All the gurus in the house, all these una RSI, OBV, STOCHASTIC INDICATORS and other furmula's just dey give me headache, I chanced on this article on the net sometime ago, and I felt I should share it with the house, you can confirm that this study actually took place in the mentioned university.

And my two cents advice is this, if you can't understand all these big big big grammer, you can still do well on the NSE with patience and simple tools like the PE ratio, a companies historical perfomance down the years and the number of shaareholders they have. The NSE is maturing, but E never mature reach all these statistical abracadabra. If yuo wait to learn all, you will probably never put your money into stocks

The gurus, make una no kill me o, but thats my opinion

cheers


[b]How Equities Markets Work[color=#990000][/color]

In a recent university experiment, three people were given a chance to show their stock picking expertise. They were:

A professional stock analyst
An astrologer
A five-year-old girl (right)

The experiment, devised by Richard Wiseman of the University of Hertfordshire in England, set up three imaginary portfolios, each with stakes of £5,000. The participants chose their stocks, a year went by, and the picks were compared.

The professional stock analyst used all his expertise and computer power to make his choices. The man on the street would choose this person if he wanted his money to grow.

The astrologer used the position of the planets to guide her choices. Common sense says this shouldn't work very well, compared to a roomful of computers.

The five-year-old girl just made random picks. She could be expected to perform about as well as the average, untutored investor relying on instinct.

The results?

The professional analyst's picks went down 46.2%.
The astrologer's portfolio went down 6.2%.
The five-year-old girl came out ahead, with a growth of 5.8%.

How is this possible? Isn't stock picking a science? Can't professional portfolio managers perform better than ordinary, uneducated people? Is our trust in stockbrokers misplaced?

Well, contrary to what you may have been told, fair, open stock markets are not predictable — not by anyone. Not in principle, not in fact.

If this were not true, if stock markets could be predicted, those markets would be neither fair nor open. In fact, the unpredictability of stock markets is proof of their overall fairness.

Hold on a minute. Did you hear me right? Yes, I'll say it again, for emphasis:

The unpredictability of stock markets is proof of their overall fairness.

Why is this true? Why are markets unpredictable by definition? Why can't there be a consistent "winning system," a "sure-fire stock picking strategy," as is so often claimed in articles and books?

Well, there are many reasons. Here are two:
If someone came up with a stock-picking strategy that worked for a time, someone else would surely notice the strategy. That person wouldn't be able to resist telling his relatives, then the stocks targeted by the strategy would go up in price (because of increased demand), thus wiping out the strategy's advantage.

The market is not a bunch of stocks sitting in a warehouse. It is a living organism — people, companies, all competing with each other to maximize their gain. These people are not acting in any predictable way, because predictable people, predictable actions, invariably result in loss. This is true because someone, somewhere inevitably anticipates, and acts on, any predictable behavior. Just like in nature.

There is only one method to gain a real advantage in the stock market, and that method is illegal: insider information. Example? At the same time top Enron executives were telling the public the company was doing fine, they were liquidating their own portfolios. That is how insider trading works — the trader knows something the general public doesn't. And that is why it is illegal.

Here is a very important secret of the stockbroker's trade, a secret stockbrokers pray you don't find out — there is no legal stock picking strategy that can outperform the average, long-term market. This is true logically, scientifically, and it is proven by history.

Why don't the professionals want you to find this out? Because their existence depends on your ignorance — if you found out this dirty secret, you would fire your broker, pick a broad, varied portfolio of stocks, and sit on them. This strategy is called "buy and hold," and it is the approach recommended by most market commentators who are willing to tell the truth.

In many studies performed over decades, the "buy and hold" strategy, as boring as it sounds, is proven to outperform all other (legal) strategies. And there is no reason a "buy and hold" portfolio should perform better than a portfolio overseen by a professional manager, except for two crucial facts:
The expense of brokerage fees.
The risk that the manager will gamble with your money by putting too much of it into too small a market segment, and lose that gamble.

Given that regularly buying and selling stocks is a bad strategy, you may wonder how people make any money in the stock market at all. Well, the reason is simple — the average market increases in value over time. This means if you bought a wide, diverse portfolio and waited twenty years, chances are your portfolio would have increased about as much as a typical market indicator like the Dow-Jones average (a portfolio of typical stocks used to measure market performance).

Which leads to this description of the two primary kinds of investment (and investor):

"Buy and hold" portfolio:
Steady, predictable performance.
Maximum gain in the long term.
Managed portfolio:
Occasionally very exciting.
Wild swings in value compared to the average market.
Added cost of brokerage fees.
Less long-term gain than buy and hold. [/b]

@blablabla,
I beg to disagree with the results of this study for two reasons:

1. The brokerage fees is nothing to write home about when compared with the gains of sound advise from an HONEST stockbroker.Experienced investors will confirm this.

2. Secondly,while "Buy and hold" is OK for some stocks(take the petroleum stocks in Nigeria,most of whom have relatively low share capital) and for younger investors(who have 20 years to wait),it certainly isn't ok for some very unstable stocks.Such stocks you must enter and exit them in a timely/strategic fashion.Make your gains and invest elsewhere or re-enter them when they are bearish.

Having said that,I still re-iterate here the dictum "NEVER INVEST IN THE STOCK MARKET,ANY MONEY YOU CANNOT AFFORD TO LOSE".I believe in it.

As always,I stand to be corrected.

@oawale,
I looked at your spreadsheet on RSI and understood nothing.Could you tell me what RSI stands for?

Thanks

RSI continues to draw attantion,

@Blablabla, Nairalanders

I believe similar experiments have been done with chimps with the same outcome.

I am basically a buy and hold investor in some stocks but willing to divest when I get sound information - not insider information(illegal).
There are stocks that I consider very risky and will tend to trade in and get out when I suspect the party is over. I don't mean "concert party" which is also illegal.

I don't think the experimental finding holds with a relatively underdeveloped market such as the NSE. Where a lot of the movement is still quite predictable. Also with all the preferential allocations in public offers, the NSE cannot be said to be open and fair.

Think about these.

Octupus:

@blablabla,

2. Secondly,while "Buy and hold" is OK for some stocks(take the petroleum stocks in Nigeria,most of whom have relatively low share capital) and for younger investors(who have 20 years to wait),it certainly isn't ok for some very unstable stocks.Such stocks you must enter and exit them in a timely/strategic fashion.Make your gains and invest elsewhere or re-enter them when they are bearish.

Having said that,I still re-iterate here the dictum "NEVER INVEST IN THE STOCK MARKET,ANY MONEY YOU CANNOT AFFORD TO LOSE".I believe in it.[/size][size=8pt]
As always,I stand to be corrected.

I have never liked the highlighted phrase. Warren buffer has all his money in the stock market and I am definite that he can not afford to lose it. It is only when you trade short term that maxim may hold water. Whenn you invest for the long term and you pick fundamentally sound stocks the maxim does not apply.
Also its young people that can even afford to take risks as they have a longer life span to recover, financially, from any downturns in the market.
The experiment is in line with many others that have been conducted to show that the best way to invest in an 'efficient market' is to invest long term. However becos the market is not perfect one can develop strategies to exploit some of the imperfections that exist in the short term. One of such imperfections is the Nigerian craze for bonus shares.

frankiriri:

I have never liked the highlighted phrase. Warren buffer has all his money in the stock market and I am definite that he can not afford to lose it. It is only when you trade short term that maxim may hold water. Whenn you invest for the long term and you pick fundamentally sound stocks the maxim does not apply.
Also its young people that can even afford to take risks as they have a longer life span to recover, financially, from any downturns in the market.
The experiment is in line with many others that have been conducted to show that the best way to invest in an 'efficient market' is to invest long term.

Frankiriri, I get your gist but you need to put the statement in context.

No one really wants to lose money. Your risk appetite will be evident in your strategy which will govern the stocks you invest in. That's why Buffet will not invest in the dot com shares even with all the technical analysis pointing at an upward movement of the prices.

As you grow your portfolio, you will start to be defensive. Simply because staying where you are is far better than going down. However, for some, he that is down needs fear no fall.

So individual situation will affect your strategy.

Shigidi, exit strategy is developed based on your peculiar situation.

On the Oceanic you talked about, as at the time I bought, I only needed 100% appreciation to meet my investment objective. It was not planned to be my 'core' holding. I bought then because it was seriously undervalued and was ready to wait for 18months for the market to come to terms with that. Note this was in May 2006. Bought 100,000 units @ 7.00.

By December 2006 Oceanic was already 15.00. That time also I needed money for Dangote Sugar IPO since I believe that it has more upside than Oceanic. I also need to lock in profit. So with my exit strategy met, I sold 60% of my holdings at 15.00. That's Part 1

In January 2007, had some money and wanted to BUY WEMA at not more than 3.50. Was not able to get what I wanted so had to look at other stocks quickly. Reason is because after January, the party would have started. So had to go back to OCEANIC (that's why I don't like trading). Bought Oceanic now at 14.00. before you say that was wonderful, note that Oceanic declared a bonus of 1 for 4 and dividend. Was now buying ex. Div. Was not too worried because based on the new forecasts, I can see another 100% in Oceanic.

By October 2007, Oceanic was already 33.00 which I considered over valued (I will not BUY Oceanic at 33.00) so I gave a SELL order. PART 2

Note that I also bought the Oceanic PO because I know that I will sell and would like to re enter again since I can now see the value in Oceanic

So you can see that the decisions were based on my 'peculiar' situation. So no wrong or right answer just who you are. One other thing was that I always make sure that I am not under pressure to SELL any stock. Pressures make one make irrational decisions.

@Windywendy, good contribution

@SGN, man day OOOOO

@Gees and DrDaniel, Auditorium is wonderful. The atmosphere was electrifying. Sorry, could not take pictures from the altar. Unconfirmed reports talked about close to N7b spent on it. The place is now a city. But how did you got involved in NOSPETCO

Well, I don't invest in things I don't understand. Was thoroughly convinced that NOSPETCO was not making the kind of money they talked about from petroleum marketing. If it sounds too good to be true it is most probably not real. However, I have close friends who invested and made money. Was I tempted to join them, of course! But I still have to stick to my convictions based on my value. Added to that is the returns vis avis the risk did not agree with my financial plan. I would be taking up unnecessary risk. I don't need that amount of returns to meet my financial goal. Would like to know the lessons to be drawn from this. Note that my friends did make money from the scheme though.

@ Naomi 101, nothing definite on Consolidated Hallmark. We are still expecting certificates from the PP. However, I expect the listing to be before the end of Q1 2008.


@SAMSTONE, moved to the NEXT LEVEL in all spheres of life. Basically, my LEVELS don change.

iconbull do note that Stockexchange is already listed but it is stillon regulated offer

@ all,
Thanks for sharing all this knowledge.
I have a friend who wants to sell 600K units of wema for 12naira. Will you consider it a good move if i get the units now, as opposed to getting it during the public offer?

@ All,

MTN\'s Private Placement


Dear All,

We do not intend to scare you nor take up yopur e-mail read time but felt you ought to know that,

, the MTN Private Placement has been set at $5m minimum for individual investors and $10M for corporate.

Our sources confirm that the market considers this a a delimiting factor and an offer on the high side.

However, grapevine info says that the offer may have been oversubscribed as institutional investors' may have taken up all the available shares.

This should be expected and we believe that investors planning to cash in on the telecomms boom which analysts predict would continue for a while, should start making plans for possible offers by competition as well as the massive approach to the market by the insurance sub-sector in the new year.

Regards,




The above is a mail I received. Money dey plenty for Nigeria and me I dey find am and I go see am to take my own share.

@wanajo, baba ibeji and other pros
Please what share can i buy for now and i will be "sure" to make some quick profit in the next 1 month or thereabout (short term, that is). Just low share prices o, nothing big. I've got just like N20,000 for the investment.
thanx

wanajo, thanks a lot.

@ All,

Any news from the floor yet.

I know sey some people here dey sleep for market. Before them don ring bell, them know closing price.

Very good to have them here for timle online real time information

@Ololufemi

FCMB closed @18.05 , low volume 2.4m

@ Wanaj0

Welcome back, I'll like to join you to the next level o.


I am still waiting for your post on financial education for children that you mentioned yesterday.
I have read from different peeps on this topic but would like to have your take on the topic too.



Btw, my Capoil don pass 1000% o, I have cashed in my investment and little profit (thanks to you) I still have about 70% there chilling

Ijay07:

@ all,
Thanks for sharing all this knowledge.
I have a friend who wants to sell 600K units of wema for 12naira. Will you consider it a good move if i get the units now, as opposed to getting it during the public offer?

Go for it.

lol, have been trying to catch up for the last 5hrs. Thank God at last. make una no blind my eyes ooo.

@wanajo
Welcome back, how is baba Adeboye? l see say ur level really changed, and don pass Redstar Transexp level.

pls dont disappear for long again

crazyT:


@ Wanaj0

Welcome back, I'll like to join you to the next level o.


I am still waiting for your post on financial education for children that you mentioned yesterday.
I have read from different peeps on this topic but would like to have your take on the topic too.

Btw, my Capoil don pass 1000% o, I have cashed in my investment and little profit (thanks to you) I still have about 70% there chilling

My view will be a bit biased based on my religious inclination.

For starters, life is not just about money. So the education of your children must be total and complete. Objective should be to have  a total child that is complete mentally, cared for physically, instructed in the word of God and to be cared for socially. So make the training to be TOTAL.

On financial education it is part of what they get by studying the word of God. The seven years of abundance and the seven years of famine in the land of Egypt is a good story that you can use to teach children about basic VALUES and PRINCIPLES. For me that's what they need to know now. Not the methodologies. Once the VALUES and PRINCIPLES are thought, they will go on from there.

Don't also lose sight of the fact that the children don't really have to be like you. So be careful of trying to fit them into a 'MOLD'.

Once they learn the VALUES and PRINCIPLES via story telling (most children love stories) the rest is simple. Let them decide whether stock market investing fits into their 'personality'. For all you know, they may be at home with other forms of investing.

Be willing to always answer the STUPID questions that they will ask once interest is generated.

As per the age to start, please start as soon as they reach the age of acountability/decision. It ranges between 4 or 6 for most children. It can be earlier for some.

MyPeace:

lol, have been trying to catch up for the last 5hrs. Thank God at last. make una no blind my eyes ooo.

@wanajo
Welcome back, how is baba Adeboye? l see say your level really changed, and don pass Redstar Transexp level.

please don't disappear for long again

Was away for just 3 working days in the first instance!!!!!!!

Well, as una don monopolise the Transexp man don move to another level. Congratulobia on moving the stock price from less than 0.70 to over 2.00!!!!!

Can't see anything fantastic in the AIICO offer. Profit forecast for AIICO and COSTAIN appears very very ambitious. It will be a surprise if they achieve that.

@ wanaj0,
Welcome back from being in his presence. I'm sure you're pregnant with insight on the NSE 2008 and hopefully you'll share some with the forum. Your contribution was greatly missed and the forum went very technical (RSI, MACD, SMA) for some of us.

toyibanj:

@ wanaj0,
Welcome back from being in his presence. I'm sure you're pregnant with insight on the NSE 2008 and hopefully you'll share some with the forum. Your contribution was greatly missed and the forum went very technical (RSI, MACD, SMA) for some of us.

Was only thinking about NSE as per how it will contribute towards fulfilling His mandate.

Na the GURUS fit dey discuss such big and TECNICAL issues. Those of us that do not know book always like the KISS (Keep It Short and Simple)

@all
seasons greetings,for those interested in the costain offer,the prospectus can now be downloaded from www.cashcraft.com. on the homepage.

Hello,which registrers is in charge of AIICO public offer,cause i want to buy and my broker doesn't have the form.Where will i buy?,pls respond.

@Wanaj0,

Welcome back!!!.

We all missed your insightful contributions.

For those in Canada - I hope you guys were not snowed in yesterday oooo!!!!. Na wa for the storm.

@Pumping - you ran away from mother nature .

husu:

Hello,which registrers is in charge of AIICO public offer,cause i want to buy and my broker doesn't have the form.Where will i buy?,please respond.

You will find a list of receiving agents (banks and stockbrokers) in the prospectus.

The issuing house is Greenwich Trust Ltd.

yodiyokun:

@Wanaj0,

Welcome back!!!.

We all missed your insightful contributions.

For those in Canada - I hope you guys were not snowed in yesterday oooo!!!!. Na wa for the storm.

@Pumping - you ran away from mother nature .

Pele. I hope you were not affected yourself. My friends have been complaining.

The winter came too early in Philly this year. There is no "Happy Holidays" in the snow for me

pumping777:

You will find a list of receiving agents (banks and stockbrokers) in the prospectus.

The issuing house is Greenwich Trust Ltd.

I thought you said you were on holidays with your family

Take time o make i no report you to your missus u dey sneak behind her back to log on to nairaland

toyibanj:

@ wanaj0,
Welcome back from being in his presence. I'm sure you're pregnant with insight on the NSE 2008 and hopefully you'll share some with the forum. Your contribution was greatly missed and the forum went very technical (RSI, MACD, SMA) for some of us.

When the cat is not on the scene the mice would come out to play

A beg stockfield marshall wanaj0 you go 'download' some of your insights for 08 for us before you go on extended leave of absence

RoughCut:

I thought you said you were on holidays with your family

Take time o make i no report you to your missus u dey sneak behind her back to log on to nairaland

He be like say you dey here. Missus no find am funny again. I have decided to remain loyal and behave myself. Fiscal Year End declared. Make I take care of my biggest investment 

pumping777:

He be like say you dey here. Missus no find am funny again. I have decided to remain loyal and behave myself. Fiscal Year End declared. Make I take care of my biggest investment

Abeg, take care of the ONLY investment. Others na supporting cast.

RoughCut:

When the cat is not on the scene the mice would come out to play

A beg stockfield marshall wanaj0 you go 'download' some of your insights for 08 for us before you go on extended leave of absence

Abeg, I no know book OOO. Don't give a dog a BIG name in order to hang it.

yodiyokun:

@Wanaj0,

Welcome back!!!.

We all missed your insightful contributions.

For those in Canada - I hope you guys were not snowed in yesterday oooo!!!!. Na wa for the storm.

@Pumping - you ran away from mother nature .

Na that una cold dey drive people like me away from that place. For peeps like me, anything below 20 ^oC is cold. How some of you survive constantly in sub zero is amazing.

Abeg, make I go sunbath outside jo.