Defend against market downturn

Average investors usually use buy low and sell high in the market to earn the profit. However, in sudden market downtrend, they normally hold on their positions and suffer the paper loss.

Recent crisis in Euro zone has spread around the market worldwide; rumour about the sudden dried-up of liquidity in Euro zone and trading system glitch have triggered massive sell off in Wall Street. We might now heading for short term correction.

Under this scenario, how do we defend ourself against the downturn? Shorting the market seems as good choice, but it might be too sophisticated for average investors, and high risk as well. Another choice is to go for inverse ETFs.

ProShares and Direxion offer a range of inverse ETFs, allowing the investors to hedge against the downturns, or seek profit when markets decline. The funds also provides the investors with even more exposure through the leverage. Under current situation, betting against financial sector seems like a good choice, allowing investors profit when financial sector index declines, and vice versa. Look up for ProShares Short ETFs and Direxion Bear Funds.

For more information, please visit for more information:

http://www.proshares.com/

http://www.direxionfunds.com/products.html

Fundamental & Technical Analysis: Why both are needed??

Very often we heard traders/investors mentioned about these two terms: FA and TA, which stand for Fundamental Analysis and Technical Analysis respectively. These analysis have opposite viewpoint on the topic of market efficiency.

For me, the starting point for new traders/investors should be fundamental analysis. A correct analysis of the factors influencing supply and demand helps establish the overall trend in a market. However, these factors may take a long time to exert their influence, so we should also use the technical analysis to help forecast future price action.

Technical analysis is a huge discipline and needs some efforts to excel it. A basic understanding on support/resistance, moving average, MACD, RSI and candlesticks patterns will give you brief idea the price action of a share, which improve the chances of profit. Technical analysis can be used to establish both the entry and exit levels for a trade, whether setting a limit to take a profit or choosing a stop to cut a loss.

An understanding of technical analysis is definitely a requirement for a trader, which often buy in at support and sell their holding when it reaches resistance price level. Without establishing this understanding, rushing into the market and make a purchase is simply considered as gambling in the stock market.

In contrary, the medium/long term investor might think understanding of technical analysis is no necessary, as they will just buy and hold for some period of time, current price action is not in their interest. The technical analysis will help to increase the chances of investment success; Without that, you might buy in at resistance level, and incur huge paper loss after that.

Lastly, as this analysis is based on the historical price level, it could not foresee any certain unexpected events. Besides that, based on same historical price action, different people will deduce different conclusion, so technical analysis is much like of an art appreciation rather than a scientific analysis.

Three types of Investors in this volatile market

Few weeks ago, I came across an interesting article in The Business Times Weekend, which using a poker analogy to summaries the groups of investors perform the best and worst in these crises. Here are the extract of the article:

• Strong Hands
  They are not only emotionally strong enough to avoid selling into panic, but they are also have deep-enough pockets to avoid doing so for financial reasons. In fact, they are those who can actually profit by buying at cheap prices near the market bottom.
  
  
• Weak Hands
  They are those never harboured any illusions about being able to hold on. They "fold immediately and therefore suffer limited losses."Momentum investors, for example, fall into this category, because they constantly shift their portfolios away from securities that have lost the most money. Sometimes, they can turn up getting profit during this severe crisis because they may have shifted their portfolio to profit from the crisis.
  
  
• Strongest Weak Hands
  These investors are those that fall in between the above two groups, and usually end up losing the most money. These investors initially think they have a strong hand, and hold on for a while as their losses become more severe. Eventually, they discover that they aren't as strong as they initially thought - emotionally, financially or both. They are then forced to sell at or near the bottom.
  

Roadmap to Financial Freedom [3]

Part Three of the article..

Source: New Sunday Times, May 3, 2009
Author: Yap Ming Hui, Managing Director of Whitman Independent Advisors Sdn Bhd

A roadmap to financial freedom frees you from money-related worries so that you can enjoy the other important things in your life. Thus a roadmap to financial freedom helps you to live a balanced life. You have the confidence that your personal finances are in order because you have managed to define how much money is enough for you and you know you will eventually have enough.

You can then focus on the important things that I call non-financial wealth, like your physical wealth, your spiritual wealth, your family wealth, your mental wealth and social wealth. Without the confidence that comes from knowing that your personal finances are in order and on track, there is always a sense of guilt when you spend time on activities that don’t contribute directly to your financial well-being.

For example, you want to spend more time on community service, so you squeeze time from your hectic schedule for this. However, while performing your community service, you may feel a sense of disquiet that there is some outstanding matter about your personal finances that you have not dealt with. Then you may doubt that you are doing the right thing at the right time.

Thus, if you are not sure that your personal finances are in order, you will not be able to focus on non-financial wealth. Usually, you only enjoy this free feeling when you have actually achieved your financial freedom with millions in the bank, as most of my multi-millionaire clients have testified. However, you don’t have to wait until then to have this free feeling. By acting on your optimum roadmap to financial freedom, you can enjoy the same free feeling.

Roadmap to Financial Freedom [2]

Part Two of the article..

Source: New Sunday Times, May 3, 2009
Author: Yap Ming Hui, Managing Director of Whitman Independent Advisors Sdn Bhd

A roadmap to financial freedom gives the feeling of financial freedom today. The reality is that financial freedom can’t be achieved overnight. However, do we need to achieve financial freedom first to feel peace of mind?

If you are living your life feeling insecure and uncertain about the attainment of financial freedom, then you are treating financial freedom as a destination. You will only feel happy and peaceful when you attain the reality of financial freedom.

But a roadmap to financial freedom can help you achieve peace of mind today. For when you have optimum roadmap to financial freedom, you will know that you are on track to financial freedom – as long as you manage your money according to key performance indicators.

Therefore, you know in your heart that financial freedom is not a dream but something you can achieve. In the meantime, you can live your life feeling secure and comfortable that your financial freedom as journey, not a destination.

You can start to experience the feeling of financial freedom while you are on your journey. You don’t have to wait until you become a millionaire to feel the peace of financial freedom.

At the end of day, aren’t we all just looking for that sense of peace?

Roadmap to Financial Freedom [1]

I came across this meaningful article about financial freedom some times back, and decided to share it here. It shows the important of having roadmap to financial freedom in our personal life. This article was published in the Malaysia newspaper, New Sunday Times under "Your Money" section. As it is quite lengthy, so I organize it into three parts.

Source: New Sunday Times, May 3, 2009
Author: Yap Ming Hui, Managing Director of Whitman Independent Advisors Sdn Bhd

A roadmap to financial freedom lets you enjoy clarity of mind and control of your personal finances. As a result, you become the master of your money. Without such a roadmap, you are in the dark as far as personal financial management is concerned. You are always trapped by your money problems. 

You worry that you overspend. You worry that you under-save. You worry that your investment return is too low. You are not sure if you can provide for your children’s tertiary education. You are not sure if your wife can stop working to take care of the family full time. You are not sure if you start your own business or even change jobs to increase your income. And you are not sure when you can retire. You have so many questions about money in your life with no certain and clear answers. In short, your life is always troubled by money worries and concerns.