On 10 Jul 2009, I wrote an article called "The Simplest Investment Advice" [Link]and that is the only advice I would give when someone comes to me. If you have followed that advice and invested in stocks or property during the last recession, you would be sitting on pretty good returns. Once again that simple advice has proven itself effective....don't need to attend investment seminars, trading courses, etc. The reason this is the only advice I give is most people can follow it properly anything more complex tend to get misinterpreted.
I don't attend investment seminars or pay for investing courses because I believe they are often run by dubious characters out to make a quick buck. A few days ago I decided to make an exception when I saw the above advertisement. There are 2 reasons for the exception - the seminar is free and Leong Sze Hian's picture appeared on the ad did lend some credibility to the whole thing - I thought he was going to appear at the seminar so I can get to meet him in person. He was in Siberia attending a conference and didn't appear at the seminar.
Let me tell you why I have an interest in this area. Many years ago when I started working, I wanted to figure out how to invest my money and I wasn't too busy with work so I thought I spend some of my spare time to figure out what kind of strategies would work, what kind of stocks to buy, how much I can lose in a bear market and how much I can make in a bull market...whether stocks move before or after a recession is over and so on. I had hunderds of questions to be answered, the Internet had not arrived in Singapore so how to I get the data to figure out the answers to all the questions? I found a company that sold a stock charting software together stock price data, another that published the last 5 years of financial data on companies listed on Singapore and Malaysia exchanges and other publications that had past economic data. I used this vast amount of data to answer the questions I had one by one. I found that there are events that occur consistently during business cycles, correlation between the economy and stock market that are reliable and discovered what commonplace ideas that were misconceptions. For example, I found out that stock markets turn around long before the economy recovers usually after the worse point in the recession and if you invest when the recession is over or when the economy is back on its feet, you are buying at much higher prices. Other questions include what are the best stocks to buy for the long term, what are the stocks you buy during the bull market. I was a computer programmer at that time and found it quite easy to use the charting software to generate scripts that will give answers to numerous "what ifs" questions I had - e.g. what if you try to limit your loses selling your stock everytime it drops by 10% is it a good strategy? If you had a stock that went up 30%, should you buy more or sell?
One of the questions I tried to answer was what are the best stocks to buy from the start of a bull market right up to the peak if you want to make a "hell lot of money". I found out that there are quite a few stocks that would go up 300%, 400% or even 1,000% during a bull market. These stocks are generally divided into 2 categories growth stocks with fast earnings and speculative stocks - lets call them super-stocks. It is quite rare for well established blue chips to go up by more than 200% during a bull market. I took a look at the price movement of the super-stocks and found that you can pick them out at the initial part of the rally because they have price movements that are stronger relative to other stocks. However, you need to be able to exit these stocks properly because they can fall as fast as they rise. The movements of these super-stocks are non-random and they maintain their trend for extended periods counter to what one expects from EMH (Efficient Market Hypothesis) ...that was what I found. I will give a possible explanation for this later on.
Asia-Charts is a small company started by a group of "private traders" that teaches investors how to a trade stocks using a strategy built around the buying and selling of these "super-stocks". From what I gather from the preview, they use a "breakout" system for stock entry - enter the stock when it breaks out of a trading range and exit the stock when it falls below a trading range - this trading band is based a proprietary formula. They seem to have put together elements a workable strategy which includes entry and exit points and money management strategies. From the general principles ( you get the details only if you attend the course) in the preview seminar and the stock data I analysed, the strategy is workable during bull markets and would have made moneyfor those using in past few market rallies, in other words, it is a positive expectation system....compared the strategies used by herd of investors who lose their shirt and pants at the stock market. Together with this strategy the company also teaches short term trading based on pullbacks( I have no idea what it is or whether this works). The company has a separate course on forex and futures trading. The forex/futures trading strategy from the material I gathered from their office is likely based on a trend following system known as Turtle Trading System which also has some validity if you look academic research on the positive expectation of such system in the futures market.
I don't recommend anyone attend their course to learn something relatively simple, you have to make your own decision here- the price looks quite steep to me although they are not more expensive than other trainers who teach totally useless stuff. The preview is conducted by the founder of the company Mr CK Ee, quite an interesting chap who keeps it entertaining and educational. There is no hard sell but he does use an endless flow of positive examples to show that the system works and numerous testimonies and results of past students. The preview would be an eye opener for investors who invest using company fundamentals because it shows you how a simple technical approach can also generate high returns during bull markets. There are however a few caveats and words of caution. Any system that becomes popular also destroys the inefficiency in the market it is exploiting so if Asia Charts courses become very popular and they train tens of thousands of investors to use the same strategy, the system will become suboptimal as a large number of investors try to enter and get out using the same signal - this is a problem for "super-stocks" which are very often mid or small cap stocks. There is no guarantee that any system that has worked in the past will work in the future. The stock market also spends plenty of time going sideways during which it strategy cannot be applied or might generate wrong signals (commonly known as false breakouts). You also need to check the system yourself to have a good understand of its behavior for under various market conditions to understand how the system can possibly fail.
I enjoyed the Asia Charts preview a lot but was a little disppointed that Leong Sze Hain did not show up. I wanted very much to ask him whether he endorses the course personally and what he thinks of it. Given the price and various potential pitfalls, I'm quite surprised Leong Sze Hian allowed his picture to be used for the Asia Charts ad. There is a real risk that the system stop working as with many trading systems in the past and he will be linked to it which may not be 100% wise and that was why I wanted to ask him personally what he thought about it.
For those who are interest in learning more about investment strategy and have more than a passing interest in stock investment, there is a relative low cost source of information and resource available on the Internet. It is maintained by AAII (American Association of Indvidual Investors) www,aaii.com. It monitors a wide range of investment strategies and how they have performed over the past few years. These include the CANSLIM strategy, Motley Fool stock criteria etc. Suppose you learn from somewhere that investing in stocks trading at discount to their book value is a good approach, you can check the AAII website to find out how such a strategy have performed in the last 5 years. Suppose someone tells you that investing in stocks with high dividend payout is a good strategy - check it out so you know what to expect. There are actually hundreds of successful strategies that will make you money but the bad news is there are thousands of ways to lose money!