My Stocks Buying Guide

The reason why i started investing on my own is that, 

The fee currently charged by average mutual fund in Malaysia is quite high compared with the results they delivered. 

Mutual fund in Malaysia typically charged 6% entrance fee and 1.5% annual fee for asset under management. In return, their performance are hardly differ from the benchmark (KLCI) index. The few rationales why i think people still buying mutual funds are

i. They lack the time & energy to learn to buy stock

ii. Their investment size don't allow them to have the same diversification benefit as the mutual fund. 

I admit that full replication of KLCI index will indeed need a large investment size. However, a half-replication (ie, with stocks holding and weightage slightly deviate from KLCI) will generally cost less and little pre-requisite knowledge is required to replicate. If you are brave enough to venture into investment universe outside the thirty stocks listed in KLCI, you might be able to find a few rare gems which reward you substantially compared to KLCI. 

Hence, below are my few tips on how to profit in the stock market. If you do profit from following my advice, do treat me for a good meal in one of the fine restaurant. 

Tips 1. Avoid Company where controlling shareholder (with close to 50%) is the CEO / Chairman of the company.They usually paid ecessively huge remuneration package to themselves, and award themselves with big employee share option scheme (ESOS). 

Tips 2. Be careful when the company is diluting the interest of existing party. Either via selling cheaper than Net Asset Value per share (NAV) to other party through private placement, or through ESOS with exercise price lower than NAV.

Tips 3. Focus on return on invested capital instead of revenue
Screening out those management who talk only about expansion instead of profitability

Tips 4. Avoid company with huge fluctuation of income

Tips 5. Avoid company with huge capital expenditure
Huge fixed cost => Easily lead to overcapacity and cut throat competition. One of the reason why i am not particularly fond of manufacturing company is that, they need to keep investing to keep earning the same amount of profit.

Tips 6. Adopt buy and hold strategy. Learn to be patient.
Sell the stocks only if
i. The long term prospect is bleak
ii. You realize the stock you bought is not worthy
iii. The stock price rose to a point where you feel greatly over-priced.