Trend Archives | MoneyDigest.sg

You Are Losing Bulks Of Money On Fads

A fad is an intense enthusiasm that is widely shared by the masses but it is short-lived. For instance, investing fads are usually the “newest” investing style in the market, which is usually unsustainable in the long run. Moreover, fad in the marketing sense is the behavior that develops on a large population due to the perception of popularity or coolness as deemed in social media or other forms.

By definition, being hooked on a fad is similar as being infatuated with a person for temporary period of time. Although, that does not stop you to spend bulks of money on fads! Avoid overspending by being aware of the ongoing fads in the Singapore market:

1. BOOK CRAZE

Remember when the Harry Potter or Twilight book series swept the nation by storm? This time, the book craze dates back from your childhood and it is none other than the coloring books! Coloring books, adult coloring books to be exact, have been increasing sales due to its social media following as the adults claim the coloring activity to be a great stress reliever. In Popular Bookstore, its price ranges from S$8.43-16.08.

2. FROZEN YOGURT

Frozen yogurt is gaining fame and does not show any signs of stopping at the time being. Companies such as Yami Yogurt, Sogurt, Berrylite, and Llao llao have been forming long queues in their stores especially the last one. Frozen yogurt is a famous product due to its healthy ingredients and high nutritional value. I shall focus on the Instagram famous frozen yogurt called Llao llao.

Image Credits: facebook.com/llaollaoSingapore

Llao llao’s frozen yogurt is made with skimmed milk and finest toppings. I can attest that their frozen yogurt is delicious and smooth. But, the price of their products on average is S$6. That is not so cheap especially if you keep coming back for more.

Image Credits: facebook.com/llaollaoSingapore

3. ENERGY DRINKS

Energy drinks are designed to give you the temporary boost you need for the day. It is popularly consumed in bars, restaurants, and gas stations. The energy drink brand that is gaining momentum in Singapore today is called “ok.-“. Ok.-‘s variety of flavors and colorful packaging speaks volumes to the urban lifestyle we live in. Furthermore, they marketed the brand in crowded places such as the Orchard Road. One pop is sold at about S$2.25. Imagine the effect on your pocket if you need the extra elevation everyday!

Image Credits: facebook.com/okoksg

4. FAD DIETS

Every fad diets claim to be the most efficient solution to losing weight and to becoming healthier. In the recent years, the famed diets include South Beach Diet, Paleo Diet, and Atkins Diet. Celebrities have sworn their lives to juicing and vegan diet. But what’s hot now is the combination of Vegan and Paleo Diet called Pegan. It is consisted of low-carbohydrates Paleo Diet (i.e., including meat, fish, and vegetables only), as well as fruits and vegetables from the Vegan Diet.

The problem to committing to these types of diets is the unnecessary price tags attached to it. For instance, you can purchase a juicer that ranges from S$49-800 just to make fine, smooth, and healthy juices each day. Organic produces are not that cheap too! Unless, if you purchase them from the budget-friendly groceries – here.

Sources: 1, 2, & 3

TA: Introduction to Trend Lines

You’ve probably heard about Technical Analysis from my previous articles and may be wondering to yourself, “How should I begin?” I feel that a great start would be learn about Trend Lines because it is the first step to knowing what Support and Resistance mean. You may wonder why is it important, and I hope that by the time you reach the end of the article, you would see it’s effectiveness and be convinced yourself. Perhaps, even try it out for yourself! I have been using trend lines faithfully and they have always served me well in my investments.

What are Trend Lines?

Trend lines are basically lines that you draw on charts that shows you the general direction of a trend. It is useful to help find potential support and resistance levels so you can time your entry and exit better. And the best part of it all, it’s not hard at all and can be performed on any charts! All you need to do is to find the best fit support or resistance line via trial and error by connecting the bottoms or tops of a trend. Here’s an example:

Here I have presented you with a chart that shows you two support lines (S1 and S2) and one resistance line (R1). It definitely doesn’t look too hard to draw isn’t it? Simply connect the bottoms of a trend and there you have it, a beautiful trend line that can help you spot the next bottom to enter your trade! You’ve always heard of people trying to “time the market”, this is one of the ways traders time their trade. Take for example the trade towards the right of the chart, at S2. Look at how easy it would have been for traders to time their entry and exit just by drawing two lines! Buy when it touches S2, and sell when it touches R1.

Trend Lines Keep Changing!

Had you not drawn the trend lines, would you have known at what price you should enter and at what price you should have exited at? Drawing trend lines help to clearly show where the next potential support and resistance will be at. I place emphasis on the word “potential” because it is not a guarantee that the trend will stay the same forever. Look at S1, it stayed in effect for about 6 months before the trend line is broken, and then we ignore S1 and move on to S2. Same goes for R1 where it was effective for 7 months before it was penetrated in mid-March. This penetrating move then renders R1 meaningless now while S2 is still in play because it hasn’t been breached.

It’s All About Practicing

I understand it can get a little confusing, but when it comes to trend lines, it is all about practice! Keep drawing and fine-tuning your accuracy when drawing these trend line because you will be rewarded at the end of the day! You can practice charting using the software I’m using, Chartnexus. (Note: I’m not receiving any commission for introducing this software from Chartnexus, it’s just that it has helped me a lot and I wanted to share with readers who are interested in Technical Analysis and it would help when I teach more about TA in the future.) Some of you may already have access to charts, do give it a try! Some charts are harder to have their trend line drawn and some are easier. Keep trying and eventually move to harder charts to improve your accuracy!

Disclaimer: The above chart is for learning purposes only and not a recommendation to buy or sell. Always conduct due diligence when making a purchase or sale of a stock.

Technical Analysis – The answer to “When to buy?”

Why Should I Consider Technical Analysis?

For questions like “What to buy?” requires fundamental analysis. But when someone asks, “When to buy?” This is when technical analysis comes into play. Technical analysis is the other approach of investing. When you talk about technical analysis, you’re looking at things like charts, chart patterns, technical indicators, etc. It gives you a visual information about how the stock price moves for the minute, the hour, the day, week and even month! This information is useful because it can give you a better sense of how the stock is doing right at the moment. Fundamental analysts usually have to deal with information that isn’t updated because company reports would only come out quarterly, or even annually! Many things happen in between the quarters but you could possibly be trading based on the previous quarter’s results which may no longer be relevant.

Pure technical analysts are not interested in the research of a company’s fundamentals because the way a stock price moves would have indicated how much everyone thinks the stock is generally worth. When an undervalued stock moves because it was uncovered by a fundamental analyst, it wouldn’t be missed by technical analyst who watch price-volume action of a share price. As long as a stock moves, the technical analysts will be there watching it as well! Price movements can give a technical analyst a lot of information such as breakouts, psychology of the market players, trend, reversal patterns, etc. These days, there are a lot of people relying on charts when buying a stock. You would only be putting yourself in a disadvantaged position if you choose not to avail yourself to the same information they are receiving. With more and more speculators in the market, fundamentals might be ignored for short moments and only technical analysis can help you for the moment to be profitable.

Here’s an example:

A pure fundamental analyst would not know where the support or the resistance is. He would know what the company should be valued at but he may not know when is the best time to enter. For example, NOL is down-trending from $2.30. A fundamental analyst values it at $1.50 based on Price-Book ratio, P/E ratio, or other metrics available to him. When NOL sells down to $1.50, the fundamental analyst would make the purchase because he thinks that is what it is worth. However, from a technical analyst point of view, he would wait to see if $1.50 is supported or not. If the price is not supported, he waits for the share price to continue falling and test the next support level at $1. When share price eventually gets to $1 and shows that it is supported with a high volume, the technical analyst buys it.

At the end of the day, both analysts got NOL, but the technical analyst got a better price because he knows that from past price movements that $1 is a strong psychological support and buys it at a support instead of simply buying it because he thinks that is what it is worth. Past price actions can give you a hint about the future price movement because of many reasons, largely psychological support and resistance levels. The fact is that many people are relying on such information, and if you aren’t, you will lose out and the market will not make sense to you. Having a visual image of how the stock market is going will be very much easier for you to find support levels such as in the case above.

Of course, this is not to say that technical analysis is 100% accurate and gives you pin-point accuracy. What it can provide you is more information that opens up your eyes to more opportunities for buying entries. There is always a time an investor will face where he says “I’m waiting for the right time to enter”. It could be a fundamentally sound company but simply trading too expensively and this is when technical analysis will tell you when the right time is. Or rather, give you a hint of when the right time is. Of course, hindsight is 20/20 and the chart above could have gone in a totally different direction and crashed through $1 rather than stay supported on 2 more counts on Nov 2011 and May 2012. I used an old chart for the purpose of effectively sending my point across rather than try to teach based on current prices where even I don’t know where the future is. No one can predict how the future price will move, they can only get a vague idea of it. By effectively utilising both fundamental and technical analysis, you would put yourself in a profitable position where the odds of a profitable trade is higher.

Important Disclaimer

The above chart is for teaching purposes only and is not a recommendation to buy/sell.

3 Tips to Performing Fundamental Analysis

You may have already known that there are two ways to analyse a company, fundamental and technical. In this post, I will be focusing on fundamental analysis and zoom into the things that are commonly looked out for when performing such analysis.

For a start, it would be good to have a foundation on basic accounting and financial accounting since you will be looking into Income Statements and Balance Sheets. Fundamental analysis is all about making sense of the numbers to give you meaningful information that can profit you.

Compare Against Past Data

When I first begin my analysis, I look at the latest financial statements released by the company. I simply look at their financial highlights to see what happened in the recent quarter if it’s a company that I’ve never researched on before. These numbers alone are not enough to tell you about the performance of the company. Always compare your numbers, quarter-on-quarter or year-on-year as some company businesses are cyclical in nature and what may seem to be a spike from the previous quarter may actually be normal or underperforming. This is one of the reasons why sometimes you may see companies report that their profits rise, but share price still falls. When you compare against past datas, you can also see trends which might help you to forecast the upcoming results and what you can expect will happen. These datas can be obtained from SGX’s website, which makes obtaining data or information really easy!

Look Out For Unusual Spikes Or Abnormalities

The numbers won’t lie. Thanks to FRS regulations and many other accounting regulations, companies must be transparent when reporting their results. You will notice that some numbers experience tremendous growth and these could be important or significant figures. This could be a spike in net profit margin, etc. It is then when you should open up your eyes and find out what is going on. There should be some questions that go through your mind as you see spikes. “Is it a one-off spike? If so, what is the impact?” Always question the numbers because this is where you can draw meaningful information out of it. Being able to discern what the information means can help you to gain a deeper understanding of the company and possibly give you a glimpse into the future of the company such as new projects, acquisitions, etc.

Financial Ratios

This is where your financial accounting will help you out. However even if you don’t have a financial accounting background, not to worry because these days the ratios are given to you already. Knowing how to calculate the different ratios and understanding the impact of a high or low ratio will give you that extra edge against other investors who do not know what the ratios mean. The few ratios that I like to look out for are Debt Ratio, Return (Efficiency) Ratio and Liquidity Ratio. These ratios are a way to make a better sense of the numbers that you see on the income statement or balance sheet. This is drawing out meaningful information from face value information. Do remember that these ratios are not one-size-fits-all. Different industries have different norms and you will have to take account of that. Always do a cross-comparison with other companies in the similar industry to get a rough gauge of what the norm is.

In A Nutshell..

There are a lot of information flowing around that we have access to. Simply put, it is how we make sense out of the information and taking the right steps to profit from the information given to us. All of this takes time to learn and it’s a never-ending journey of learning. Do not be too overwhelmed by the things that you have not learnt yet if you are just starting out, and take things one step at a time. Over the weekends, pick up a book in the library and expand your knowledge on the subject. Or you could also simply google the questions you have in mind. Even better, ask your friends who are already in the know. Investing is a journey to requires one to keep learning and improving. This is a long journey that will be worth it at the end!

Search the site