STI Soar to a record high again

STI soar to a record high again at 3800 and I have a hunch that it will hit 4000 at the end of the month. From what I have observed, the stocks which are surging upwards with strong buying demand are mainly blue chips so I was wondering if there's a possiblity people are funding it by selling growth stocks. Well, actually I guess daily trading activity is not as important as it seem to be and predicting it may even impair my own judgement but I just can't resist the tempation of viewing my portfolio performance every half an hr because it is just a click away!!!.. HA, I should have work at a place with no internet access (just joking ) ...

As what I have mentioned in my previous post, my portfolio consist of mainly growth stocks where they mainly move together with the economy.. The sectors which I'm currently vested are retail, construction, internet, beverage and water treatment. If I do follow strictly with Buffett's methodology to purchase only stocks with a economic moat (close to a monopoly of business), I guess I would not be holding any of the stocks except maybe for 1. I broke the rules mainly because I forsee them benefiting in the future from global demand and econmic growth but still, I only purchase them when they fulfill the following criterias :
1: Healthy financial Records (3 years Financial statment, balance sheet, Cash Flow)
2: Competent Management (Some indicators like ROE, ROA, Remuneration, Board indepedence)
3: Not purchasing them at an inflated price (Important)

It is extremly difficult deriving the company's intrinsic value using discount cash flow method. Firstly, I have to predict the company's inflow of cash flow for 10 years which is literally impossible because future is uncertain... The best I can attempt is to give a fair estimate to future cash flows to derive the present value of future cash flow but the accuracy depends how aggressive/conservative you define the discount rate.. After obtaining the price from the formulae , I will further discount it at a rate depending on the company growth and that will be my entry price.. Normally, you will get an entry price that is much lower than the current price so patience plays a key factor but having said tat, this isn't any magic number and need not be followed rigidly....

To be continued!..

Melynn

My viewpoint on diversification

If you have been investing for a while or either reading up financial journals or books regularly, you will realise that it is a prevalent belief among people that diversification is essential to ensure above average returns and also to minimise risk. There is a saying that one should put the eggs in many baskets but I chose to believe that one should just put the eggs in a basket and watch it carefully. This is because a portfoilio which is heavily diversified will never give u an above average return whereby you may have better gains by just putting your funds into an ETF.

In my opinion, to achieve an above average return, one should remove their own obstacle of allocating a huge portion of his fund to a specific stock but in order to accomplish this, you will need a strategy and a system that suits you well else it may result a huge loss!

In my case, I realized two of my stocks from a portfolio of six and planning to top up the remaining stocks when a good opportunity aries. Pardon me but I will like to reiterate again because I think this is crucial to one's investment sucess. Over diversifcation don't always minimise risk but at times, it may also magnify your lossings so simply allocate your fund in a ETF if your dont feel comfortable to have a concentrated portfolio!