Wednesday, November 3, 2010

Is Stock Investment A Passive Income or Active Income ?

Many people say property and share investments are sources of passive income. Well, yes and no! No doubt, if you are a value investor that practices long term hold strategy, you may not sell your share until 5 or 10 years later. Hence, you get dividends and capital appreciation during the holding period, and yes that’s passive income. However, as an investor, before we buy any investment, be it properties or shares, we need to “actively” searching for the relevant information available to us, and to scan for any fundamental problem for the particular investment that we are buying, as there must be a reason why a certain investment is too cheap.

There are many sources of information available in the stock investing business. One good source is the analyst report. Just two months ago in August, it was the Chinese “Hungry Ghost Festival”, traditionally, investors would think that it is not a good month for investment, however, when I read the analyst reports from various brokerage firms, most of them recommend overweight on the banking sector. Not long after the reports, I saw the banking stocks jumping 10sen, 20 sen per day!

Our stock market is very much driven by so called “investment themes”. Besides the above banking sector theme, other examples are: Iskandar Development Region (IDR), Economic Transform Program (ETP), and The Budget that will have impact on the stock market. Hence, we must breathe the same air as other market participants, but don’t follow the trend blindly. Stay objective and try to make decisions based on probabilities and reasons.

Hence, from today onwards, give yourself some time to read the analyst reports every week, it doesn’t matter how much you can absorbed, at least by browsing through them will give you some investment ideas.

Happy investing,

Pauline Yong

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