If ze Market continues to rise..

Read this interesting piece the other day...

• Asset allocation and evaluation of results
  
  “During the strong market of the 1990s, most investors who rode the wave ignored traditional ideas about valuation. Some money managers remained invested on the basis of a practical calculation: "If the market continues to rise and I'm not participating, I'll lose my job. But if it falls dramatically, I'll be in the same situation as everyone else." Others were conscious market cynics who thought they could successfully exploit the foolishness of others. Momentum investors didn't need an opinion about valuation. They were consciously saying, "The market may be overvalued-we don't know and we don't care. All we know is, it's been going up, and we're going to invest as long as it does-and get off the train before everyone else." The problem lies in executing the greater-fool theory. If you get off every time the market ticks down and then reestab­lish your position when the market starts to go up again, you're going to get killed, because even rising markets fluctuate on the way up. And if you wait, you risk going down with everyone else.

This got me thinking.. hmm... if the market continue to rise ... am i gonna miss Ze opportunity?

Should an investor's reasonings to invest and hold a stock be based on that particular stock's underlining fundamentals or should it be based on the prevailing market conditions?

What say u?

Me? I prefer doing it based on what i know best. If a stock is over-valued, i would sell. If a stock's fundamentals is deteriorating, i would sell. If a stock is fairly priced, it simply means it is fairly priced. And if a stock is worth investing then it is worth investing. And if the management or owner of the stock attempts any funky corporate manouveres to cheat me, ain't it a no-brainer to kiss the stock goodbye forever and ever?

To base my investment reasonings on the stock market? Should i invest in a stock because the stock market is going up? Gosh! It's simply beyond me because there is simply no way i could tell if the stock market is coming or going! Me pants would definitely be on fire if ever i told u i could. So where is the market heading? Issit bull or issit bear? I have simply no idea! I dunno lah. Do you?

Anywayyyy..... in short.... i would rather miss such opportunity.... and if the market goes flying, it goes flying... so be it.... as Ah Beng Kor would sing in his bath-tub.. Que Sera Sera mah... :D

err.... this is just me personal opinion lah... and if u dun agree, do feel free to leave ur comments, ya? :D

The last bit of that write-up is certainly a great reminder to all... i think... :D

• Finally, there is the challenge of evaluating results. For stretches of time, a stock picker may outperform the market for reasons that have nothing to do with skill. He may simply be in sync with the biases of the market-favoring telecommunications stocks, for example, during a pe­riod when the market as a whole favors them. Or he may be lucky. The "random walk" theory posits that if a large number of monkeys pick stocks by throwing darts at stock tables, half will do better than the aver­age stock picker and half will do worse. If the winning monkeys then re­peat the exercise once each year for ten years in a row, one out of 1,024 will beat the average every year, merely on the basis of probabilities. A stock picker who beats the S&P 500 ten years running will almost surely be lionized as having a special genius-and some may-but others will do so merely as a matter of chance.”

Hmmm... doesn't it make sense? During 1999-2002 .... there were a lot of cheap stocks..... The underlining market was simply cheap and stock picking was simply easy then... .... so stay modest lah....dun get so big-headed lah... whatever good results achieved then... doesn't mean much really. The underlining market was simply cheap and stock picking was simply easy then... :D

Oh.... and.... if any stock picker(s) starts boasting their investment results based on these periods of time, say 1999-2002 or even 2003, and starts giving investing advice(s) based on their so-called excellent track record....do take it with a pinch of salt! For these buggers might not be as geng as u thought, they were simply lucky to be investing in a period of time where stocks were simply cheap! So dun simply-simply call any1 sifu and dun simply-simply follow lor.

But then.... stock investment is not a game of follow you, follow me mah.... tiok boh?

:D