Emotions do not rule in stocks investment

After setting up a trading account with a local stock brokerage firm in late June 2008, I was all geared up to make my first purchase into stocks. I had only by then read up only a few books on stocks investment and had got complacent that I should be ready to start my first stocks purchase. I call this a first-timer enthusiasm kills.

I made my first purchase (5 lots (5000 units) of CapitaCommercial Trust units @ $1.95 per unit). I recalled I was quite eager to hit the buy button of my online trading platform while watching the unit price of CapitaCommercial Trust keep changing by the second. It was like my moods was caught and held by the constantly changing quoted price on the online trading platform. It was a trying moment for me to keep my cool and patience watching the constant price change. I waited for the whole first day since the start up of my trading account and decided against buying the units. However, the second day came and I watched with the same undying enthusiasm at the constantly changing unit price of CapitaCommercial Trust. I finally gave in to my temptation and hit the buy button to purchase my 5 lots of CapitaCommercial Trust units. I consoled myself that the unit price has already dropped a few cents after one day's time, and I should have made a good purchase at that unit price.

Little did I know that a few days later, the unit price of CapitaCommercial Trust went on a further descent, and it continued its descent weeks later like going on a road of no return. It was during July 2008 when stocks market was still heading downwards. I got my first taste of the bear market descent. The feeling of watching the unit price keep descending was next to horrible. It was like a falling knife. It was also later that I learnt of the term "to catch a falling knife" which expresses my situation back then very aptly. I was really catching a falling knife without knowing (getting locked into the descent of my purchased units).

I further encountered some more bumps and knocks in my stocks investing adventure further ahead before I learnt some more lessons the hard way.

More to be continued...............

Discussion points:-
Thinking back, I commited several mistakes through my initial stocks purchase.

Mistake One:- I was affected by my emotions (extreme first-timer enthusiasm) which really kills at stocks investing.

Mistake Two:- I neglected and underestimated the effects of the financial crisis already looming at large causing the global stocks market to go on a descent. It was really heartache to catch a falling knife watching one's stocks holdings continually depreciating in value.

Mistake Three:- I did not analyse the fundamentals of the stocks carefully before I made my purchase. Back then @ $1.95 per unit, the distribution yield of CapitaCommercial Trust was only around 5% to 6% which was average, and not particularly attractive. I also did not consider the possibility of any maturing debts due for refinancing within one year's time. The unit price @ $1.95 was only slightly below its net asset value (NAV) around $2.50 per unit one year back which was not very attractively cheap.

Emotions kill at stocks investing.

One should consider also the macroeconomic big picture after considering an attractive company to purchase its shares. This is to time one's purchase into stocks carefully to "prevent catching a falling knife" (betting against a market descent which spares no investors). However, one should not try to time market bottom as it maybe unlikely for anyone to accurately do so.

No matter what investing approach one uses, it is always prudent to analyse the underlying business fundamentals of a stocks before purchasing to avoid any unwelcomed surprises.