Mental Preparation For Stocks Investing (股票投資的心理準備)

1. Mental Preparation For Stocks Investing(股票投資的心理準備)

2. Greed and Fear are detrimental to investor's return

3. After he finished college, Buffett invested $100 in a Dale Carnegie course: “… not to prevent my knees from knocking when public speaking but to do public speaking while my knees were knocking.” --Buffett

4. The purpose of this presentation: Not to prevent one from greed and fear when investing in stocks but to investing in stocks successfully while in greed and fear

5. 股票投資的心理準備 • Prepare to Accept Reasonable Greed • Prepare to Abandon Market Timing • Prepare to Benefit from Market Volatility • Prepare to Do Independent Research • Prepare to KISS (Keep It Simple, Stupid) Stock Investing • Prepare to Do Performance Record & Company Story Check-up • Q&A

6. Prepare to Accept Reasonable Greed I've heard people say they'd be satisfied with a 25 or 30 percent annual return from the stock market! -- Lynch

7. Prepare to Accept Reasonable Greed

8. Prepare to Accept Reasonable Greed

9. Prepare to Accept Reasonable Greed • Over the past 20 years through December, the average individual stock mutual fund investor earned 4.25% per year, while the S&P 500 returned 8.21%,  -- The New York Times recently reported, citing data from Dalbar Inc.

10. Prepare to Accept Reasonable Greed

11. Prepare to Accept Reasonable Greed

12. NJL Stock Investment Newsletter Performance Record

14. Prepare to Abandon Market Timing Peter Lynch’s Cocktail Theory

15. NJ Lin’s Seminar Attendance Index

16. Prepare to Abandon Market Timing

17. Prepare to Abandon Market Timing • As Stock market close to top, less companies meet the buy criteria, and as market close to bottom, more companies meet the buy criteria

19. Prepare to Benefit from Market Volatility • A history of DJ30 declines (1990-2012) • Source: Capital Research and Management Company

20. Prepare to Benefit from Market Volatility • Severe Bear Markets (-40% or more):

21. Prepare to Benefit from Market Volatility

22. Prepare to Benefit from Market Volatility Prepare your courage to buy more stocks when everyone has extreme fear about the market

23. Prepare to Do Independent Research • Ultimately, it is not the stock market nor even the companies that determine an investor's fate. It is theinvestor -- Lynch • The same couple that spends the weekend searching for the best deal on airfares to London buy 500 shares of KLM without having spent five minutes --Lynch • The only thing anyone wants to know is, ‘what are you buying today?’ -- Buffett

24. Prepare to Do Independent Research • If you turn over 10 rocks, you may get 1 gem • You probably will spend about 1 hour to research 1 company

25. Prepare to KISS (Keep It Simple, Stupid) Stock Investing • Investing is not a game where the guy with the 160 IQ beats the guy with a 130 IQ. – Buffett • IQ fall somewhere above the bottom ten percent but also below the top three percent -- Lynch

26. Prepare to KISS (Keep It Simple, Stupid) Stock Investing • KISS Stock Investing: *Buy Growth Companies (high EGp) (Consistent Growth, Cyclical Growth, Turnaround Growth) at Reasonable Price(low PE) *Buy Asset Play Companies: Stock Price <Net Cash + Positive FCF (free cash flow)

27. Earning, Earning, Earning!

29. KISS Stock Investing: He (Graham) said that the three most important words of investing: ‘margin of safety.’ –Buffett (EGp+%D)/PE >1 >2 >3 Margin of Safety OK Excellent Chance of lifetime

30. KISS Stock Investing: (EGp+%D)/PE < 0.5 May consider to sell

31. More on EGp: EGp: (projected earning growth rate, %/Yr) *Like Wayne Gretzky says, go where the puck is going, not where it is. -- Buffett *Of course, the investor of today does not profit from yesterday’s growth -- Buffett *Earnings, or a promise of future earnings, give stocks their value -- Buffett

32. More on EGp: EGp is hard to predict, because Stocks Information Include: You Know You Know You Know You Don’t Know You Don’t Know You Should Know You Don't Know You Don't Know GIGO (Garbage In Garbage Out)

33. Prepare to Do Performance Record & Company Story Check-up • Are you cutting the flowers and watering the weed? • The point is that fortunes change, there's no assurance that major companies won't become minor, and there's no such thing as a can't miss blue chip -- Lynch • If a stock is down but the fundamentals are positive, it's best to hold on and even better to buy more -- Lynch

34. Prepare to Do Performance Record & Company Story Check-up • WFC (Wells Fargo): This US 4th largest bank made money during the 2008 financial crisis; it rank No.1 among 10 large and regional bank peers for 5-yr compounding annual earning growth rate (CAGR) • (1) It has the lowestcost of depositand the lowest residential mortgage foreclosure rate. • (2) It achieves the highest return on asset. • (3) Warren Buffett'scompany owns 6.5% of WFC.  • (4) WFC is expected to grow EPS at 10%/Yr, and with its dividend yield of 2.7%, • (5) the (EG+%D)/PE ratioof 1.2 is respectable.

35. 股市有時升有時落 升起免太歡喜 是賣Hot Stocks的好時機 May Sell When (EGp+%D)/PE < 0.5 落下免太驚懍 是買Quality Stocks的好時刻 買Consistent Growth, Cyclical Growth & Turnaround Growth (EGp+%D)/PE >1 (OK) >2 (Excellent) >3 (Chance of Lifetime) 買Asset Play 不理股市升股市落 繼續投資 兩三個Market Cycles看輸贏

36. 股票投資的心理準備 * To receivethe content of the presentationor the ComplimentaryNJ Lin's Stock Investment Newsletter, please send your request to: nanjae@yahoo.com