If you are
a reader of my blog, you probably have heard of Muddy Waters and OLAM. Let’s
look at the 4 charts of OLAM, NOBLE, WILMAR, GOLDEN AGRI .
Poor
performance relative to local STI. In fact if you look at commodities asset
class as a whole, most of them are performing poorly, with the exception of
physical gold and oil.
Recall my
post here in 2008 where I blogged about my investment philosophy. I wrote at
one point on NOT investing in high volatile stocks and assets classes.
“I do not have high risk tolerance
and will avoid investing in equities that are highly volatile in nature. S
chips, penny stocks and commodities are almost out of my consideration. Unless
I have strong reasons and have done due homework, I will not invest in them, at
least in the near future.” SBC (2008)
I do not
invest in volatile stocks from simple observations. When a stock falls from $1
to $0.90, it only has to rise 11.11% to regain the 10% drop.
However, if it falls from $1 to 0.50, it needs
a good 100% rebound for it to go back to $1. And we know volatile stocks are
rarely high dividend counters, there is little hope of even recouping one’s
initial capital when you are hit with a 50% loss.
Making good
investment decisions are not the most important. Avoiding any bad investment is
the critical success factor. Do not forget it is human nature to hold on to
losing stocks and selling winners too early. Hence one is likely to book a 20%
- 30% gain rather than cutting loss at 20%-30%.
This is the
importance of having investment philosophy. Have a sound one and have the
discipline to adhere to it.
