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I remember vividly my feeling right after I attended my first 2-day
seminar with Investools in late February of 2005. After that initial
seminar, I subsequently attended the rest of the series and it definitely
changes the way I live and trade the stock market.
I was trading blind relying purely on big name blue chip stocks.
During my education process with Investools, I was amazed by the abundant
opportunities to make money in the stock market utilizing option trading.
I believe most investors invest in one-dimension financial vehicles such
as mutual funds, annuities, pension plans, IRAs to name a few. The
problem with this investment is if the market goes against them, they
will be set back financially. Most fund managers advise their clients to
“hold back”, “sit tight” and wait for the market to bounce back. Invest in
the long run is the key to success. I found significant fraud in this
investment philosophy. Time and capital are among the factors. Not all
investors invest early enough to enjoy the luxury of time. Not all
investors are wealthy enough to weather a downtrend.
The market will always move in all three directions: up, down and
sideway. If we can find a way to benefit ourselves in all three market
condition most of the time, we will be in good shape financially. Of
course, there is no perfect way to do it. We all know we are not living
in a perfect world. We need to educate and train ourselves to think
before reacting to a certain severe market condition and adjust our
positions accordingly. It takes me almost 4 years since the early 2005 to
train myself to be an option trader that I am today. I believe the
process will continue as long as I want to continue to improve my trading
skill. Blood and sweats were certainly involved during the learning
process. Those who can take it will survive. Those who can’t will be
dropped out.
Anticipating a bear market at the beginning of the year, I closed
most of my mutual funds and transferred them to my own stock fund. I was
getting out of the bus and driving my own financial vehicle. After my
investment education, I notice one interesting point: Most amateur
investors will look at the profit first before they invest. If they like
the profit, they will invest. The
amateur investors will hold their losing positions hoping for a bounce
back and cash out their winning positions to keep the profit. It is their
investment philosophy: Look at the profit first. The professional
investors always look at the risk first before they invest. If they think
the risk is manageable, they will invest. The professional investors will
cut their loss quickly and never let the loss go beyond their manageable
level. They will let the winning position run until it meets their
risk/reward ratio and then they get out with a much better profit.
I am sure most of us are aware of the current global financial
crisis. I believe the “E Quadrant” class is the one who suffers the most
during this hard time. Their jobs are certainly not secured any more and
their 401K Plans are undoubtedly in jeopardy. That is expected. Those are
the one-dimension investment vehicles I mentioned earlier. It broke my
heart when I watched the news the other day and saw some retirees
struggling with their pension plans. Some even say they may have to
re-enter the work force to make ends meet. For the first time in modern
history, the stock market suffers a triple digits loss the entire week.
Regardless of how sophisticated an investor is,
loss is usually occurred when the market moves dramatically in one
direction like it does this week. I am not an exception. For the first
time since my investment education with Investools, my portfolio is in
the red zone. However, I am still doing much better, percentage wide,
compared to the major indices counting back from 2005 to present.
I remember we had a friend meeting not too long ago in Orange County. One of my friends is a
successful businessman who owns numerous small businesses and real estate
investments in California and Hawaii. He thought
I must be in a difficult time during this stock market drop. When I heard
his comments, I giggled. It proves my point the majority is still trapped
by the myth that money can only be made in an up market. Little do they
know there is a way to make money in all market condition with, of
course, investment knowledge and financial literacy.
To be good in any thing, I admit we need luck as well as ability. I
consider myself lucky when I entered the “Golden Era” of the stock market
in the 1990’s. I accumulated sizable capital taking advantage of that
one-of-a-lifetime market condition. Luck ran out at the turn of this
century and the ability factor kicked in. I consider myself to be luckier
to find a good investment education company to train myself to be what I
am today. Strangely enough, during this week market meltdown, I was not
panic. I was actually excited because during this incredible market drop,
I had a chance to review, adjust my positions and develop a new trading
strategy so that I can make money regardless of the market condition with
minimum effort. It is still in the early stage and it needs to be tested.
The reason I can weather this global financial crisis is not
because I am smart. I am just an educated investor knowing what to do in
a certain market condition. As I mentioned in my “Risk” article, a crisis
is a combination of danger and opportunity. Do not let the danger scare
us away. Find the opportunity and capture it.
Dennis
Phan 潘家墉
KhaiMinh, UCLA
& Investools Alumni
Los Angeles, California,
U.S.A., 13 October
2008
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