Can you make a million from the stock market? This is a question that many would like to answer in the affirmative. However, there are also many who would think it is an impossible task. Below is a story that a friend shared with me, and that I believe could be interest or inspiration to those forummers here striving to get rich from dabbling in the stock market or in other business:
A comb manufacturing company intended to expand its business and was looking to employ a new Sales Manager. The company advertised the position in the newspaper and received over whelming response.
Faced with the problem of choosing the best candidate for the job, the Company’s HR manager decided to test the applicants by assigning everyone a task to perform. The task was “Selling Combs To Monks In Temples”. Only 3 applicants were willing to take on the challenge.
The HR manager instructed: "Now I want the three of you to sell these wooden combs to the monks in the temples. You only have 10 days to do it and to report to me."
Ten days later, they returned to report to the HR manager who asked A: "How many combs have you sold ?" A answered: "Only One."
The HR manager asked: "How did you manage to sell one? A answered: "The monks in the temple scolded me when I showed them the comb but on my way downhill, I met a young monk who bought it to scratch his head due to dandruff."
The HR manager then asked B: "How many did you sell? B replied: "10 pieces. I went to a shrine and noticed that many devotees’ hair was in a mess caused by the strong winds outside the shrine. The monk listened to my advice and bought 10 combs for their devotees as a mark of respect to Buddha."
Then, the HR manager asked C: "What about you?" C replied: "1,000 units."
The HR manager and the other 2 candidates were simply astounded.
The HR manager asked: "How did you do that?" C replied: "I went to a famous temple. After observing for a few days, I discovered that there were many tourists. I then told the Chief Abbot there. "Sifu, those who come here are very devoted. If you could give them a gift, it will be more elating to them. I told him that I have a bulk of combs here and asked him to put his signature on the combs as a present to these visitors. He was very delighted and immediately ordered 1,000 pieces."
According to a research by HARVARD UNIVERSITY, 1) 85% of a person’s success is due to attitude and 15% to capability.
2) Attitude is more important than intelligence, specials skills or luck.. in other words, professional knowledge only constitutes for 15% success factor while 85% is due to self-cultivation, public relations and adaptability.
Another story is the “Selling Of Shoes to Africans”.
When 2 Salesmen were sent to sell shoes in Africa, one of them retorted: "Cannot do it. No one wears shoes over there!” The second salesman said: "It is a huge market with selling opportunities."
Success and Failure is dependent on how we face problems. When the economy or stock market is good, there are people going bankrupt or losing money. When business is bad, there are many new millionaires as well. So apply the 85% of the right working attitude fully. Lesson To Learn: To be successful in life, we must adopt a positive mindset and learn to "think out of the box" even with 15% capability. We can then be confident of solving problems as long as we have the RIGHT WORKING ATTITUDE, COMMITMENT, DISCIPLINED, DEDICATION and DETERMINATION. Challenge To Forummers: Can you make a million from the stock market? Alternatively, can you make big money from S-chips [high risk but high gain stocks at very cheap prices that just about everyone now avoid for fear of losing money]?
Hey Observer2, nice to see your interesting & enligthening articles again & thanks for sharing. Very good Sunday morning. + But my little advice is still not to play with S-chips...Why? if we take a closer look at counters like Cosco Corp, ChinaAviationOil or the recent ChinaGaoXian, we can understand why. I heard from some veterans that some are still sitting on paper losses today for Cosco bought at $3 plus few years back, OMG + I mean if u really want to play due to 'itchy hands', then just few lots shall suffice (like tikaming), but not buying few hundreds lots at one go... + It's either u win big or lose big...i quote one 60-yr-old uncle that i happen to meet regarding about investing in S-Chips, 'Ten people went in, Ten coffins came out'. LOL. + Thanks & have a fruitful investment ahead to all.
Hey observer2 and csltay: Thanks for yr differing ideas. My 2 cents worth is as follows:
a. it's possible to make $1 m fr stocks. It would take about 10 years of experience or so of investing (= making mistakes, losing some $, waiting for the bull market.)
b. We are now at the cusp of a possible rebound -- the US and Europe problems are being tackled and will be resolved. No way will US go into default. With the urgent issues settled after early Aug, the market will shoot up.
c. S-chips will possibly be the biggest % gainers, becos they have been the biggest % losers in recent months!!! Some will shoot up, some will just limp along.
My bets are --- Eratat Lifestyle, Sino Grandness, Ziwo.
Tikam, tikam ---- Renewable Energy Asia.
Buy when everyone is selling, you can then get it cheap. Sell when everyone is buying. Then you avoid traps. No one know-how long the negative sentiments surrounding the s-Chips will last, and no one knows how many cans has worms. Sure, if one is risk adverse, avoid all the cans. But do not forget risk is not just dependable on the product but also the level of knowledge in the products. Remember the mini bonds and High notes. Ppl get complacent with capital protected clause and thought is the same as guaranteed. Risk is dependable on timing and price too. A rock solid blue chip will cause as much as grief to anyone who bought it at the peak. Not to mention that blue chips can collapse too. Hence the best insurance is still to do your homework and have your own risk management system. In this way, u curse yourself when u lose and learn and give yourself a pat when u win, frankly it's not the product but the knowledge behind the product that determines risk. 75% of my equity portfolio is on s-chips. If capital invested is taken as consideration, then 85% of my capital is invested in s- chips. My list isQingmei, Fuxing, Hu An and An Chun. An Chun I got in too early and is nursing a loss of more than 40%. yet the reason for buying has not change yet. I am still holding on. I max out all my ammo during this US and euro crisis and is hoping like many for a rebound with the release of 3q results. But this is with the assumption that US debt ceiling get raised. If it doesn't , I know I will have to nurse more painful wounds but at least I blamed no one (or product) but myself for making a wrong call.
Hi, csltay8033,
I share your concern over the danger of S-chips, which is really not suitable for everyone to invest in. Those who invest in S-chips or penny stocks should have a positive mindset and be able to “think out-of-the-box” in order to do well in reaping good returns. A person with a positive mindset would think of all the probable ways of doing a task to achieve a desired objective while one with a negative mindset would think of all the reasons why a task should not or cannot be done - for example, too risky or dangerous to do; too many people have failed before; poor corporate governance; can lose a lot of money or even go bankrupt, etc….. so best not to do!
My views on S-chips are as expressed at the start of the thread on “Opportunities In Out-of-Favour Stocks” – reproduced below for ease of reference.
I also share the views as expressed by both Reck and Greenrookie. There will always be market rallies (not technical rebounds) in a bull or bear market. As we do not have a market rally for several months now due to the series of bearish events coming one after another, the likelihood of getting a rally in August or later is getting higher and higher. With S-chips being bashed down to bargain basement levels, there would always be a small number of astute and discerning investors who would make a pile when the S-chips eventually recover from their pathetic price levels; and there will always be “latecomers to the party” given the task of holding the babies when the party is over. This is all part of the stock market game.
[observer2 20-09-2010]: DISCLAIMER: This is not a call to buy out-of-favor stocks but to share information with fellow investors especially those who are not averse to investing in stocks of out-of-favor sector. Managing risks is an integral part of investment success and the onus is on each one to do his/her homework and manage his/her own risks well. “No Risk No Gain; Higher Risk Higher Gain” as the saying goes. Stock investment has unforeseen risks as the stock market is irrational e.g.
Good news, share price up – that ‘s logical !
(Occasionally) Good news, share price down - that ‘s illogical but true ! Because …….
STOCK MARKET IS THE NAME
DECEPTION IS THE GAME
WHEN WHAT YOU SEE IS NOT WHAT YOU GET
YOU’VE BEEN FOOLED, ONCE AGAIN.
From time to time, certain sectors of the market will lose favour with investors because of business downturn, economic recession, poor corporate governance, scandals, etc. Presently, the S-chips and oil & gas sectors are 2 examples.
Interestingly, history has shown that it is only a question of time before an out-of-favour sector would come back into favour again. How would this happened and could an investor capitalized on such a situation to make a “killing” in the market? The answer appears to be “YES” and “NO”.
“YES” for those who do their homework and are patient and astute enough to move ahead of the crowd.
“NO” for those who just follow the herd’s instinct and only believe in what they see and hear
Looking back to the past, many stocks in out-of-favour sector normally would sell at very low valuation for considerable period of time. A time would then come when the fundamentals of some of these stocks started to improve causing them to be very grossly undervalued and to catch the eyes of some astute investors. Since these stocks are already at very low valuation, its share price had little downside and can only move sideways or up. When their share prices had appreciated substantially to give their shareholders a large windfall, the “fearful” investors on the sideline could only watch with disbelief and envy. Soon any painful experience that many of them had encuntered in the past would start to be forgotten and whatever fearfulness they might still have of such stocks gradually dissipated. Instead, fear of missing out on opportunities to make money began to dominate their emotion.
S-Chips Sector As Example
History will repeat itself because of the unchanging behaviour of the market along with its participants. I believe it won't be long before the S-chips make a come back since too many people have been avoiding them because of their poor corporate governance and that many had been badly burnt by them. This has resulted in their very depressed share prices and valuation. As not all s-chips are rotten, the recovery of many businesses in China after the fallout of US housing & financial crisis, have seen many China stocks making significant recovery in their profits lately - Sunvic and Bright World are 2 good examples.
It just need a few of the China stocks to make a spectacular recovery in their share prices giving a dramatic windfall to those brave enough to collect them at the "depression time" prices. This would then make the "herd" envious and have the effect of transforming their FEAR into one of "GREED". It had happened in previous market cycles and appears destined to happen again. Right now there are already signs of S-chips slowly making a come back in their share prices after many of them reported significantly improved business & results. The "herd" is well aware that blue chips with dividends are always the safest bet & this belief is supporting well their high stock valuation as compared to the many “potato chips” selling at a fraction of the prices for the same PEs. However, capital gains in blue chips appear rather limited making them less rewarding due to their high valuation.
In the last bull market of 2002 to 2007, S-chips were noted to have fallen out of favor with the "herd", after the scandal of CAO in 2004. They then made a dramatic recovery some time later & then went out of favor again after 2007 when the bear market and US financial crisis set in. Since then, this sector has remained out of favour with investors. Below is an extract of a report of S-chips' reception over the past few years taken from The Edge Malaysia, Issue 757 (June 2009) -
"The S-chips were investors’ darlings in 2006 when China started to open its doors, allowing domestic investment funds — which are called Qualified Domestic Institutional Investors (QDII) — to invest abroad. The Chinese government had set a quota of US$14 billion (RM49 billion) for such funds to be invested overseas. Investors were shovelling money into S-chips on the expectation that these counters would be the priority choice of China’s QDII funds too.
The enthusiasm faded when the earnings of these companies fell short of expectations, compounded by the start of the downturn. The S-chips have now fallen out of favour among investors, and many have had their fingers badly burnt when share prices tanked as accounting fraud and bankruptcies started happening.
Oriental Century Ltd, China Sun Bio-Chem Technology Group Company and Fibrechem Technologies Ltd are among those that have been hit by alleged accounting irregularities. FerroChina Ltd has halted production in China and filed for bankruptcy. The steelmaker is facing 206 lawsuits from creditors that are claiming RMB4.82 billion (RM2.5 billion).
There is a growing fear that some companies will just vanish into thin air when their inflated sales figures, empty coffers and huge debts come to light as the crisis continues to bite.
“The rosy picture that the management had painted earlier has now been proven wrong. Investors are wary of the S-chips as it is so difficult to judge which are the good ones and which are black sheep,” says a fund manager in Singapore.
“Fund managers visited their plants and offices in China, met the management regularly, and made other checks. In the end, some still turned out to be con jobs. Many investors have decided not to touch the S-chips to avoid the risks,” he adds."
The stock market alternates between BULL & BEAR while the "herd" alternates between FEAR & GREED. Investment is about managing one's risks. Risks are very much lower in a bull market than a bear market and history has shown that corporate failures and scandals occurred mostly during an economic downturn along with a bear market. There is a time for all things – a time to sow, a time to reap; a time to BUY and a time to SELL. TO EACH HIS OWN.
We can have lots of opportunities lying out there but it is the bedeviled USA and Europe which are the curse of the markets. Can’t they get their houses in order?
Stocks plunged Wednesday as the U.S. edged closer to defaulting on its debt and the economy showed more signs of deteriorating. Major indexes gave up all of their gains for the month.
The Dow Jones industrial average fell 198.75 points, or 1.7 percent, to 12,302.55, its biggest one-day drop since early June. It has fallen for four days straight.
+ But my little advice is still not to play with S-chips...Why? if we take a closer look at counters like Cosco Corp, ChinaAviationOil or the recent ChinaGaoXian, we can understand why. I heard from some veterans that some are still sitting on paper losses today for Cosco bought at $3 plus few years back, OMG 
+ I mean if u really want to play due to 'itchy hands', then just few lots shall suffice (like tikaming), but not buying few hundreds lots at one go... 
+ It's either u win big or lose big...i quote one 60-yr-old uncle that i happen to meet regarding about investing in S-Chips, 'Ten people went in, Ten coffins came out'. LOL. + Thanks & have a fruitful investment ahead to all. 
