I am going to write some of my thoughts of stock market investment.  Those thoughts are from the lessens I learn from my 8-year investment experience.  Not very long even if I consider my practice around 2000 is “investment”.  Comments from anyone are welcome.

Just before PTR A share IPO in Shanghai, Warren Buffett sold all his PTR positions. After he sold PTR, PTR H shares in HK was up another 20% or more.  When asked why he sold his position, he mentioned that he made the decision based on the current price of oil, which is close to $100/barrel.  He said it was easy to buy PTR when oil price is around $30/barrel, but around $100/barrel of the price, he is not so sure.  So he sold it.  I am not sure whether that is his only reason or even main reason to sell PTR position (I kind of think another or main reason is that when PTR was valued as the biggest market-cap company on earth, he thinks that is enough of the value priced in), at least we can learn one important lessen from it.  That is, when you invest in stock market, you make the buy or sell decision based on reasons which you understand.  True, PTR was up another 20% or more after Buffett sold his position, but that is the part Buffett doesn’t understand, so for him, it is OK he doesn’t make that portion of the money.  Similar thing happened around 2000 when Buffett didn’t invest in dotcom bubble and his explanation is that he didn’t understand so he didn’t want to be in it.

One common (and I think which is the biggest) mistake many investors make in stock market (or real estate investment) is they make the decisions that they themselves don’t understand. (BTW, I don’t think it is either “greedy” or “fear” that most people believe.) Some people intend to seek the opinion from other people (or experts) to buy or sell especially when they see other people are making the money.  I often heard in the financial radio show that people called in to ask the experts how about to buy or sell a certain stock.  The expert often explains to them where the resistance or support level is, and some even go back to 10 year chart to get such information.  But not many times the expert asked the caller the questions like why he or she decided to buy or sell the stock,  what is the reason behind the decision, do they know why the stock price will go up or down from here or how much he or she think this stock price going to be,….  The stock price is at the support level doesn’t mean it will go up (Enron stock hit many support levels when it ran from $90 to 0), or the stock price is at resistance level doesn’t mean the price will go down (MSFT hit many resistance levels in its run).  Or even stock breaks resistance level doesn’t mean it will go up more (Enron is an example here again) or stock breaks down support level doesn’t mean it will go down more (MSFT is an example here again).  If you don’t understand, it is more like a gambling game and the outcome will be the most likely to be the same.
 
I used to seek advice or opinion from other experts because I think they are making wealthy in the stock market.  Many years ago, one guy told me the following:  No one will start his or her own medical practice the next day after they see the Medical Doctors are making the money, or no one even bother to ask a doctor how he or she makes the money; because people know it needs expertise for the doctors to practice to make money and before they reach that skill level themselves from their own learning and experiencing, they won’t be able to do that same thing.  But in stock market, so many people think there is shortcut like that.  Then you know how unwise the people are in stock market.

So I think the point I try to make here is that you only make the money in the stock market based on what you understand and by doing so, you have better chance to achieve your goal.  If you make the money but don’t know why, it will be hard (if not impossible) for you to make money consistently.