Lately, I received a question from a member of DividendVault.com as followed:
Understandably, most would expect quick answers such as ‘Yes bro, you can sell them.’ or ‘I think it is better to keep.’ But, at DividendVault.com, our intention is to transform all our members to become their own fund managers who has the capabilities to build and manage their own investment portfolio independently.
As such, independent thinking and ownership of all investment decisions would be highly encouraged and to me, it is a very freeing way of investing. So, if I give members quick answers like the ones above, I’m doing a disservice to all for the answers given will be counterproductive to learning and growing as investors.
The above posted has reflected a couple of things and I like to highlight them to all for educational purposes. They are as followed:
1. The Above is a Question on Trading, not Investing
First, there is a distinction between trading and investing. Traders do trading for fast money. Investors like to accumulate shares of good businesses in pursuit of sustainable long-term wealth.
From above, the focus is on making money itself as his eyes are fixated on stock price movements itself, not on ownership of businesses. Hence, this question is on stock trading and not stock investing because a trader could be interested to either ‘buy low to sell high’ or to ‘buy high to sell even higher’.
Personally, I’m an investor who earns dividends from my stock portfolio. Hence, I do not know much about stock trading, market timing, forecasting, prediction, trend following, candlesticks … etc. Thus, the question above has been asked to the ‘wrong person’, especially if you intend to trade or speculate.
2. What’s Your Purpose of Buying MBB and CIMB?
I’m an advocate for all to be purposeful when investing. This means, we have to understand the whys of what we are doing and have the big picture of what we ultimately want to achieve from our investing activities. They are personal and I believe our objectives and preferences will differ individually.
This is why I don’t believe in telling people what stocks to buy, hold, or sell. This is because it is not helpful to anyone. To me, if you have a plan on what you like to achieve in the next 1, 5, or 10 years into the future, you will know most likely what stocks to buy, when you should buy them and how your portfolio will look like in the future. Without a plan, you will likely be chasing the wind by wanting stock tips, comments, opinions, advises, recommendations … etc.
What you need is not tips, but wisdom, a plan and a system to invest.
So back to the question, what is your original purpose for buying shares of MBB and CIMB? Did you buy them because the market is down and their prices have dropped to certain figures? Are there any other reasons why you chose them?
It would be helpful for you to reflect and list down your answers. But, if by now, you say, ‘Bro, all I want is to know what I should do with these stocks. Is to keep or sell? Why do you write so many things and not tell me the answer?’
Then, you might have just missed out on an opportunity to learn about yourself and investing altogether.
So, here is homework for you. Take time to reflect on why you bought what you
have now (MBB and CIMB). Your objectives will reveal what you should do with your MBB and CIMB.
3. When Is the Right Time to Sell or Keep?
Evidently, the questioner bought MBB and CIMB without having a game plan as to what to do after purchasing them. It is a commonality in the stock market.
Ideally, it is best for all to buy stocks with a plan crafted beforehand. The logic is similar with having a blueprint drafted out before building a house. It would tell you how your house will look after building it. Where is its living room, kitchen, study room, bedrooms, lavatories, garden, garage and so on and so forth?
Imagine trying to build a house without a blueprint. How would it look?
Personally, I’m an investor who likes to accumulate stocks for the long-term. So, my plan is to find good stocks which deliver consistent growth in sales, earnings and cash flows and I would invest in them, if their stock prices are undervalued. I wasn’t into stock flipping, trying to flip what I have bought for quick profits for that is just not my game.
4. ‘I Always Sell at the Wrong Time’
Understandably, many people buy stocks, hoping that they will go up. A stock is deemed to be a good ‘investment’ if it can rise up higher and faster. Hence, this had attracted many people into stock trading and speculating activities because they are into them for fast money.
Sadly, it is a fallacy to believe that stocks will always go up after buying them.
I believe it is more realistic for us to expect stock prices to go up, down, or even sideways after purchasing them. The stock market has been volatile, still is, and will be in the future. So, why not accept it and embrace it altogether?
This is because if you buy stocks in hope that they will go up and … they do not, you will be quite disappointed and believe that stock investing is ‘risky’.
Before you buy your stock, you may want to answer the following questions:
a. Why do you want to buy the stock?
b. Would you like to own the stock for the long-term or … forever?
c. If you buy it for $ 10 and it goes up to $ 11 and above, what would you do?
d. If you buy it for $ 10 and it stays at around $ 10, what would you do?
e. If you buy it for $ 10 and it drops to $ 9, $ 8 and below, what would you do?
That way, you are prepared for all eventualities that could happen to the stock.
5. Trading Profits versus Dividend Income
Today, I believe there will be people who will be delighted to buy a stock at $ 10 and sell it for $ 11 and hence, having a trading gain of 10%. The person who can earn 10% in trading gain in 10 minutes is considered to be better than one who earns his in 1 year. But, like I said, this is not my thing.
I’m not one who actively buys and sells stocks in the stock market.
Personally, I made very few but calculated transactions in the stock market.
But, these investments would deliver regular dividend income on a quarterly or semi-annually basis into my brokerage account without my activity after buying dividend-paying stocks.
In essence, you can say most of my stock transactions are dividend transactions into my brokerage account which are automatic, not buying and selling stocks. I can safely say that this is common among dividend investors worldwide and the best part is that anyone with logic and primary school maths can do this for it is not rocket-science.
So, why don’t I focus on selling stocks for profits?
This is because in my view, why do I need to sell stocks if they are good assets. I don’t like to kill my golden goose when it is still producing golden eggs each day without fail. Hence, if you want to know how to trade stocks for profits, I would say I’m probably the wrong guy to talk to.
Conclusion: Are You Trading or Are You Investing?
First, it is helpful to understand that stock trading is different from investing.
The whole mindset, skill set, and how we approach stocks is very different from one another. It is a fallacy to think that a stock investor is a good trader and will know how to predict markets and use technical analysis tools to trade for quick profits. To me, I believe stock investors are just business people who like to find and invest into shares of good businesses if their prices make business-sense.
As such, if you wish to know more about stock investing, you may check out the following free training below:
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