Sunday, September 18, 2011

4 Stages of Stock Market Cycle - So What?

I just read around and I found this 4 stages of stock market cycle by Stan Weinstein. It basically means no matter how the stock will look like, it can never go out of these 4 stages. These 4 stages are very powerful because it can apply to all time frames whether it is 1 day, 1 month, 1 quarter, 1 year or 5 years. Powerful or not? Also, it will be repeated over and over again. For example it goes back to stage 1 from stage 4. Now let’s look at what are these 4 stages about:

Stage 1: Consolidation & Accumulation

This is also called base building stage or a depression stage. Basically, It is the most bottom point of the stock market cycle where majority of investors have lost confidence at this stage and are reluctant to invest their money in stock market. Smart investors at his point are waiting to use their reserved cash to start investing when it starts moving to Stage 2.

Stage 2: Uptrend &  Mark-up

This is also called the expansion stage or mark-up stage. At this stage, the stock has been stable for a while and starts to climb up. Novice or inexperienced investors are still hesitant to get in because they are still haven’t recovered from the stage 1. Smart investor will start investing at the early of stage 2 as shown in the graph.

Stage 3: Distribution & Peak

This is the stage where you can hear all the good news and the economy seems like it has never been better. At this stage, most novice or inexperienced investors jump into stock market because they think the prices will go even higher. This is exactly what happened to me when I owned an US stock with USD100 price in year 2000. I was still expecting it will go even higher! Smart investor at this stage are getting ready to exit.

Stage 4: Downtrend & Mark-down

This is a declining stage but nobody believes the downtrend especially at the early stage. They believe the downtrend is just a correction and it will go up pretty soon. On the other hand, smart investors have mostly taken profits and sold all their shares causing the share prices to drop. Novice investors will either take losses or turn to long-term hold if they reluctant to sell.

Note: These 4 stages of stock cycles are always correct because it is based law of nature. What is the law of nature? The law of nature is: what goes up must come down, what goes down must come up. So no matter what, the 4 stages are always correct!


So what? You may ask because no one will know exactly which stage they are in and this makes the whole thing pointless. Basically you still do not know when is your best time for buying and selling. The purpose of this article is to let you know there are these 4" stages. What you need to do next is how to identify or at least to make your best guess to identify where you are in this 4 stages based on whatever data that you have.

P/S: A technique called “Technical Analysis" is one of the ways you can predict the future based on the past historical data. However, I have not used or researched on technical analysis yet. So for those who have used technical analysis before for your stock investment, what do you think of this technique? Can technical analysis predict the future or at least help you to make a right investment decision?

Thursday, September 15, 2011

Single People Need Budgets Too

Many financial experts highly recommend a household budget in order to keep family spending and savings goals on track. It makes sense that proper money management for a household is a necessity to ensure financial security for all family members. For those who do not yet have families, it is equally important to establish a budget to prepare for the future as well as survive day to day, especially when single individuals are just starting out on their own, financially independent from their parents.

Why Singles Need Budgets

Overspending income is the reason why so many people are facing debt problems. With a budget you can properly account for where all of your money goes on a weekly or monthly basis. Without a budget, it can be all too easy to spend cash as a single person because outside of basic financial obligations, there are likely no other responsibilities to tend to such as children who need things or spouse who should have a say in money matters.

As a single person without a budget, it is also easy to lose sight of the big picture. Spending what you earn as you earn it leaves little room for saving for the future or building a truly solid financial foundation.

How to Start a Single Person Budget

A budget is simple to get started. Sticking with the methods is what gets many people who end up ceasing their good financial habits. It makes sense to develop a simple budget that allows you to make simple entries that doesn’t waste time. A weekly review of a budget is all it really takes to ensure you are on target.

Developing a budget requires that you gather all of your financial obligations for a month including utility bills, credit card bills, mortgage or rental payments, and any other monthly expense paid out on a regular basis. You will also need to gather your income statements so you know how much you bring home each month.

These amounts along with the creditors who receive your monthly payment should then be listed on a personal budget worksheet. Once all of the information is entered, the total amount of expenses should be deducted from the total amount of income. If the difference is negative, it is a clear sign that you need to make cuts to your budget or find a way to earn more money. If there is an overage, the funds that are ‘left over’ each month should be allocated into a proper savings account for emergency situations, vacations, or retirement.

In addition to the compilation of expenses and income, single consumers should also take a solid month to track the money they are spending and where they are spending it. This is for all expenses outside of regular financial obligations, including coffee stops, dining out, and transportation-related expenses. By tracking every penny spent in a month’s time, you are able to develop a more accurate budgeting system and as a result, establish a much more solid and reliable financial foundation for the future.

This is a guest post by Tisha Tolar.

Sunday, September 11, 2011

Understand Market Trend Before You Trade - NASDAQ and KLCI

If you have no idea what is stock at all, I suggest you read the following first: Stock Market 101: Understand How Stocks Get Started.

To be successful in stock investing, the first thing that you want to do is to analyze the entire stock market as whole and learn how the majority investors behave in the stock market. The stock market index is the indicator to tell you how the market moves. It represent everyone present in the market place. :D

I personally invest in US stock and Malaysia stock market. So 2 stock market indices that I"m interested are Nasdaq Composite Index and KLCI.. The following charts show the 1 year histrory trend.

KLCI - FTSE Bursa Malaysia Large 30 Index

KLCI comprises of 30 largest companies in Malaysia with approximately 70% of the total market capitalization of the FTSE Bursa Malaysia 100 Index.

Nasdaq Composite Index

Nasdaq Composite Index comprise of over 4000 innovative and fast growing technology companies in United States of America.

Note: What I like about this chart is when you click on it, it shows you the technical analysis of the chart. You can then perform the "Technical Analysis" on those chart. Basically technical analysis helps you to make investment decisions based on the study of charts rather than the stock fundamental. Interesting isn't it? But this is still something new to me but I will share with you more later on once I"m familiar with it. :)

What I don't like about this chart is only able to display up to 1 year trend. To view more than 1 year trend, you will have to use Yahoo Finance.  But Yahoo doesn't have a way to embed the stock chart in a website or blog.If you know, feel free to share with me.

P/S: What about you? There are lot of stock market indices out there. Which market index do you refer?

Didn't find what you want? Use Google Search Engine below: