Taming the Money Sharks: 8 Super-Easy Stock Investment Maxims

By Philip Shu-Ying Cheng

Easy-to-follow guidelines from a pro for simplifying your investments, protecting yourself from the investment sharks and achieving financial freedom

Drawing on his years as an investor for leading banks in the U.S. and Asia, Philip Cheng delivers down-to-earth strategies guaranteed to make you "shark-proof" while you optimize investment returns. Statistics show that only 20% of small investors ever come close to achieving their investment goals. The other 80% get eaten alive by "investment sharks"—investment advisors, fund managers and other hucksters out to line their pockets with your hard-earned cash. Motivated by a sense of fair play, Cheng resolved to write an investor's survival guide in which he'd share everything he's learned in his years as a successful professional investor. The result is Taming the Money Sharks. The easy-to-follow guidelines you'll find in this book will help you navigate the shark-infested waters of the investment world, all the way to the financial freedom you dream of and deserve.

• A must-have survival guide for novice investors, and a source of fresh thinking and innovative strategies for experienced investors
• Features many illustrations, summaries, charts, real-world examples along with other powerful tools to help you avoid common mistakes and win at the investment game
• Lays out 8 proven strategies for investing systematically and surviving and thriving in the shark-infested waters of the stock market

• Language: English
• Publisher: Wiley
• Release date: May 29, 2013
• ISBN: 9781118550434

Book preview

Contents

Acknowledgments

Preface

Author’s Disclaimer

Chapter 1: Stop the Bleeding

A. Chasing a Hot Stock

B. Chasing a Hot Trend

C. Maxim No. 1: Don’t Rush into Buying, and Avoid Further Bleeding

Chapter 2: Select an Industry to Increase Probability of Profitable Investments

A. Basic Knowledge

B. Choosing an Industry to Invest In

C. Industry Characteristics

D. Maxim No. 2: Profit from One Chosen Industry or a Selected Few Industries

Chapter 3: Wise Use of Information Resources

A. Listen to a Friend or Relative

B. Listen to a Stock Guru

C. Listen to a Stock Analyst

D. Listen to an Investment Advisor

E. Listen to a Large Investor (Possible Shark)

F. Maxim No. 3: Reference External Inputs but Stay Focused

Chapter 4: Decide on Company Values and Buy–Sell Prices

A. Relevant Company Historical Facts

B. Most Basic Financials

C. Five Key Indicators

D. Don’t Be Blind to a Company’s Personality

E. Deciding on Buy–Sell Prices

F. Maxim No. 4: Trust but Verify

Chapter 5: Simple and Effective Portfolio Strategies

A. Portfolio Planning Guidelines

B. Core versus Satellite Portfolio

C. Portfolio Risk Management

D. Maxim No. 5: Manage and Accept Portfolio Risks

Chapter 6: Capitalize on Policy Directions

A. Are Policies Fair?

B. Policy Directions

C. Maxim No. 6: Profit from Policies and Trends

Chapter 7: Loving an Investment or Loving to Make Money

A. Is Love Forever?

B. All-or-Nothing Thinking

C. Love a Person? Invest for Love?

D. Maxim No. 7: Emotions and Investment Don’t Mix

Chapter 8: Fully Enjoy Your Profits from Stocks

A. Manage Your Investment Lifestyle and Health Simultaneously

B. Swap Poor Health for Big Money

C. Investment Emotions That Are Detrimental to Our Health

D. Investment Flowchart

E. Maxim No. 8: Maintain Health and Wealth

Appendix A: Basic Technical Analysis

Appendix B: Deciding on Buy Prices

Appendix C: Deciding on Sell Prices

Appendix D: Strategy for Investing in High-Dividend (HD) Stocks

About the Author

Index

Additional Praise for Taming the Money Sharks

For those investors who want to profit from the investment markets like professionals, this book is the key to success in eight simple steps. You will find Professor Cheng’s investment language in sync with our daily lives—complex theories are replaced with real-life examples and interactive illustrations pinpoint the fundamental knowledge we all need to know to accumulate and protect our wealth.

—Patrick K.S. Wong, Former General Manager, Jardine Fleming Taiwan Investment Management Ltd; Investment Director, Jardine Fleming Unit Trusts Ltd Hong Kong; President, Polaris Investment Trust, Taiwan

Mr. Cheng has written a highly readable guide for individual stock market investors who wish to develop an organized approach to creating and managing their portfolios. He uses real-life examples to effectively illustrate investing pitfalls and principles, while presenting tools and techniques that are valuable to the discipline needed for success in this activity. Rooted in common sense and conservative principles, his investing framework will best serve individuals who are willing to make a serious commitment of time and energy to research, trade execution, and ongoing portfolio management activities.

—Richard Mellon, Retired Financial Manager

Copyright © 2013 by John Wiley & Sons Singapore Pte. Ltd.

Published by John Wiley & Sons Singapore Pte. Ltd.

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This book is dedicated to all the individual investors who have lost money in the stock market. Many of them shared their experiences with me and enabled me to define the focus of this book. I urge my readers to maintain the proper frame of mind and to form good investing habits in order to survive and prosper despite the presence of the money sharks.

Acknowledgments

Many people have contributed to my thinking about this book over the years, and I would like to thank them all.

Particular thanks go to my family, friends, and coworkers, who helped directly with suggestions that contributed to the writing of this book.

Special names that should be included in these acknowledgments include the following: Nick Wallwork, Publisher, John Wiley & Sons Singapore Pte. Ltd. (for his overall guidance and advice); Gemma Rosey, Development Editor (for her creative editing); Senior Production Editor Stefan Skeen (for his innovative copyediting); Jules Yap, Editorial Executive at Wiley (for her patient efforts and organization); Stuart Leckie (for his specific Preface suggestions); and Stella Lam (for her meticulous preparation of this manuscript).

Preface

Do you want to swim in possibly shark-infested waters and still survive? Better yet, do you want to get rich by taming the money sharks?

Congratulations! In this book you will find eight super-easy stock investment maxims that will enable you either to stay away from the sharks or to protect yourself from them. You can even become rich systematically by drastically simplifying your investments.

Most of us want to get rich, but do not have the following:

1. Time (we are already very busy with regular work, family, friends, entertainment, etc.)

2. Experience (our professions are not directly investment related)

3. Focus (we are generally bombarded by misinformation)

During my 40 years of investing, I have played with many types of money sharks. Based on my battlefield experience along with the lessons I have learned from my own friends and coworkers, I have distilled some down-to-earth steps for you to consider and follow. You may already have read good books on investing, but in this book I have set forth eight super easy-to-follow maxims of investment to optimize your results.

I also realize that readers will have neither the time nor the patience to deal with demanding investment terms, which are typically presented in many investment books. To reduce the frustration involved in dealing with investment terms, I have eliminated them as much as possible, while still presenting effective investment advice.

Even though investment strategies are not one size fits all, I present some proven principles for dealing with ongoing uncertainties. These will help you reduce your losses and maximize your gains.

I realize that each of you has your own objectives, strategies, and hoped-for results. Thus, I encourage you to modify my investment principles to fit your own portfolio and risk levels, whether you want your investment profits to satisfy near-term objectives (e.g., buying a nice car or a new house), or long-term goals (e.g., saving for a college education or retirement).

This book has eight chapters as highlighted in the flowchart that follows. I recommend that you try to follow as many pointers as possible to be successful. According to my historical feedback, many friends have followed just a few of these principles judiciously and have already enjoyed systematic profits from their investments.

Stock Investment Flowchart as Discussed in This Book

After reading this book, you will be able to swim in your own investment water while co-existing with the money sharks. The sharks referred to in this book are of two types:

A. The first type consists of the huge operators. They execute huge buy–sell orders in the stock market based on their own needs. They do not purposely attack individual investors—or any other investors, for that matter. However, because of their huge size, any investor that happens to get in the way of their normal operations would definitely get hurt.

B. The second type consists of malicious sharks who would purposely scheme against any investors (especially individual investors). These sharks use deception to trick and attack unwary investors, causing blood loss or total incapacitation.

Please follow my investment flowchart and build a new investment framework for yourself. Follow as many of the eight maxims as possible to form your new investment habits. This book offers not a quick fix but a lifestyle change that will benefit you for many years if you follow it.

I sincerely hope that you profit from this book as much as I enjoyed writing it.

Author’s Disclaimer

This book is intended to provide information from sources considered to be reliable, but the author and publisher make no representation or warranty as to their accuracy or completeness, and specifically disclaim any liability, loss, or risk, whether personal, financial, or otherwise, that is incurred as a consequence, directly or indirectly, from the use and/or application of any of the contents of this book.

Chapter 1

Stop the Bleeding

Should You Continue to Invest by Striking While the Iron Is Hot?

Don’t chase after any hot asset; first learn why it is hot.

Why do we chase after a hot