Feng Shineng, former editor-in-chief of Malaysia's Nanyang Business Daily, has 30 years of investment experience and has gained financial freedom in investment almost entirely on personal strength, and is regarded as the "god of Malaysian stocks." This article is an excerpt from Mr. Feng's previous compilation of articles in Nanyang Business Daily.

1、The left way and the right way in the world

The creation of wealth must be based on the creation of value. As a link of economy and commerce, stock value cannot be created out of nothing. If it exists, it can only be a flash in the pan. The right way is to invest according to fundamentals from a business point of view. If a stock investor has the wrong idea of the stock market from the beginning, thinking that he can get rich quickly in the stock market, then his fate will almost certainly be tragic.

2. To buy stocks is to buy shares

To buy stock is to buy shares in a company, which represents the assets and business of the company, just as the deed represents land. The establishment of this point of view is very important, it can be said that it is also the key to stock investment. Without establishing this concept, it will be difficult for you to succeed in investing in the stock market.

Every time I buy, I have to remind myself that I am buying shares in the company, not the chips on the table. After knowing clearly that buying stocks means buying shares, the whole investment landscape has completely changed. So, before taking a stake, like a partnership, you must have an in-depth understanding of the company and be as cautious about the management of the investment company as your confident friends.

3. How high is the stock risk?

Many people think that stocks are risky, but they do not exceed the risks of doing business directly. As long as you do not follow the market sentiment and buy the company's stock at a high price, then your shares represent the company's business. If the company is successful, the value of your shares will rise accordingly. If you fail, or even go bankrupt, your loss limit is zero. But if you are doing business, if you are guaranteed by assets, it may also involve individuals.

So,The risk of stock investment comes from the failure of the enterprise, which is the enterprise risk. If the purchase price is too high, there is a risk of falling prices in the market.Therefore, investors should avoid buying stocks at high prices, because it is difficult to make money if they buy good stocks at high prices, not to mention the possibility of buying bad stocks. Therefore, the way to get to the root of the problem is reverse + growth + time = value. This is the equation that has been adhered to for thirty years with indifference. Investors can get a reasonable return as long as they follow the right path for a long time.

4. Long-term investment should not seek swords on a boat.

If investors hold five shares of Malaysian Bank, Volkswagen Bank, Fenglong loan, OYL and Oriental Industries in their 20s, it will be RM10,000 (Malaysian dollars) in 30 years' time. But investors always have the illusion that they buy some stocks, lock them in a safe, ignore them, and open them 30 years later to find themselves a millionaire.

But there is no doubt that this kind of thinking is a struggle for a sword. Over the past 30 years, only a few of the more than 900 companies in the Malaysian stock market have become such a top grade, and more companies have been sinking or even disappearing.

therefore,After buying stocks, investors must closely follow the company's developments and changes and remember to ignore them. Once it is found that the company's environment changes and the business shrinks and goes downhill, it can no longer stick to it, even at a loss.

Therefore, how long the long-term investment is appropriate and whether or not to continue to invest should not be determined by time, but by the performance of the company. In addition, if the stock market is extremely crazy and gives outrageous prices, and you stick to long-term investments that are not for sale, you are not the material to invest in stocks.

5. Why can't we wait three years?

If you buy wasteland to open up an oil palm garden, from logging, burning, digging ditches, raising seedlings, planting, weeding, and fertilizing, you have been busy for three years before you see the brown fruit appearing, and the harvest is still not enough to maintain your expenses. wait another two years, the palm fruit will be more and more abundant, the income and expenditure of the oil palm garden will be balanced, and there is still no money. This is the fifth year. Busy for five years, only pay, no income, you do not think bitter, because you know that is the inevitable way to make money.

If you are a small and medium-sized entrepreneur, you have experience in making a certain product, you used to manage the company for others, now you decide to start your own business, you decide to build a factory, you investigate the market, get loans from the bank, find the factory site, design the plant, recruit staff, install machines, test production, and put the product into the market, from planning to the product appears on the shelf of the department store, plus or minus three years. Hold on for another two years before you begin to make a profit, which is already the fifth year. You think this is the normal process of starting a business, and you are willing to walk with your career for five years without complaint.

The above examples-opening up an oil palm park, engaging in industry, opening retail stores, from preparation to making money, one and a half years quickly, and then five years slowly, operators have never complained, because they understand that it takes time to do anything, and there is absolutely no such thing as an instant.

The above examples have one thing in common, that is, to invest money in the hope of making reasonable profits, which is called "investment". Apart from knowing that investment takes time, they also accept the fact that every investment has risks. No investment is risk-free, and risk is the price they pay to earn higher profits than banks.

Investors accept two facts: ① investment takes time to make a profit, and there are no shortcuts. Every investment in ② has risks, and the level of risks is often proportional to profits.

Stock investment is one of the many investment channels, why investors can not accept the above two facts. To start a career, you can wait three or five years. Why can't stock investment wait three or five years? After failing to do anything, most people only blame others and put the blame on others or the environment, and very few people can reflect on themselves.

The same is true for stock investments. if you lose money, you will not blame the stock market, or blame others for deceit, and never review the reasons for your own failure. Ask again: you can wait three years to buy a house, why can't you wait three years to buy a stock?

6. stock investment should have "three understandings".

For investment to be successful, there must be "three knowledge", that is:Knowledge, common sense, courage。

Knowledge is to have a deep understanding of the object of investment. For example, to buy bank stocks, you must choose a bank with strict management, because the bank is a small profit and quick turnover industry, the profit rate (net profit margin) is about, the management is slightly lax, the bad debt increases 2%, the bank will lose a lot of money.

The second is the business of banks, which involves a wide range of business. branches are distributed all over the country and abroad, and it is impossible to supervise them in a "hands-on" manner. therefore, the "system" is very important. for banks to succeed, the system must be improved and strict. the staff must strictly abide by it, and they must not be "creative" in handling business, let alone emotionally, otherwise, bad debts will inevitably increase. The level of bad debts is the key to the success or failure of banks.

So when you buy bank stocks, you need to know whether the bank is "loose" or "tight" when lending, and whether the person responsible for approving the loan accepts "gifts". If borrowers are not eligible to obtain loans, and approvers accept "gifts", or if senior officials make large loans under the influence of politicians, never buy shares in such banks.

7. How to reduce losses?

I once asked my eldest son, who was studying medicine,"what is the most important thing to study medicine? He said, "learn how not to cure people to death. "This answer is very strange, and it is still fresh in my memory more than ten years later. So,First of all, people who do stocks do not learn how to make money, but learn not to lose a lot of money.

As a retail investor, there will always be times when you get wrong and buy the wrong stocks and suffer losses, but as long as you earn more and lose less, you can make money in the long run. How to reduce the loss? Experience is to adopt a reverse strategy and buy as low as possible. a simple view is that the average price between the lowest and highest price of the year belongs to the low buying range between the lowest point and the average price. If you want to buy stocks in the low buy range, you have to get into the habit of getting into the opposite habit and enter the market at a low ebb.

For most goods, the cheaper the price is, the more people buy it, but the lower the stock, the less people buy it. The higher the price, the more people will buy it. That's why most people end up losing money. If the stock price rises by 50%, it is basically out of the danger zone and can be allowed to run. If the company's performance continues to improve, it should not be in a hurry to sell, but should continue to follow the growth of the company. However, if the business of the company tends to deteriorate, it should be sold decisively, no matter whether it makes a profit or a loss.

8. Retail trilogy

In the roller coaster stock market, retail investors panicked and became scared birds. In the rough sea, retail investors' emotional quotient (EQ) trumps wisdom quotient (IQ). When emotions control reason, the decisions they make are emotional decisions, not rational decisions. There is no reason for emotional decisions.

Because emotion and reason are incompatible with each other. When emotions dominate everything, reason has to back off. In this stock market crash, many retail investors, who were suddenly overwhelmed by the huge waves, lost their heads, lost control of their emotions, sold in panic, made big mistakes, and sold their shares cheaply at the worst of the stock market. Less than a month after the bargain sale made a big mistake, they regretted it because they sold it almost at the lowest price.

Why did you make this mistake? Because their eyes only see the stock price, not the assets behind the stock. If they understand the assets represented by stocks and the value of these assets, they will not be so flustered and will not sell regardless of cost, resulting in unnecessary losses. For retail investors who invest according to their emotions, their actions can be divided into three stages, called the retail trilogy.

• Share purchase Trilogy

Part I: bear market-stock prices are low, the market is quiet, the retail market is extinct, the stock market is lifeless. In fact, at this time, most stocks are undervalued, but retail investors are not interested, they are interested in the stock price, not the value of the stock. So they don't buy it.

Part two: cowhide is stable-the stock market has gone up a bit, so retail investors should not buy it. Because they did not buy at a low price, and now the stock price has risen by 20 to 30 cents, they are reluctant to buy it.

Part III: the formation of a bull market-the Composite Index broke through five hurdles and surged above 1400 points. Retail investors saw the joy of hunting and the confidence of their relatives and friends were greatly increased, so they wantonly entered the market.

In high spirits, the second house incident turned into a stock market crash, which led to the sale of the trilogy!

• Sell the trilogy
  

The first part: the profit is not much, and the bull is awesome, of course he will not sell it.

Part II: the composite index fell to 1300 points, which he thought was temporary and would pick up soon, so he decided not to sell it. Moreover, there is a profit when the price is high, but now they are losing money, and they are unwilling to sell it.

Part III: the composite index plummeted, falling below 1200 points, he had a sense of disaster, confidence collapsed, regardless of cost. It turned out that he sold at the lowest price. The characteristic of buying trilogy is: buy high. The characteristic of selling the trilogy is that it sells at a low price. Buy high and sell low, just with the stock market motto-buy low and sell high is counterproductive. Do you want to make money in the stock market? If you want to, it's very simple, as long as you buy and sell the trilogy upside down. It's called going backwards. This is the "reverse".

9. "rotten" is more terrible than "falling".

If the business of the company shrinks year after year, and the loss is getting bigger and bigger, and the company may eventually face the bad luck of bankruptcy, the value of the shares will inevitably fall again and again, and you may lose all your money in the end.

In the short term, the price of stocks will be affected by the trend of the stock market or human manipulation, and fluctuate violently. But in the long run, the stock price is bound to keep pace with the company's performance, that is to say, the stock price is bound to reflect the company's performance, but sooner or later.

Take a Malaysia example: before the financial crisis in 1996, the share price of Volkswagen Bank (PbBank,1295) was as high as RM4.64 and as low as RM3.04. If you bought a thousand shares (face value 50 cents) at the highest price of 4.64 ringgit in 1996, after receiving five bonus shares and subscribing for one additional share, you now own 1950 shares (par value of one ringgit). At today's price of RM3.04, it is worth more than 18000 ringgit, which is equal to four times the amount invested ten years ago, if the generous dividends received over the years are taken into account. Earned more than five hundred bar cents.

Please note that you bought it at the highest price of the year in 1996, and you can still make a profit of 500 bar cents. If you buy at the lowest price of the year, you will make more money. Volkswagen Bank once fell to RM0.81 during the financial turmoil in 1998, and if you buy at this price, you will earn more than ten times.

If you keep taking it, you will certainly make more money in the future. The profit of Volkswagen Bank is rising year after year, which is the main reason why you can turn defeat into victory even if you buy it at a high price. More than a decade ago, when the shares on the second board were all over 10 ringgit, my friend bought 1,000 shares at a price of 10 ringgit and held on to this day. Due to the company's successive losses, the stock price has fallen again and again, and today there are only two points left.

Do not buy bad stocks at a low price is also bought at a high price, the holding period is also more than ten years, buy good stocks and buy bad stocks, the results are very different. Therefore, retail investors would rather buy good stocks at high prices than bad stocks at low prices. Of course, if you adhere to the reverse strategy and buy good stocks at a low price, you can earn more. "rotten" is more terrible than "falling". Ten times as terrible.