Tuesday, December 6, 2011

Introduction to Stock Market

Have anybody here invested in stock market ? Buying shares or mutual fund? If not, then this is a good opportunity for you to know more about another investment instrument that is widely used in the financial world.
Because the number of investor in Indonesia is still very small, which is around 350k, or just 0.2% of Indonesian invest in stock market, it is really slight comparing to US which is more than 60%, it creates opportunities and advantages for the early investor, because we can know, learn, and even buy the shares cheaper than later on

Many people regard stock market investment to gambling, but for me, in a business perspective, it is more business-like than gambling. The stock that we buy consist of an on going business. Think of it like this: if we want to open a store, we have the concept of what store that we want to open, who is our target market, and so on and so forth, right? Now, after we got successful in our first store, say, we want to expand, by duplicating the success formula of our store to let's say another 4 stores, we look for investors, maybe friends or relatives that is interested to put their money to our business. Let's say the friend name 's James, and he agreed the terms and conditions to buy our shares, then ta da! James is our investor! Now the question is: will the store will stay profitable after the expansion? Of course the answer is: nobody knows! Using the same success formula, the same business plan, the same concept, maybe it is more likely to success, but in business, anything can happen, right? Maybe new competitor? Out of trend? That is the risk of doing business, so that means, it is mostly the same to open a business or being an investor, it got it's advantages and disadvantages as well

One misconception about stock market is, people tend not to differentiate between investment and speculation. People tend to speculate when they think that they are investing, because both investing and speculating are using the same object, which is stock. We can invest as well as speculate with the same stock, the big difference is on the mind, purpose, and the time frame. For example: if I bought a stock, let's say Bank Mandiri at Rp 6,500.- and I plan to hold it for a year, or until it reach Rp 10,000.- then I am investing. But if I plan to sell it tomorrow, for 2% or 3% profit, then I am speculating. The thing I want to stress is, speculating is a whole lot riskier than investing, because we can hardly predict what is going to happen tomorrow, but it is easier to forecast longer term prospect of a stock, because if we done our homework, and look at the financial statement or researches, we can forecast better the stock's performance

A little trivia to enhance your appetite on stock market, and well, this is a real story: the best time to buy the stock market is when the market has just battered from a crash. During 2008 crash, I recommended a stock named Hexindo Adiperkasa, a company which sell and rent heavy equipment of Hitachi. I still remember very clearly that on January to february of 2009, it's price moved ranging Rp 1,000.- to Rp 1,100.- and I keep on urging my clients to accumulate this particular stock, because from what I see, the financial statement is so good and more over, it is selling at an impossible bargain. So we did accumulate it, and sell it in a month at Rp 1,400.- for a handsome profit of 30%! It is a month performance for a six years of saving interest! For 1 Billion, my clients average earning is 300 million, and that is in-a-month! Isn't that great? Yeah.. That was one of the biggest mistake that I've ever done in my life. If only I can wait another year, the price is hiking to Rp 7,450.- and the 1 Billion turned to 7.45 Billion in a year! And if we hold for another year, the current price is Rp 8,800.- now, can you see the beauty of investing? :D. And I must let you know, that the stock that perform extraordinarily good is not just this stock, if most of you know Astra, I'll tell you it is performing great as well, from bottom of Rp 6,600.- to Rp 76,000.-, and if you know Charoen Pokphand, it is one of the best, from a tiny Rp 65.- it peaked Rp 2,975.- it is 4,476%! a client of us bought at 109, as much as Rp 28 million, and the portfolio grew to Rp 700 million!

The main point I want to emphasize on this subject is, it is really good to know about stock market, because it is one of the most profitable investment instrument, and the most important thing is, stock market is not a place to gamble, the share that we buy really consist of a business that is on going, and not just a paper or certificate. And to think of it, the  richest person on universe, Bill Gates, Warren Buffett, Carlos Slim, you name it... All of them accumulate their wealth via stock market. So, ain't it worth a try? :D

No comments:

Post a Comment