tell you any secret nor telling you any foolproof method in stock investing, if there is any. As a amateur investor, if you do not wish to rely on fund manager to manage your hard earn money, if you have enough bad experiences with your brokers and rumors, you always have other options. I am going to list down a few and to be frankly, you have to spend some times on it for sure.

1) Common sense and logical thinking is one of the best way in stock investing. If you ever read Peter Lynch's book ( in fact if you didn't, i highly recommended you to read), you knew that you can make money in the stock market by using what you already know. How and why? Please remember, the keyword here is "what you already know", that means you do not buy into a company which you have problem to speak out what is the business, nor do you understand the business well. Now, let me take a bursa stock as an example in a scenario. Few years back, if you went to any shopping mall, or visit to any department stores, you will start to notice that there is a home grown brand call Padini been expanding in Malaysia. It is not hard to notice that their existence is getting more and more popular and if you have a quick check on their report, you knew that they are growing real fast. I believe many people have been visited to Padini Concept Stores or Brand Outlets, but how many have actually bought into this shares? If you bought Padini shares few years back and hold until now, you have earned multi-baggers. Is it hard? Everyone could possibly know that Padini is doing good, the staff knew it, those shoppers knew it, their supplier knew it, the passerby knew it, the management of the shopping mall knew it too. If you do not like to shop and seldom pay a visit to any shopping mall, you can  know it from newspaper?from social network? from your friends who always wear SEED shirt? All you have to do is to check their report to ensure that the aggressive growing of outlets derived into good earnings too. You do not need any professional knowledge to spot on this, you do not need any tips or rumors, you do not need any insider news too to find out this great company. 

2)Looking on your edge. What is your edge when comes to stock investing? If you have a great accounting background, you can read and understand a company thoroughly from its financial report, and thus avoid to invest into those companies with unhealthy balance sheet, or possibly those with accounting frauds? If you have been working into steel industry, you knew that this industry is cyclical and competitive, you knew that the supply is overwhelming, and if one day the steel price starts to pick up i am sure you know better than the others right? Likewise, those working in plantation industry, furniture industry or drug industry? We don't listen to an engineer talks about how good the plantation will be on this year, nor do we listen to a doctor to tell you that oil & gas will be the best theme of this year? Invest what you know best and be confident with will be a better choice i believe.

3) Do not try to time the market. If you always wait for the best moment to get into the market, you might end up buying nothing. No doubt that some people are real good in timing, they can make money in a short time. If you able to consistently do it, it is a great achievement and congratulations to you. However, if you are the one who failed to do it, you might need to reconsider your strategies. Stock investment can be easy can be tough, it is depending on one's philosophy of investing. 

Basically the lists do not end here, there are still long to go if you really were to list down one by one. The abovementioned methods are powerful for me and often overlooked by many investors. As an amateur investor, we can do well in stock market too, sometimes even better than the fund managers.