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Controlling the controllable (只控制可以被掌控的事情)

There is a lot of people who likes to control something that are not controllable by them. For example, they would want to predict the share price movement and predict the profit that the company will earn in the next quarters by using extreme optimism. The writer would say that these are all things that we can’t control, why not we invest alongside with things that we are controllable.

The first thing we can control is broker fees. As we all know, broker fees will be charged for each transaction, regardless of it being to buy or to sell a share. Let say you are transacting twice per day, hence 40 times a month, and the broker fees including all stamp duty will be around RM10. The amount you will be losing without even accounting your share price will be RM400 per month, and that is about a third of Malaysia’s lowest income limitation. However, if you can control yourself to being a long-term investor with only transacting once per month, you will be able to save up to RM390, and spend it on other stocks.

The second thing we can control is risk. In order to control and manage risk, we will need the margin of safety when buying stocks. Never buy the stocks when they are overvalued, and buy the stock when they dropped to a reasonable price. Hold a certain amount of cash to counter any uncertainties that may happen in the future. If one has no cash left and the market suddenly crash, all we can do is just watch. Although the market will eventually rebound, but the opportunity is definitely missed.

The third thing we can control is our self, and our emotion. Whenever there is a market crash, normal people will follow others and sell their position just because they would like to get their cost back. However, a more intelligent investor should see this as an opportunity and buy more so when the market returns to normal, they will be able to earn more. Besides, there will be certain stocks they will surge continuously and they may look tempting to buy. However, it is the best to control your emotion and resist buying stocks that are going up continuously and getting higher valuation. That way, you reduce your risk for not buying a high valuation stock.

In short, investors nowadays like to time the market and would like to control the price movement. However, these are the things that we small investors can’t control. So, why not we just focus on smaller things that are within our control, and resist our self from making silly decision. This way, we can also prevent unnecessary losses without having the concern of share price either.






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