The KLCI shed 1.6% today. Haven’t seen such a huge drop for a while. Shanghai shed almost 6%. Has fear and panic crept back into the market? Reminds me of “the cycle of market emotions” I’ve read about in the July 2009 newsletter by HSBC.

What goes up, must come down. What goes down, must come up.

Be like Warren Buffett. Be greedy when people become fearful. And sell when people become greedy. This is the smart way to invest. Making buy sell decisions based on logic.

But instead of this common sense way, people usually get caught up in the market emotions. When everybody is greedy, they become greedy as welland usually end up buying overpriced assets. When everybody panic and sell, they become panicky too and sell at a distressed price, usually undervalued.

In summary, we have to look at the market and see what everybody else are doing. And sometimes it may be more profitable to bet against the herd.

“Lies, damned lies, and statistics” - unknown

The US Government announced that the US unemployment rate for July dropped from 9.5% to 9.4%. However, if you look at HOW the statistics is calculated, you will come to understand that real unemployment has actually increased, not dropped.

Statistics have been used by many people to support their arguments. Why do people use statistics? Because the general public has the perception that numbers don’t lie. However, not many people know that these statistics can be manipulated or presented in such a way to mislead, highlight or hide certain information.

Have you heard of the quote “a man drowned in a river with an average depth of six inches”? How about this story, “two soldiers who both fired on an enemy soldier: one missed by one foot to the left, and the other by one foot to the right, but they nonetheless congratulated each other on the grounds that their enemy was, on average, dead.”

Today, I have reached my first hundred thousand networth. This is of course excluding my retirement fund EPF which I have no control over.

My stock portfolio grew to RM90,890 and I have another RM10,900 in my futures trading account. I’ve invested a total of RM97,000. I have reinvested all my dividends. My investment portfolio value of RM101,790 represents a gain of 4.9% since November 2008 when I first started investing in stocks.

It took me about 3 years for me to reach where I am today. I can still remember the times when I had to tighten my belt to pay off my credit card debt. Then I had set my goals to achieve a networth of RM100,000 by 2010. I have achieved this goal in August 2009, four months before 2010. I have achieved a significant milestone in my life.

Words cannot describe how I feel. It’s a mix of feelings, happiness, relief, some sadness, and lots of hope. I feel happy because I’m on track towards my goal. I feel relief that some expectations I have put on myself have been lifted. I feel some sadness, when I reminisce about my past 3 years and the sacrifices I had to make. But it’s all worth it.  My hope is overflowing because I have proven to myself that my goals are achievable. And my dreams are one step closer to becoming reality.

People say the first hundred thousand is the hardest. The next hundred thousand is much easier. And so will the many hundreds of thousands to come. And I can feel it in my bones that I can achieve the next hundred thousand before end of 2010, even if my take-home-pay plus bonuses for the next 17 months is only RM90,000. Still, I have no doubt that I can achieve my goal. My burning desire and the conviction to achieve my goal will guide and show me new opportunities to financial freedom.

I look forward to my next one hundred thousand.

I’m going to list down some observations of the stock market crash of 2008. Hopefully next time I’ll make better decisions.

1. Don’t catch falling knives. Wait for the market to bottom first. It’s better to miss the bottom, than getting hurt trying to catch the bottom.

2. Buy blue chips, fundamental counters. Don’t buy second liners, speculative counters. It’s easier to get burned with speculative counters than with fundamental counters.

3. Should transfer money from EPF to mutual funds sooner than later.

4. Buy stocks and hold. Excessive trading leads to high transaction costs, eating into gains.

5. Set a target price, and let Mr Market come to you. Don’t go chasing Mr Market.

6. Consider leveraging up. Make use of Share Margin Financing to borrow and buy shares.

In the August issue of Personal Money, there’s a readers poll on EPF. Some of the feedbacks are indeed interesting.

1. Studies by the EPF have shown that 70% of members who withdraw their funds in a lump sum spend all of it in less than 10 years. Yet 53% or more than half of the respondents in the poll plan to make one lump sum withdrawal when they reach the age of 55.

2. 84% replied that they did not expect their EPF funds to be enough for their retirement.

These two points taken together shows that the Government should raise the retirement age. Especially more so now because with better healthcare and nutrition, people are living longer.

3. Of the respondents who withdrew their EPF money to invest, 62% reported that their returns are higher than dividends from EPF while only 15% reported lower returns than dividends from EPF.

Why are EPF’s returns so poor? EPF should start buying land and wait for the land to appreciate. It has enough money to buy lots of land. When development takes place either by private or Government initiatives, then EPF will make alot of profit, and this will benefit the contributors.