About 2 months ago when our Ringgit started to strengthen most of the companies that sell their products in US$ would earn less profit in terms of Ringgit. Shareholders began to dump their holdings.
In the last few days, most of the companies that export their products such as Focus Lumber, Latitude, Supermax etc reported reduced profit because of the Ringgit strengthening. As a result, their share prices plunged and I suffer heavy losses on paper.
Fortunately, Lii Hen reported increased profit and its share price has been going up and up. How did they overcome the foreign exchange rate fluctuation?
I have learned a new lesson in share investing. In the stock market there are always some unexpected announcements and catch you unprepared.
Sometimes for no good reason, there are investors dumping their shares and sometimes investors buy shares aggressively. As a result share prices often fluctuate violently and shake out weak holders.
Never completely rely on financial analyst reports because they are based on historical facts and figures. They cannot predict the future.
Also do not completely rely on chart to buy and sell. Sometimes you can find really good shares to buy while the chart is showing down trend and sometimes really rotten shares go up for no good reasons.
It’s a jungle out there, if you enter the jungle too often you will meet a tiger.
In the stock market, investors cannot be successful without confidence, even over confidence but how to balance between confidence and humility is always a big problem. Success leads to confidence, leads to over confidence, leads to failure seems to be a natural cycle. The only protection is humility.
The best way to reduce risk is to own a larger number of counters. Do not put too many eggs in one basket. If you have invested in many counters, you can take advantage of the frequent price fluctuations. Sell those that are going up for no good reasons and buy those that are falling for no good reasons.
In fact, this is what I normally do every day. It is exciting.
Koon Yew Yin 官有缘 - Koon’s Investment Lesson #9: How to avoid surprises?