Have the Discipline to Say No

1.  A particular security is selling in the market for $25 a share.

2.  The strong fundamental qualities of this security are well known, and as a result, the stock has typically traded at a fair to overvaluation.

3.  At the current price of $25 a share, the stock is indeed slightly above fair value.

4.  Eager to buy, an investor is on constant watch for any dip in stock price, but the dip never comes.

5.  Instead, over the next few weeks the stock seems only to go up in price and is now at $35.

6.  Not wanting to miss out on the continued rise, the investor rushes to buy in. 

7.  In the next few weeks, the stock is back at $25 and the investor, an able and bright fellow, feels like the dumbest man on the planet.

8.  His downfall had nothing to do with intelligence. 

9.  Instead, it had everything to do with emotions dictating the investment decision.

10.  Whether the security will trade above his purchase price a year from now is irrelevant. 

11.  Even if that happens, it's just foolish to dismiss the investment as an intelligent one because the investment process was manipulated by emotional decision making.  

12.  Next to taking a loss, nothing is more painful than the aforementioned chain of events.

13.  Learning to say no until the price is right is of paramount importance.


Referring to the above example, the ultimate failure (or success) of the investment decision was not based on intelligence but on emotion. The investor could not allow himself to "miss" the continued rise in the price of stock.  Disregarding any fundamentals whatsoever, he made the assumption that because the shares had continued to go up for weeks, they would continue to do so.  What is important here is not the investment performance but rather the process employed to make the investment.

Discipline is what separates sensible market loss from foolish market loss.  If you are disciplined and your approach to investment is sound and businesslike, your winners will more than compensate for your losers.  The undisciplined investor is the one who racks up losses similar to the example given earlier.  Succumbing to investment losses in this manner can mean the difference between an above-average and a below-average investment track record.

In cases like this, be disciplined enough to walk away and search elsewhere.  Always remember that any business is undervalued at one price, fairly valued at another, and overvalued at yet another.  The intelligent investor's goal is to buy at the undervalued price, avoid at the fairly valued price, and sell at the overvalued price.  Only by maintaining a very disciplined approach can this strategy be carried out effectively.

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The Role Of Parents In Financial Education

As the global economic recovery continues to lose momentum, the issue of financial literacy is becoming increasingly prevalent. This has already prompted political leaders in the United Kingdom and Australia to propose mandatory financial education for students, while the Consumer Financial Protection Bureau (CFPB) in the United States has made numerous recommendations concerning the advancement of fiscal literacy within independent states. Providing a comprehensive financial education to youngsters represents a significant responsibility; however, it is a duty that cannot be carried by schools and local authorities alone.

The Link Between Financial Literacy and Economic Growth
To understand the importance of financial literacy, it is important to consider the recent economic crisis that has engulfed the world. Essentially the result of irresponsible lending and reckless investment, the crisis showcased how poor financial decision-making impacts citizens, business owners and political leaders alike. While banks and lending institutions may have accepted considerable criticism for their role in triggering the recession, it is important to remember that millions of consumers were also willing to enter into poorly thought out and unmanageable financial agreements.

Further support for the importance of financial literacy can also be found in household debt levels from the last five years. Cumulative consumer debt reached its peak of $12.68 trillion at the height of the global recession during the third quarter of 2008, while it has continued to fall as the economy has showed tentative signs of growth. Totaling $11.23 million during the first quarter of 2013, its decline shows that decreased borrowing and more considered financial decision-making has resulted in a more prosperous economy.

So when it comes to economic growth, it is clear that the fiscal decisions that we make as individuals have a tangible impact on the overall economy.Joint research products between the George Washington University School and the University of Pennsylvania have sought to provide more context to this theory by evaluating how low levels of financial literacy lead directly to money-losing decisions and transactions. The results reveal considerable gaps in consumer knowledge concerning pension accounts, credit agreements and the impact of interest rates, which can now be measured in dollars and cents and afford a monetary value to the importance of financial literacy.

Who Should Shoulder the Burden for Imparting Financial Education?
As education remains a matter for the local authority in each state, it is unlikely that the U.S. will see mandatory reforms implemented at a federal level. Despite this, however, there is a common consensus among political leaders that dictates that financial education will be a universal feature of the K-12 curriculum by the end of 2014. While this will make local schools and government bodies primarily responsible for teaching financial literacy nationwide, it is also important to appraise the role of parents and established fiscal institutions.
In general terms, parents and schools must collaborate to deliver a comprehensive education to their children. While parents are charged with cultivating positive behavioral patterns and imparting fundamental values, it is the role of educational authorities to teach academic skills and subject matter. There is an imbalance when it comes to financial literacy, as the current generation of adults are hindered by a distinct lack of money management skills. According to a recent Consumer Financial Literacy survey conducted in 2012, just 59% of adult respondents had savings, while approximately one in four continued to spend outside of their means.

This skills gap is a vast and obvious one, and it has prompted both local authorities and banking organizations to drive financial literacy themselves. In fact, the American Bankers Association has been a keen supporter of financial education since 1997, when it introduced the innovative "Teach Children to Save" program as a way of emphasizing the importance of saving money. While these efforts and recent work by the CFPB have partially offsetthe lack of parental knowledge, guardians cannot ignore the importance of financial literacy and must instead be encouraged to support a detailed program of education.

The Bottom Line
The need for a concerted program of financial education cannot be ignored, and even though many parents are ill-equipped to lead the charge, they can at least support the efforts of state schools and banking institutions. They certainly cannot afford to adopt the same approach as parents during Chef Jamie Oliver's drive to introduce healthy and nutritional school dinners in the U.K., as thousands allowed their ignorance and lack of knowledge to compromise an extremely beneficial government initiative. By understanding their own shortcomings when it comes to financial literacy and welcoming the local governments' attempts to redress this considerable imbalance, parents can still play a proactive role in creating an entire generation of responsible adults.

Check out our series of guides designed to help you teach financial literacy to children of all ages.

http://www.investopedia.com/articles/personal-finance/052313/role-parents-financial-education.asp?utm_source=financial-edge&utm_medium=Email&utm_campaign=PF-5/28/2013

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Somebody Got It Right..yea its a relief rally

I told my readers that I will not participate in the rally if BN wins. I just got invitations by  local stock brokers to attend their market outlook briefings. In short, they are saying the retail investors should buy stocks since the big risk risk has been removed. Most also said we are yet to catch up with the regional stock markets. I deleted those invitations without hesitations. It's bullshit and a waste of time.

Somebody got it right called it as a relief rally. There was a huge buying panic when the stock market opened on Monday.  A little bit of today too. That basically because the local fund managers were panic and afraid of being under-perform the index if the stay in cash. They sold down a lot of stocks prior to GE. Their game plan was to buy at lower price. It's turnout that they were forced to buy even at higher prices pre-GE. Smart money? My ass, smart money.  A super high volume spike is not sustainable.

Long term fundamentals are deteriorating.  A few reasons:

1. The foreign funds begin to get worry actually. Credit Suisse for example sounded cautious

Those reforms now seem in doubt, Credit Suisse said in a report on Monday, although Najib is expected to push ahead with $444 billion Economic Transformation Programme aimed at boosting private investment and doubling per capita incomes by 2020.

If there is no follow through buying by foreign funds, who will be the next buyer?

2. Stretched balance sheet

Najib was trying to do window dressing to prop up Malaysia GDP growth by stretching our balance sheet. Debt/GDP has never come down to less than 50% in last 4 years.

It simply cannot continue with this trajectory or else risking our credit worthiness downgrade.

Malaysia economy growth will risk slow down if BN were force to "deleverage" in the first 2 years. 

Najib may be an economist by training but I think his administration has one the worst economy mis-management.  

3. Subsidy cut and widening revenue base like GST may not come true. I won't be surprise if Malaysia gets a downgrade as there were already warnings firing shots last year. We never get serious with what we promised. 1 Janji? Only orang kampung tertipu. 

4. Perceived political stability may come into question. If MCA were to leave BN or no multi-racial BN coalition government is form. O I was wrong, MCA? It's non-existence actually. Eunuch roles suits them better.

The rural/urban divides will continue to expand.  You can see how the kampung folks are so easily bought with RM 500 or easily get intimidated during this round of GE.

The intellectual divide will continue to widen.You can see which side got "brains" by observing how PR components' brains at work during campaign period. Even though they don't have much money, they are really creative and able to connect with people. 

Look at their manifesto. Scrutinize their shadow budget. PRs got more professionals and smart brains. BN got old tired people that keep thinking how to rob people's wealth and share the left over with the kampung folks. They copy unashamedly. 

Premium of safe heaven? Looks pretty shaky to me.

5. It's not peaking yet because no sheep or pigs got slaughtered. True.........small cap is yet to make its all time high. 

6. Najib's position is really shaky. The next successor can be even more radical not moderate. They must be thinking if they have survived "Chinese tsunami" this time, why bother to reconcile? They won't accept it's a Malaysian tsunami. Or what ever lah,menang tetap menang. More complacency will come in. More money will go into Iskandar. Bla...........

7. For many high net worth retail investors, money is already started to leave Malaysia. More soon. Not only Malaysia suffers brain drains, it will suffer capital drains as well. Why Robert Kuok leaves Malaysia in the 70s. A far sighted man like him deserves my respect. He saw what was coming post May 13 1969 and New Economic Policy. We had lost decades. We will lose may be another decade or more........

I personally have started to invest outside Malaysia and that percentage will continue to go higher over time.

I am not a smart man when come to predictions and wanted to be wrong badly with all these arguments.

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