#151. Question On Gold Investment And Tetrahedron

Does The Theory Of Tetrahedron Work In Gold Investment?

Gold price charts for 2007 and 2008 (till 15 Dec 2008)

(click on the picture to enlarge)

After I have written two articles on gold investment trends, a reader, Caryn, wrote to me:

Hi Carson ! My name is Caryn Chiang and I have read your articles on gold investing.

I would like to thank you for sharing your thought with the rest of Malaysians and I am quite impress with your finding. Your chart shows the year 2008 have you tried your pyramid on the previous years? Do they work on those years too ?

Hope to hear from you soon. Thanks !

Well, here is my answer:

Please refer to the picture above. I can't find a good chart for 2007 and the above is the best I could find. I put it side by side with the 2008 chart. 

I found that in 2007, there were three spikes toward the end of the of the year. And there after the price took off in early 2008 reaching the climax of just above USD1000 level per ounce on 17 March 2008. 

So, Caryn, what do you think? Does the theory of tetrahedron work? Is there a natural force at work?

If you are able to find a better chart for 2007 or previous years charts on gold price, perhaps you can see the spikes. However, because in the earlier years, the movement were too small, the 3 spikes and tetrahedron pyramid are hard to discern. 

Movements will get larger and larger in the coming years based on the Fibonacci theory. The price movmentss will get bigger and bigger. Bolder and bolder. I will see price fluctuation in a greater degree as in 2008. In 2009, the fluctuation will be even bigger. And this is good news for us. More opportunity to make profit when you are able to time and invest when the price is low. 

Just an additional note

Nevertheless, please do not adopt this theory of tetrahedron as the ultimate guide in timing your investment in gold. You also need knowledge on determining the uptrend of a chart. Where will it head next? Up or down? You also need to have knowledge on Elliot Wave. 

#150. Top Money Tips For Malaysians

Learn The Simple And Practical Guide To Managing Your Personal Finance, For Malaysians

KCLau has recently published his first book. This is a, as shown on the cover of the book, 'simple and practical' guide to managing your personal finance.

However, don't be fool by the word 'simple'. The keyword in my opinion for the entire content of the book is 'practical'. I wish someone has given me a book like this when I started working in my first job many, many years ago!

The practical tips and guides are so valuable that you would not have even thought of it. Reading this book will save you at least a few years of self-studying to improve your personal finance. I am such person that have constantly been trying to read up on tips to improve all areas of personal finance. However, it amazes me to find some gems in there that I have not thought of!

The book is essentially divided into four important parts that everyone should know when it comes to the betterment of our own personal finance.

1. Smart Money Tips

Of course, the first step towards riches and growing your wealth is to spend less than you earn. And once you have managed to spend less than you earn, what do you do with the extra that you have saved? Find out in the book on how to grow your wealth with the money that you have saved. And more importantly, used OPM (Other People's Money) to increase your wealth!

2. Money-Making Tips

Well, you can't stop at just spending less, and then investing the money you saved. To expand your wealth horizon further, what else can you do other than look for ways to make money!? The chapter on "Turn your passion into money making machine" itself is what I think, the best tip a person can get! I only wish someone has told me this just when I started out in the 'rat race'. I definitely will not be in a rat race today if I have followed this tip. Thanks, KCLau, I will definitely pass this tip on to my son when it's his time to earn his own bucks.

3. Money-Saving Tips

OK, this part has a lot of great practical tips that will surely blow your mind! Tips included in this part is usually not discussed even by people in the industry of unit trust, car dealers, or mortgage sales personnel.

KCLau offers valuable tips here on how to you can get your first car for FREE. Again, something I should have been told when I get my first car! I am wiser now and of course kept telling everyone about getting a used car. While my tips in my blog share on how to save a virtual RM30,000 off the purchase of your car, KCLau offers a 'practical' tip on how you really can save a real RM5,000 and more on the purchase of your car.

Next, you will learn how to minimize the sales charges when you invest in unit trust. I do share a few tips myself too, however, KCLau has now reached a wider audience when he shares the tips in his book with Malaysians. Just hope that people in the unit trust industry don't get mad with him sharing this trade secret. I am a believer in helping people to look for ways to save their money though, even if I am in the unit trust industry myself. KCLau, you have done a great job here.

Now, mortgage is something most of us will use in our lifetime. Again, this book offer a great tip in 'manoeuvre your mortgage' especially when banks are slashing their rates in this financial times. I have myself practised this tip but without realising it is actually a 'simple' practice that can help save thousands of Ringgit.

4. Money-Protection Tips

Finally, the important part of your financial journey definitely has to include these tips. Or it won't be complete.

Here, you will learn the benefits of having a good insurance plan to protect your wealth. Insurance is something that people always put off until it is too late. However, we should be thinking of this first before embarking on our journey on creating wealth at all.

I remember a friend of mine who is an insurance agent that had shared this tip with me:

"Imagine you have accumulated so much wealth throughout your life. Let's say you have RM1 million and yet without an insurance plan. Your will only leave your son with RM1 million after you leave this world.

However if you have an insurance plan that can pay you RM1 million to your beneficiary upon your 'departure', that would mean your son and wife will now be having RM2 million (your own wealth and the money from insurance).

Many people don't realise and know that insurance is also a wealth creation financial tool by itself."

Read KCLau's books to find the right plan for using insurance as a wealth protection and creation tool. Then learn how to calculate how much insurance premium you need to pay and how you can save money on the premium. Definitely a great read in this part since KCLau is sharing information from an insurance insider's (his is himself an insurance agent) point of view.

The book is sold for RM29.90 at local bookstore, or you could buy it over the net and have it delivered to you. Click here for net purchase.

#149. Recovering Investment Losses

Find Out How You Can Quickly Recover Your Investment Losses, Even If You Have Lost 40%

 

Hong wrote in the comment section of article #56. When To Switch And When To Do Dollar Cost Averaging? as below:

I'm investing into PM's PSEASF. This fund has been dipping for the past 1 year. 

Looking at current financial crisis 2008/2009, shall I continue with DCA (invest monthly)?

My objective of this fund is for medium term (5 yrs). What's your opinion?

And my immediate reply was:

I sympathise with you for investing in this fund during this financial crisis. If you have bought this fund during it's launch at 25 sen per unit, as today, there is already a 40% reduction in your investment. 

In the future, it will be wise for you to set a 'stop loss' target say at 10% or 20%. If you have hit that point, you should cut your losses and switch to another funds. (Read this article for more information: http://www.unit-trust-investment.com/2008/05/91-when-to-cut-losses.html)

However, since you are now 40% below your initial investment, I reckon it is too late to cut your losses. If you choose to stay on with your investment (since you have a 5-year plan) you have other options. Read on. 

Well, the market is cyclical as I have always said. What is down now, may be up in the future.

This fund was launched at 25 sen. How low more can it go? Whereas most PM's funds are above 50 sen to 1 ringgit per unit. Optimistically, in the long run, you can wait for your investment to improve in price.

What you can do now is continue with the DCA on a monthly basis. However, look for an equity fund that has to date suffer the least losses. And look for funds that pays good dividends. Perform DCA on those funds instead of your PSEASF. Those funds will have a better track record compare to PSEASF which is a new fund. And those funds will recover faster when the market picks up again.

When the market eventually recovers, you will be thankful that you have invested during when the price is low with your DCA.

However, if you are psychologically feeling that even DCA is a wasted effort, perhaps a better thing to do is look for an investment that can reap you a better reward. Bearing in mind, that this 'investment' has to give you a return that can help you recover the total amount of your losses in PSEASF. 

Any good and safe investment that can give you a good return should be considered. At least, this will minimise the losses in PSEASF. 

Nevertheless, this losses of 40% in PSEASF is just paper loss. It is not materialised until you liquidate your funds. Give yourself the 5 years time and work things out slowly.

Warren Buffett's number One rule of investing is don't lose your money. An investment should protect and grow your wealth. However, when the investment has suffered an inevitable loss, we just need to find the quickest way to regain profit and recover the losses. This is what I have said in the Philosophy of Investment.  

Now, to expand the above points further:

1. Set a 'stop loss' target. Know when to call it quit. How much losses can you take when go into an investment? If it is 20%, then move your funds out once the investment has reached 20%. 

2. Find other ways to make your investment profitable again. Once you have decided to cut your losses, move your funds out. 

(i) You can switch it to another fund that is performing. Some funds that you can consider when the economy is going down are:

(By using the Public Mutual Fund Performance tool, select the funds and then choose the 'Date Range' as from 1/1/2008 to today's date I obtained the performance below.) 

Public Islamic Bond Fund - year to date performance of 3.70%

Public Money Market Fund - 3.00%

Public Select Bond Fund - 2.29%

You may also want to choose the beginning date as the same date you have invested in your 'losing' fund and made a comparison of how other funds have performed against your own fund.

The benefit of switching your fund to these bond funds is you do not have to pay anything (for switching from an equity fund to a bond fund). And when you switch from the bond fund back to an equity fund like PSEASF, you just need to pay a low switching fund of RM25. This saves you money compare to if you were to sell your PSEASF fund and then later buy again when the economy picks up. You will incur a sales charge again. 

(ii) Or withdraw the funds and put in Fixed Deposit. I know it is not a good idea to put your money in Fixed Deposit, but a gain of 3% in Fixed Deposit at least helps you to reduce the 40% losses. 

Bear in mind that 3% in Fixed Deposit is the same as the above Public Money Market Fund's performance. So, a better choice is to switch your fund within the Public Mutual's funds as describe in 2(i). 

3. Once you have decided to switch your losing fund to say Public Islamic Bond Fund that has a year to date performance of 3.70%, you may want to begin to do your Dollar Cost Averaging on this new winning fund instead. That way you can be sure that your new money is put in an investment that is gaining profit. 

You are heaping soil onto a hill (lama-lama jadi bukit) rather than throwing soil into a deep hole. It takes time to fill up the deep hole. But you can see your small hill becoming a larger hill. 

Remember too that the sales charge is 5.5% on equity fund (PSEASF). The sales charge in bond fund on the other hand is low. It's a mere 0.25%. When your investment is at a loss, you might want to minimize further losses in your new money injected into the investment. Paying 0.25% sales charge is much better than 5.5%. 

4. Alternatively, you may want to liquidate your investment from unit trust and invest in other type of investments. For example, I invested in gold at a price of RM86.03 per gram on 28 October 2008. Today's (18 December 2008) price per gram is RM95.54 per gram. 

That means, I have made per gram = RM95.54 minus RM86.03 = RM9.51

That is a gain of about 11% within a short period of less than two months!

For example, if your initial investment of RM10,000 in PSEASF has suffered a loss of 40%, that means you are now left with RM6,000.

You then take out this RM6,000 to invest in gold and make a handsome profit of 11%. That means you now have RM6,660. So, instead of incurring a loss of RM4,000, you are now in a much better position. You are now at a loss of RM3,340 (4000 - 660). 

However, to be able to get this kind of return, you have to 'time' the gold market. Timing is crucial in investing. Everything has a timing. While you drive a car out from a junction, you also have to time the exit so that you don't hit other oncoming cars. You have a time to eat your dinner and a time to sleep. So why not a time to buy your investment?

Timing the market certainly comes from understanding the market and your investment. It takes practice and knowledge to time the market accurately. 

5. When the market and economy improved and return to an uptrend, switch your funds back to those that are performing the best. Again switching and your timing is key to help you regain your losses and make your investment a profitable one again.  

#148. Gold Investment And Tetrahedron Update 2

Timing The Gold Market With Tetrahedron Movement

In #139. Gold Investment And Tetrahedron, I proposed the idea that the market moves in 3-dimensional in a tetrahedron shape. See the chart above for a brief idea. 3 triangles form a set of movement. And after one set of 3 triangles, the market is likely to move upwards.

Based on the above assumption, I bet my dollar on the gold price on 28 October 2008. During that time, the third triangle as you can see above, has not yet formed.

The above chart is how it looks like on 18 December 2008. At the time of writing, the third triangle has sort of formed. And the price is moving upward and is at USD866.97 at the time of writing this.

From this article, you can see that technical chart analysing itself is sufficient to guide your investment. It overrides the 'noise' of the so-called fundamental news. It is as if the market has a mind of it's own and there is an invisible natural force that shape the market. And fundamental news just fall in place at the right timing to support this natural force at work.

What do you think?

#147. Gold Investment In Malaysia

Find Out 5 Ways You Can Invest In Gold In Malaysia, And Know Which Is The Best

Many people have been interested in this shiny metal as investment of late. If you have seen my previous article on my forecast on gold price, it's coming true. The third triangle has formed and the gold price is now going up.

This article will give a comparison on where is the best place to invest in gold in malaysia.

1. Poh Kong
I bought a piece of 50gm Poh Kong Bunga Raya 999.9 Fine Gold gold bar on 5 November 2007. The selling price was RM95 per gram.

On 8 December 2008, I sold it back to Poh Kong. While the retail price for 999 gold on that day was RM105 per gram, Poh Kong bought it back from me at only RM94 per gram. Doing the maths, that's about 12% buying and selling price difference.

This is definitely not a good place to buy gold and invest in gold.

2. Maybank Gold Savings Passbook
In my early days of investing in gold, I was happy that Maybank offers a gold savings passbook account. This means that I don't have to find a safe deposit to keep the my gold bars from Poh Kong.

Let's examine the buying and selling price.

Today's gold price in Maybank:
Selling RM100.61
Buying RM93.10

Doing the maths, you can see the buying and selling price difference is about 8%. This is better than Poh Kong.

But wait, there is more. Read on.

3. Public Bank Gold Investment Account
On 21 April 2008, Maybank Gold Savings Passbook Account had a new competitor. It is the Public Bank Gold Investment Account. I was happy with this initiative from Public Bank. Let's see their buying and selling gold price difference to see what I mean.

Selling RM97.78
Buying RM93.83

Doing the maths again, the price difference between buying and selling is 4.2%. This is about half of what Maybank is offering. Definitely a good place to invest in gold. Don't you think?

A related article that I have written that you can read is here.

Now, why are we interested in the buying and selling price difference?

Well, the smaller the gap is, the faster you can break even on your investment when the price is going up. If you buy a Poh Kong gold bar, you have to wait for the price to go up more than 12% before you can make a profit in your investment. You are buying at the Retail price (Selling price) and you are selling back your gold at their Buying price. Therefore, the smaller the difference, the better it is.

Of course if you prefer to hold physical gold coins rather than just having a passbook account, you can do so by buying them from Maybank or UOB Bank.

4. UOB Bank Gold Coins
UOB offers competitive pricing in their gold coins and products (click on Gold Prices on that link).

UOB has Australian Nuggets, Gold Maple Leaf, Kinebar, Pamp Gold and Singapore Lion. They come in different sizes. The best ones are those 1 oz weight.

For example, look at the Aust Nuggets buying and selling price.

Selling RM3078
Buying RM2993

Let's do the maths. The difference is about 2.8%. This is by far the best compare to all those above.

5. Maybank Kijang Emas
Maybank has its own gold coins too. It's called the Kijang Emas Gold coins. It comes in three sizes, 1 oz, half oz and quarter oz.

The best rate of course is the largest one, the 1 oz gold coin.

Selling RM3141
Buying RM3041

Do your maths and see the selling and buying price difference. It's about 3.3% difference. Certainly can't beat UOB's prices.

So, now you know the difference. Invest wisely.

Disclaimer:
1. All prices shown above are based on the date of this article is published. Please check with the banks or retailer for the latest gold prices (the links are already provided throughout this article).
2. Physical gold coins or bars may not be available at all branches. Please check with the banks and retailer to find out where you can purchase them.

#146. Aesop And Investment

Here's a fable told by Aesop:

The Ants And The Grasshopper

One bright day in late autumn a family of Ants were bustling about in the warm sunshine, drying out the grain they had storedup during the summer, when a starving Grasshopper, his fiddle under his arm, came up and humbly begged for a bite to eat.

"What!" cried the Ants in surprise, "haven't you stored anything away for the winter? What in the world were you doing all last summer?"

"I didn't have time to store up any food," whined the Grasshopper; "I was so busy making music that before I knew itthe summer was gone."

The Ants shrugged their shoulders in disgust.

"Making music, were you?" they cried. "Very well; now dance!" And they turned their backs on the Grasshopper and went on with theirwork.

Times are hard now. Many are suffering in this economy turmoil.

We must learn from this event and remember to work hard during the good times; and stock up our funds so that we can use them during the rainy days.

We must also cleverly invest and save our funds during the good times and profit from it. In the low times, these funds can help us procure investments at a low price.

Have you learned from other Aesop's fables and applied in your life and investment? Please share by leaving your comments.

#145. Philosophy Of Unit Trust Investment

What Is Your Purpose In Investing?

Lately, I have undergone a kind of change in my thinking towards unit trust investments. I have always been looking for ways to simplify the things I do in life. Whether it is naming my files in the folders of my computer, or keeping my house organised, or writing my blog postings in numbering system. 

However, when it comes to unit trust investments, we have failed to simplify the things we do. 

By 'simplify', I mean how can we achieve the best efficiency for our money in investment. When you do things in a simplified way, you save time. That's the thinking that sprouted all those concepts on Kaizen, the Six Sigma and The Toyota Way. When you save time, you save money. Money is time. Time earns you money. When you achieve an efficiency in investment, you make more profit. That's the secret that I have finally realised!

The purpose of investment is to make money! If you don't find the best way to make money, you are simply wasting your effort, time and money!

Let me borrow a philosophy from martial arts. The philosophy in martial arts is summed up in three words: Speed, Accuracy and Power.

The reason for learning martial arts is to knock down your opponent. You want to punch your opponent's nose without any time-wasting flowery movements. And the faster you can knock the opponent down, the better. Therefore, Speed. In investment, don't you want to see 'speed' in making your money grow? So, best to buy low and sell high to see your money grow fast.

Next, Accuracy. In martial arts, you don't want to waste energy throwing punches that don't hit your opponent. Every punch has to be accurate to conserve your energy. Imagine how tiring it is to prolong a fight, what more to throw a lot of punches that don't hit. Trust me, I have learned Chinese Wushu, and it is really tiring to spar with your opponent. You want to conserve energy and learn to hit accurately

By Accuracy, in investment, it means you choose the right timing to invest in unit trust funds. You study the charts to invest at the right time when the price is really low. You accurately buy at the time when the chart and market is perfect to do so. And conversely, you sell when it is time to take your profit. 

Third, Power. Every punch in martial arts has to be punched with much power as if that is the punch that will knock down your opponent. It has to have power and impactful.

In unit trust investment, Power means, your unit trust funds have to be from a good company and managed by good fund managers. If it has a good track record, that's the best. You can know the track record sometimes from the Lipper or Morningstar ratings or the awards that it has won. Get the best fund for your bucks!

You buy the best funds to do the job. And the job is to earn money. Don't invest in funds that have a nice name or just because the unit trust agent says so. Make sure it serves the purpose. 

Investment should be made simple. We have complicated things over the years and have forgotten the true purpose of investment. 

What is your purpose in investment? Do you think of ways to simplify your money making effort in investment?

#144. Unit Trust Agents And Your Investment

Is Your Unit Trust Agent Knowledgeable To Help Your Investment Grow?

How many of you have lost some money in unit trust investments? Well, I hope you have come to right place. I will explain in a while below. Now, Warren Buffett gave his staffs two very clear rules. Rule number one, do not lose your money. Rule number two, refer to rule number one.

So, what is investment? 

I won't answer this question, instead, let us ask another more important question. Why do we invest?

We invest because we want to make money. We want to make our money make more money. That is the simplest philosophy. However we have complicated things along the way. And more importantly we forgot about the true aim and reason for investing.

Your unit trust agents should play an important role in making sure that your investment makes you money. Not the opposite. However, I always cringed and curled when I hear from friends and relatives that they have just bought so and so unit trust funds from so and so unit trust agents. 

Well, well, why do I cringed? 

Right Funds

Most of the time, these agents recommended the wrong funds. That's the first reason. You may ask, how can I say that when I have not even profiled my friends and relatives on their risk appetite. There are only a few funds that are worth investing in. Read an old article that I have written to find out one of the best funds to invest in. 

When I don't hear my friends and relatives talking about funds that are supposed to track the market trend, I know they have bought the wrong funds. Market is cyclical. There are ups and downs in the market. Buying a fund like Index Fund clearly shows you are long sighted and smart in your investment.

However, even if you have invested in an Index Fund, doesn't mean that you are well on your way to riches. And you can now sit back and watch your investment grow. Not yet.

Next reason why I cringed when I hear people buying or investing in unit trust funds at the wrong time. More often that not, they invest when the market is too high, or when the market is going to dip further. 

Perfect Timing

Just like the day and night, everything has a timing. There is time for us to eat and to sleep. Investment is the same. There is a time to buy. And a time to sell.

However, when someone has bought at a wrong time, I know that the unit trust agent has just closed a deal just so he or she can take home a fat commission. Unit trust agents earn their keeps based on how much they can get their clients to invest in the unit trust funds. They just want to earn a living and will not tell you that the time is not right to invest. 

When the market is down, the agents should be recommending you some bond funds. At this moment, best to buy some bonds and wait till the market dips to the bottom. Once it hits the bottom and on its way up, you can then switch your funds from bond funds to equity funds. No hurry now to go into equity funds. I became perplexed when I heard my friend who had just invested in an equity fund two months ago. What was the agent thinking? Just to make some sale and earn the commission. 

Knowledgeable Unit Trust Agent

Next, I will ask my friends and relatives how much they know about their unit trust agents?

The answers I get will be: "Oh, she is good. She is a full time agent. She just sent me an SMS to inform me that the price has gone lower and whether I want to top up."

Spot the rat there?

Being a full time agent does not necessarily means she is good. It is how knowledgeable the agent is on the market. Whether the agent knows when is a right time to invest?

Of course from the answer above, I don't find the agent knowledgeable on the market. Otherwise, she would not have sent an SMS to my friend to ask him to do a dollar cost averaging by topping up his earlier investment. 

If the agent knows about the market, she would not have advised anyone to go into a declining market and only to ask the investor to top up the investment later when the price goes lower. 

That to me is suicide in investment. You are burning your money.

Remember, investment is supposed to make you money. There is a time to buy. There is always a right time to buy. 

So, how to spot a knowledgeable unit trust agent?

Test your unit trust agent by asking: "Show me on this KLCI chart, where are the resistance and support?" If the agent doesn't have a KLCI chart, walk away. How can you talk about an investment when you don't have a chart?

If your agent can answer you what 'resistance' and 'support' mean, then ask further: "Which wave of the Elliot Wave are we in now on the KLCI?" 

This will make most of them go "huh?" and they will quickly change the topic to something else. 

Well, you see, most of the unit trust agents out there are just into the money. Most are too lazy to learn the real stuff of investment. Even more are too lazy to even read books on investing. Some do not even care whether it is uptrend or downtrend. They will just tell you: "Just do dollar cost averaging on a monthly basis. Invest regularly." 

Again, dollar cost averaging is a good technique. You can make it more effective by buying more when the price is low. Not when the price goes up so high.  

I have met many agents that are new and are very eager to close some sales. They say things that doesn't make sense to me. However, to an unknowledgeable investor, their words sound like wise words of investment simply because people think they are dealing with a 'unit trust agent'. And these 'agents' are supposed to be knowledgeable in handling their investments. 

#143. Foreign Currency Fixed Deposit

Is It Worthwhile To Save In Foreign Currency Fixed Deposit

With Central Banks around the world slashing interest rates in the current economy turmoil, rates for foreign currency fixed deposit in Malaysia has also seen a drastic decline.

In article #33,  I have mentioned in March 2008 that you can earn interest rate as high as 8.6% in a foreign currency fixed deposit. However, the rates today are only half of that.

In Hong Leong Bank's site, the rates are as follow:

AUD 4.10% p.a.

GBP 3.25% p.a.

USD 3.00% p.a.

NZD 4.75% p.a.

The highest being New Zealand Dollar Fixed Deposit.

The return is much better than our local FD. However, bear in mind the foreign currency exchange rate. The buying and selling rates that the banks use when you deposit and withdraw your money.

CIMB Bank and Public Bank have higher rates. 

Would you save your money in these foreign currency fixed deposit accounts? With unit trust funds at low prices now, wouldn't you save your money in unit trust funds?

What are other better options besides Fixed Deposit? Leave your comments.

#142. KLCI Chart And Elliot Wave

Is The Market Predictable?




From Wikipedia:
The Elliott wave principle is a form of technical analysis that attempts to forecast trends in the financial markets and other collective activities. It is named after Ralph Nelson Elliott (1871–1948), an accountant who developed the concept in the 1930s: he proposed that market prices unfold in specific patterns, which practitioners today call Elliott waves. Elliott published his views of market behavior in the book The Wave Principle (1938), in a series of articles in Financial World magazine in 1939, and most fully in his final major work, Nature's Laws – The Secret of the Universe (1946). Elliott argued that because humans are themselves rhythmical, their activities and decisions could be predicted in rhythms, too.

The illustration above shows the movement of Elliot's waves. There are 5 waves up (1-2-3-4-5) and 3 waves down (A-B-C).

And within each wave, there are actually smaller waves mimicking the bigger waves.

You can read up further here in Google, or Amazon.

The above chart shows our KLCI performance. The red line is KLCI's movement from 28 November 2005 to 27 November 2008. In these 3 years, the market has moved up and down.

If you have bought the Public Index Fund (shown by the blue line) on 28 November 2005, and hold it, you would have only made 4.01% 3 years later. This is the reason why I disagree with the buy-and-hold strategy.

Should you have bought and sold at the appropriate times, you could have made profit a few times in the last 3 years when you sold at (1). Bought at (2) and sold at (3). Bought at (4) and sold at (5). And so on.

At this moment, I think we have reached wave C. And we just have to wait for the low point to be hit, and then a visible upturn before you can buy into the Public Index Fund again.

Even the gold market follows the same trend as in Elliot's Waves. We just need to know how to measure and study the charts and trends.

Again, it's not something easy, and it's not something difficult to do. Otherwise we would not have all these wonderful people showing us today on the ways of knowing the market movements. Elliot was one of them. There were and are also people like W.D.Gann and Bradley Cowan.

What do you think? Do you agree that the market is predictable and there is a natural law in the universe governing this? Or do you think this is utter nonsense? Please give your views.

#141. Buy And Hold Or Buy And Sell

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:

1. Price may go down during that 3 years from the time you bought the fund. This results in losses.
2. Price may go up and you would have not taken action to sell and thus profit opportunity is lost.
3. You need to continuously do dollar cost averaging technique throughout these 3 years to minimise your losses.
4. At the end of the 3 years, we will not know where the fund price is from whence you started.
   

My new views are:

1. Don't have a fixed mindset of the number of years you need to invest in.
2. Buy when the price is low. And sell when the price is high. Cash in your profit.
3. 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.
4. 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.

#140. Public Bank Vs Maybank Gold Investment Account

How The Gold Price Is Determined By Our Banks

On a previous article #76. Public Bank Gold Investment Account, I made a comparison between investing in Public Bank's Gold Investment Account and Maybank's Gold Savings Passbook Account.

In this article, I will highlight another difference between these two Accounts. The difference is on the gold price that the two banks offer.

Maybank

For Maybank, as shown above, the selling and buying price is based on the previous day's internation gold spot price. Or possibly based on the price in the morning when Maybank opens it's bank's doors as shown in the picture above - 8:24:34 AM.

Thus, on 3 December 2008, the buying and selling price in RM will be set based on the USD776 price.

The buying and selling price remained unchanged throughout the whole day of 3 December 2008.

If the price in the day goes up higher, you will gain as you will be buying based on the USD776 price. However, as in my previous article #76, it's best to buy from places where the buying and selling price gap is smaller.

Public Bank

Public Bank's gold price is updated regularly throughout the whole day. You can see in the above picture, the price is last updated in the afternoon.

When you are in the branch to do your investment, you will likely be given a different price by the cashier. This is because they based their price on real time international gold price movement. You can literally make some profit within the same day if the price changes a lot from morning to evening right before the bank closes it's doors.

Well, be a smart gold investor and choose which bank you want to put your money with.

#139. Gold Investment And Tetrahedron

Find Out If There Is Such Thing As Timing The Market

What I am about to show you here will be something that you may not have seen anywhere else. In a way, this piece of article can be somewhat controversial. I know I risk myself being called a madman if what I show here does not come true. But then again, it's just my thoughts and should not be taken as fully accurate. It also should not be taken wholly as a guide for your investment. 

This is based on the Theory of Tetrahedron. The price moves in a set of triangles forming a tetrahedron. A tetrahedron is a 3 sided pyramid. In a 2-dimensional form, the tetrahedron is laid out as three triangles as you see below.

The above shows the gold price chart around 29 October 2008. I have shown this to my friends about the possibility of the gold price (red line) to go up and form another triangle.

The observation I gather is that, after 3 triangles, the graph will go up. This is something like the Elliot Wave. Perhaps I will discuss the Elliot Wave in my future articles.

Certainly, I took a position to purchase some gold on 28 October 2008. I was confident that the gold price has dropped to a low during that period. This is based on the triangle shape. The upside and downside of the triangle are usually of equal length. Hence, you can see that the price has reached quite a low.

The above graph shows what the gold price is today, 2 December 2008.

Did you see that?

Fair enough, the triangle is forming. Although not as big as I have imagined. Still, it is a triangle in the making. Sadly, I didn't sell it when it reached a high on 24 and 25 November 2008 (US$822.50) as I was busy to go to the bank. Could have made a few bucks there.

Now, I just have to wait for the price to hit a low to take a new position to average out the cost. Need fresh ammo and wish I have some.

As I write this now, the gold price is at US$767.50 per ounce. Well, I am still in the profit zone. But a smaller margin. Hope it doesn't go too low.

Can we time the market?

This is always the argument. Can we time the market? Can we know when is the best time to enter the market? When to take a position? When to leave the market?

From the above demonstration, to an extend, I have proven that we indeed can time the market. Of course, it is not as simple as you read here. I employed other charting tools too in finding the right timing. I used the MACD (Moving Average Convergence Divergence) charts. I used candlesticks charts.

I know there will be argument that we still need the fundamental news. Lately, I have found that the so-called fundamental news were of no use to me. The market reacted differently to what we read in the headlines. When it is expected to go up, the gold price went down instead.

So, what do you think? Please leave your comments.