By: Dennis Ng

Dennis Ng, the writer is a Certified Financial Planner with 15 years of experience in Bank lending. He co-founded an independent Mortgage Consultancy Portalwww.HousingLoanSG.com in year 2003.
 

Warren Buffett, who started with US$100 of his own money and became the richest person in the world by investing, building to total wealth of over US$50 billion. Thus, if you want to make money from investing, it is Common Sense that you ought to listen to this man, who definitely shows he knows what he is talking about - investing.  

One of his famous saying is "Be Fearful when others are Greedy. Be Greedy when others are Fearful."  

It is easy to see the wisdom in the above saying. When others are greedy, is typically when stock prices are very high, it is actually time to sell (be Fearful), rather than time to invest.

On the other hand, when others are Fearful, this is typically when stock prices are low, when prices are Low, actually the risk is Lower, NOT higher. Thus, it is actually time to Buy (be Greedy), rather than time to Sell.

Most people do the reverse, be Greedy when others are Greedy. Be Fearful when others are Fearful, which typically leads to them Buy High and Sell Low. Is it any wonder why most people lose money in investing?

Last year I sold out 80% of my stocks when others are Greedy and Prices wee high. In the last few days, I bought a few stocks, one of them has Cash Per Share of S$0.26, and I paid S$0.26 share price to buy this stock. What it means is that I'm just using my Cash to buy the Cash this company has. All its factories and businesses are actually given to me FREE, UNBELIEVEABLE!!! How risky can this investment be?

I also paid S$0.38 to buy another stock which has a Net Asset Value (Assets less Liabilities) of S$1.20, or I'm paying 0.3 times Book Value, or in other words, I'm paying 30 cents to buy S$1 worth of assets. Again, how risky can this investment be?

Be Greedy when others are fearful. It is easy to say, difficult to do. I think I managed to do that when I made the above investments.

On the other hand, last year when stock prices were high, Analysts were issuing "Buy Call", asking people to invest in stocks. In recent weeks, when stock prices are falling and prices are getting lower, analysts are issuing "Sell Call" and asking people to sell stocks. I simply don't get it, if you follow their advice, you're going to Buy High and Sell Low, a sure way to lose money in investing.

I'm not saying that Stock Markets have bottomed. Nobody really knows when markets bottom. However, if you have S$100,000 to invest, now is a time to probably put 30% of that money to invest. Even if markets go down, you still have 70% of your Money, which you can deploy partly to buy at lower prices.

Note: In the previous Stock Market Crash, STI bottomed at about 1,200 in March 2003. STI now just below 1,900. If it goes to 1,200, that's another 36.8% Downside risk from current level.