My Rules of Investment

It has been almost a year since I purchased my first ever share (HSL 6238) in Bursa Malaysia. In the past one year I have gone through super bull period as well as few minor corrections, and of course I did enjoy some gains as well as suffer from some losses in the share market. I have made some stupid mistakes in investment. Nevertheless, I'm rather grateful that the mistakes happened in early stage of my investment adventure. I should really learn from past mistakes in order to do better in future.

I have set myself few rules of investment based on experience gained thus far:

1) Never buy into rumors - very frequently on stock forum you can see people spreading rumors that certain shares will be 'goreng'. Do not listen to rumors, rumors are normally spread by those who stuck at high price who try to unload/cut loss.

2) Invest in shares with strong fundamental - must do homework before buying a particular share. Doing fundamental analysis is a must in order to find out if a company is worth to invest. The few things to consider when assessing a particular company include past earning record, price per earning (PER), earning growth, return on equity (ROE), gearing, cash flow etc. Comparing with competitors to determine if the company is overvalued/undervalued. Besides, it is necessary to know the company structure, the nature of business and board of directors. The risk would be lower once you truly understand the company that you are going to buy.

3) Never play contra/margin - buy shares with your own money.

4) Call warrants are EVIL - the lifespan of call warrants is normally very short, around 1-2 years. Unlike ordinary shares, the longer you hold a call warrant, the higher the risk would be. This is because call warrants might become worthless (which means you lose everything, you get zero return) if it is out-of-money upon matured. Try to avoid buying call warrants unless it is really attractive with close-to-zero or negative premium, and still far from maturity.

5) Strong holding power - hold with patience onto good/undervalued shares with to enjoy greater profit. Keep an eye on the quarterly financial reports to ensure earning is on track and business is still profitable. There were several times I was too impatient to take small profit from very good and solid shares like HSL and KFIMA to blame myself for stupidity after seeing the price kept going up. Should I have hold longer, I would have enjoyed greater profit and decent dividend.

6) Do not put all eggs in one basket - diversify investment in several stocks in different sectors.

7) Be humble and learn from people who are more experienced and knowledgeable in share market.

8) Keep myself updated with financial news and with whats happening in the world.