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Wednesday, 30 October 2013

Risk Management - A little knowledge is more dangerous than no knowledge

A few years back, there was a posting in the papers by a person who was complaining that his mom was diagnosed with terminal stage cancer when she had gone for regular health screenings at a polyclinic for the past 20 years...

There is a common misconception that if I passed a basic health screening test, I am "healthy and fit".

Most of the "free" or "cheap" health screenings only check the cholesterol level, blood pressure, blood sugar, obesity, etc. These are mostly coronary tests as heart attacks and strokes are the top 5 killers in Singapore.

But if there's no chest X-rays or CT scans, there's no way anyone can know whether you have early stage lung cancer.

Same goes for the no.1 type of cancer for males in Singapore - Colorectal cancer. If there's no test for blood in your stool, the doctor would not have the early warning to recommend a more invasive colonoscopy test.

Yes, we have to do our part by asking questions and getting ourselves acquainted with what the health screening tests are for; and their limitations.

Plus we need to tell our doctor our family history of illnesses if you not sure which are hereditary or not. The doctor then can recommend what additional tests we should do as a precaution if we belong to the high risk group.

If you are a smoker and heavy drinker, and you lie to the doctor, well... it's your life; your problem!

And yes, more tests; more money. That's why it's better to have a conversation with your family doctor so you don't pay for tests you don't need.

 

I see the same misconceptions when it comes to the field of "investing".

Just listen to the blaming and finger pointing when "investors" lose money in MAS approved financial products and CPF approved stocks.   

I know SGX has a better reputation than some other regional bourses, but to assume all SGX listed stocks are "healthy and fit"?

Some even got the cheek to question whether Temasek or GIC got do due diligence on their stock investments? When these investors were freeloaders who piggybacked on the coattails of Temasek and GIC...

There's nothing wrong in following others like lemmings. Just as long you understand and accept the risks involved.

A little knowledge is more dangerous than no knowledge



 


35 comments:

  1. Want to play with fire but blame Fire Engine never come on time to prevent them getting badly burnt.

    See those comments in the Cyberworld and ST's Forum page.

    LOL!

    ReplyDelete
  2. "A little knowledge is more dangerous than no knowledge" - SMOL
    So true indeed!
    Before I knew about penny stocks, I was a dividend chaser only guy (I still am). Now, penny stocks look so tempting... How? :)

    ReplyDelete
    Replies
    1. Hello ckw-I99,

      We all go through different phases in life.

      I started out with penny stocks too - that's where the action is! Blue chips are for widows and old fogeys or so I thought then.

      Sometimes its better to bang into walls and fall in to man-holes ourselves. It's a lot better than listening to others tell us what we can or cannot do ;)

      Do what you want to do. Enjoy the journey of self-discovery!

      Our coconut professional friend almost doubled his money playing the 3 designated stocks in less than a week. Power or what!?

      You may want to read this old post of mine:

      http://singaporemanofleisure.blogspot.sg/2012/03/beware-of-goody-goody-guy.html

      Delete
    2. wah lan smol, thats nothing la. key is not double or triple, key is how much you bet on it, i still feel disguisting after that win (40k haha)!

      my view is never say never in trading (or investing). all things are possible. don't limit yourself and don't draw boundary upon yourself.

      Delete
    3. most people got burn and they swear they never want any part of it no more. thats not right in trading.

      what i'm saying is got screw up, learn your mistake and walk right into it again haha.

      Delete
    4. coconut,

      I am very impressed with your exit - you were not distracted by your broker brother ;)

      Just like we don't learn to ride a bike by reading a book, we need to fall once in a while to experience the joy of riding.

      Never let a crisis go to waste! We can't profit from it if we don't take responsibility for it.

      Delete
    5. the exit is bread and butter for me actually.

      i saw the gap up, though they keep changing but i knew it was a big one, exectly how big i let the market decide for me, so i put in the orders well below the equilarium price.

      just my luck it gap up at the days high, this tactic i used it everyday!

      Delete
    6. ofcos one has to be careful and know the risk involved, otherwise you ended up with orders (or prices) that you do not want at all.

      Delete
    7. We need more newbies to contribute part of their earned income to lao jiao as trading for a living. Not them. Then who?

      LOL!

      Delete
    8. thats very true, and thats how market works, exactly same as in evolution and life.

      for every dollar lost, it will be share among many, including winners and also brokers, exchanges, govt etc etc.

      but there is one flaw in that statement CW made. the bulk of money lost, or rather i made (thats a serious statement) does not comes from newbies, they accounts only very few %!

      guess what, the bulk actually comes from the big player, the institutional players,

      thats right.

      Delete
    9. coconut,

      Your comment is reminding me of the documentary I watched on Africa's elephant dung beetles ;)

      Delete
    10. our lives really revolve with money, money here money there money everywhere! when one look at the market place, its all about money and nothing else matter.

      take away that money element and you will see that it is really a game of survival, very much like evolution and life, with all kind of strategy deployed.

      treat trading as a game and not a place to make money and you have a much better change of making some money.

      Delete
    11. so am i the elephant, the beetle, or the dung?

      LC la! haha

      Delete
    12. haha but thats true, i'm like the beetle.

      but can you take a better example like i am the small little fish that swim along side the big shark and eat whatever they have left over?

      Delete
    13. coconut,

      Got chance go watch the documentary on dung beetles lah. It's a nice analogy on you profiting from the big institutional players ;)

      Delete
    14. Ah! The small fish is called pilot fish.

      Delete
    15. smol, please don't make this statement that i profit from the institutional player, its not right, sounds like i deliberately going after them.

      no, we are all market player, we all contribute, big or small, newbie or lao jiao. its a mix soup, who ever can contribute, contributed.

      big player bet more and so as their winning and losing, and it is often that these big player are moving the market and thats what i want them to do.

      Delete
    16. coconut,

      My bad.

      I should not reinterpret what you wrote:

      "the bulk of money lost, or rather i made (thats a serious statement) does not comes from newbies, they accounts only very few %!

      guess what, the bulk actually comes from the big player, the institutional players,"


      There! Restored back to original ;)

      Delete
    17. LC la, stop digging my past le!

      Delete
    18. by the way you know what is cycle or not?

      i win from you, you then win from mr A, and mr A win from me, goes on and on...

      me, the institutions, the newbie, the lao jiao are doing the same thing. my strategies are tag much closer to the institution, naturally i take from them much more than the others directly. got it?!

      Delete
    19. So fierce!

      Come let's sit down. Have a cha sao bao and sip some tea.

      LOL!

      Delete
    20. ofcos must be fierce!

      actually, i'm quite disappointed with the market lately, pretty quiet, the big player hardly make their moves. volume traded are very low, prices is like stuck in the mud.

      if i don't chat, i probably will be taking nap.

      Delete
    21. very boring, lets chat something.

      one of my friend, the one who is selling health product part time, recently make 2 comments. first i told him about my recent purchase of the "3 stocks", hoping he will tag along, ofcos he didn't, then i told him i sold and make the money and then he say,

      "wah, you have just got your second hand car for free (my honda i bot recently actually cost about 50k) le". then, he say,

      "now the price had gone down, why not use the profit to buy and double it again, if you lose, your capital is intact, if i i will do it."

      he actually said that to me, can you spot the mistake or are you one that is agree with my friend?

      Delete
    22. coconut,

      Thinking and acting like your friend was how I gave up a lot of my realised profits. Ouch!

      That's why I shared on the Money part of 3Ms - it's not about just protecting capital; protecting our profits is just as important.

      Once I had that mind-flip, I began to explore and experiment with trailing stops, trading around a core position, hedging, etc.

      I want to improve and grow - keeps me occupied ;)

      Delete
    23. whatever you say my friend. if it is about your strategy, stick to it.

      first, the win has absolutely nothing to do with the car or whatever thing i needed. i trade to increase my capital base, not to increase my needs.

      second, and you are partially right, winning are not free money, they form part of your new capital base and should trade according to your strategy.

      my friend sound more like a gambler to me and he is. this is just not the right attitute to bring into trading.

      Delete
  3. Hi smol

    With regard to your analogy for the medical, sometimes I hv so little knowledge about all these stuffs that I need to rely on the so called doctors questions n tests to determine. We took so many tests some yearly some during job changes and we hope that these tests do tell us more than just high blood cholestrol or aids symptoms but I guess this is something that the govt could perhaps make it mandatory to make these tests more comprehensive.

    ReplyDelete
    Replies
    1. High blood cholesterol or aids symptoms are just tests to remind us annually what not to do in the following year:


      Don't eat too much Rich food.

      Don't anyhow screw.

      Delete
    2. B,

      May I suggest you take a step back and listen to what you just wrote?

      You knew you know so little... Who is responsible to get yourself educated?



      The Company should do this...

      Management should do this...

      Big Daddy should do this and that...

      Schools should...

      Teachers should....

      Parents must...

      Where is "I"? Gone fishing!

      Delete
  4. Hi SMOL,
    Pilot fish is great. There is another called Remora. i learnt it from someone in valuebuddies.com

    ReplyDelete
    Replies
    1. Hey temperament,

      Thanks! I This type of Remora fish s a better analogy to "freeloaders taking a free ride"; contributing nothing.

      The pilot fish at least contributes by clearing parasites from the sharks while feasting on the scraps.

      Delete

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