Investing in the local stock market is becoming more popular among Malaysians
nowadays. Although stock investment carries a high degree of risk, especially among
the speculative issues in the Second Board, many local players are simply fascinated
by the ups and downs of stocks listed under the Kuala Lumpur Stock Exchange.
Recently, there were a number of local analysts who expressed optimism on the
outlook for the local stock market. Some analysts predicted more gains on the speculative
Second Board although it is unlikely that the 1996 super bull will be repeated this
year. Again, anything can happen on a rumour-driven market like the Second Board.
Other analysts were largely positive on the main board given the improving economic
outlook. Such bullish comments are likely to attract many investors who are hoping
to make some fortune in the Year of Ox.
For first-timers, analyse before rushing in to buy a stock as recommended strongly
by someone close to you even when the market is running really hot. If you are the
conservative type and you can't sleep or eat well after buying a stock that has gone
down by a mere 10 cent after few trading days, stay away completely from speculative
issues in the Second Board even though your source "guarantees" you that
the recommended stock price would increase tremendously.
What options will you have as a first-timer if you are a conservative type, interested
in playing shares but do not have the time to monitor the ups and downs of the ever-changing
Consider less speculative issues in the main board. Buy good quality stocks or
blue chips listed on the main board for long-term security. The length of time you
will or can remain invested can directly affect your ability to reduce risk. Buy
and wait for the value of the stocks to grow over the long-term. You should not invest
for short-term gains if you are the conservative type with low risk tolerance.
Do not be "lured" by all the short-term profits. Just ignore them! Simply
remember that investing over a longer time frame has its advantages. As a long-term
investor, you will not be subject to frequent price fluctuations. Time diversification
is critical for volatile investments. Price fluctuations smooth out considerably
over longer time periods. Other suitable investments that you could select are fixed
deposits, bonds and unit trusts.
If you are the more aggressive type or "punter", then there are a number
of rules that you should be aware of in order to minimise your investment risk. If
you are a newcomer to the investment scene and wish to speculate for short-term profits
in the second board, then you should be prepared to take on higher risks associated
with your investment.
You should invest in speculative issues only if you have a substantial amount
of spare cash. When acting rationally, you are unlikely to heavily commit yourself
with speculative issues by using a large portion of your hard-earned savings allocated
for your child's college fees. If you are a beginner, then you should start investing
with small capital base.