Do You Make More Profit Buying-And-Holding, Or Buying Low-And-Selling High?
A reader of my blog sent me an email:
Hi Carson,
Thank you for the info and your generous sharing with us in your blog. I have trouble getting into POST COMMENT (Ask a Unit Trust Question) as I need to select Comment as : Profile and I cant fit into the list in the profile.
Anyway, I wish to ask your view on China fund (Public Mutual). Is it worth investing for 3 years term or shorter or longer since launched?
Thank you.
Regards,
Name Withdrawn
And my reply:
Hi Name Withdrawn,
Thanks for your compliment and your email. You can select 'Google' in the Profile since you are a Gmail user.
Previously, I have the thinking of investing for a fixed period of time. You may read my earlier blog postings. I have spoken about investing long term in Unit Trust to make profit. This is the general thinking among the Unit Trust consultants. However, my thoughts are now very different.
Let's look at the disadvantages of investing for a fixed number of years:
- Price may go down during that 3 years from the time you bought the fund. This results in losses.
- Price may go up and you would have not taken action to sell and thus profit opportunity is lost.
- You need to continuously do dollar cost averaging technique throughout these 3 years to minimise your losses.
- At the end of the 3 years, we will not know where the fund price is from whence you started.
My new views are:
- Don't have a fixed mindset of the number of years you need to invest in.
- Buy when the price is low. And sell when the price is high. Cash in your profit.
- To be able to know when the price is low, you need to do your own research on the chart. Study the Elliot Wave Theory and the like.
- Similarly, to know when the price is high, you also need to do your own research on the chart.
I know it is not as simple as it seems in spotting the low price and high price. It takes time to learn. Keep reading my blog for new insights.
Right now, I think there is still possibility of price dipping further in the near term. I won't buy now.
On the note of China Fund, I will not invest in an overseas fund despite people saying that China is a booming market. This is simply because I am not familiar with the market and the companies that the China Fund invests in. For your info, The Shanghai Index has the worst performance year-to-date (down 56%) compares to other Stock Market Indexes in the world. Even the Malaysian KLCI fares better.
Stay posted for my discussion on Elliot Wave and the KLCI in my next posting.
You can see that buying at appropriate time is possible when you have studied the chart carefully as I have shown in a previous article #139. Gold Investment And Tetrahedron.
Meanwhile, what do you think about the strategy of buy and hold for a fixed period of time versus buy and sell at appropriate times? Please leave your comment.
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5 comments:
I believe that it is very hard to time the market. This leads to the argument of whether buy and hold or buy low sell high.
The problem is we don't know when is the lowest?? But we do know that it is low..
Like now, it is low. But it may not be the lowest point, yet. A good strategy is to go in the market slowly. When it goes lower, we invest more provided that you still believe the investment will bounce back one day.
KCLau,
Yes, it seems to people that it is very hard to time the market. However, W.D.Gann certainly didn't think so.
There are many intriguing materials on the internet discussing W.D.Gann's methods. Known as "The Master Trader", Gann had accurately forecasted the historical market crash of 1929.
He also accumulated much wealth from his stock trading through his accuracy in predicting the date and price level.
He used very scientific methods nevertheless.
The next best thing we can do is to study the charts and buy when the price is low and sell when the market is high.
I recently came across your blog and have been reading along. I thought I would leave my first comment. I don't know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.
Deborah
Term Life Insurance
its not easy to time the most bottom or the peak, but using technical analysis, it is not tough to identify the 'right after' effect, which allow some to 'follow' trend.
however, this is the 'rat race' of investment methodology btw fundamentalist and techncal analyst, if you switch from one to another then you may most likely to end up like an investor who doesn't know both to start with ...
in short, you have to be very clear to start with when using the chart, is it for long term judgement or is it for shorter term. If you follow too closely for a long term chart analysis, you will end up paying more transaction fee than you can earn.
there are also talks about having a good 'money management' before using these charts ...
http://malaysiapersonalfinance.blogspot.com/2008/12/technical-analysis-vs-fundamentals.html
Michael,
Thanks for leaving your comments.
It takes time to master the art of knowing when it is the bottom and when it is the peak.
Knowing the bottom and peak involves a lot calculations:
1. Calculating the dates. I have found this to work. Yes, it sounds like astrology. This is nothing new. It's been in practice for many, many years.
2. Knowing your basics in charts and technical analysis. We should know the basics of Gann's 50% retracement theory, Fibonacci numbers, Golden ratio, Elliot Waves, geometry, etc.
Fundamentals to me are just 'noises' that moves the market up and down. For a period of 1-3 months, charts and technical analysis are still the best. They have helped me to stay focus and eliminate all the noises of so-called fundamentals.
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