Monday, August 4, 2008

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Bill Gross Investment Tip:"The ability to get off the majority wave-even if a little early-is critical to preserving capital for the next bull market"

The following is an investment tip from Bill Gross extracted from one of my favourite books, "The Best Investment Advice I Ever Received":

I've found that money is made over the long term by riding the wave of the crowd for 75 to 80 percent of the time. After all, the crowd is the dominant force in bull and bear markets and to go against it for a majority of the time would be like going to Vegas and expecting to beat the house! The crowd, in other words, has the odds in its favor much of the time if only because of its buying and selling power. As Baruch points out, however, you can't perpetually get something for nothing and the ability to get off the majority wave - even if a little early - is critical to preserving capital for the next bull market. The same applies to the jumping - in point during periods of excessive pessimism.

How to do this? Livermore says it best. "An investor has to guard against many things-' most of all against himself." The secret to getting off and back on the wave of the crowd is to separate yourself psychologically from what is going on, to be hopeful when there is fear and fearful when there is too much hope. I think you can only do that by analyzing your own personality. Take an honest look at your weaknesses, how you react under pressure, whether you are an optimist or a pessimist, whether you are a risk-taker or a conservative, and so on. Write down your impressions and try to correlate them to prior behavior patterns in the markets. Put yourself on an investor's psychiatrist's couch with the objective of analyzing yourself within the context of the investment world. Then take that knowledge, along with Baruch's analysis of human nature, to help you to ride the market's wave for much of the time and to safely exit for the balance.
Lastly-another quote from Baruch-"Sell to the sleeping point." If you lie awake at nights worrying about your investments, you own too much or are taking too much risk. When you can go to sleep at night and not wake up wondering how the markets are going to open up the next morning, then you are adequately invested.

May also want to read:
History of Singapore Property 1960 to 2008
Buy or Not Buy: How to decide amid mixed market signals
When to Buy, When Not to by
Property Price Index Graph Plotter & Online Property Valuation
Your Property Investment Determines Your Financial Success in Your Life
HDB Resales: West Sees Highest Price Increase


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The blogger here has been affectionately named by close allies as "Smart Buyer" but really, he's not smart. Smart Buyer just believes that being prudent is smart. That's the essence of the message of this blog and Smart Buyer hopes it'll benefit other property buyers.

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