Zoom in

For subscribers only

The old issues of i Capital are extremely useful as they contain plenty of advice on a bewildering range of subjects. Some of our subscribers keep all of them. Being an investment adviser, naturally a big chunk of our advice, which is all given free from conflicts of interest, concerns investment and investing. Take i Capital dated 18 Nov 2010 for example. The main article in that issue concerns The Three Fools in the stock market. Although originally written in the early Nineties, the advice derived from this investment fable remains as valid as before, if not more. Let us read what we wrote in 2010.

"There are 3 Fools in the stock market, observed our managing director in the early Nineties.According to him, they are the Old Fools, the New Fools and the Regular Fools. At any point in time, they will all be present in the stock market. Which type of fool predominates the market will give one a clue as to the prevailing state of the stock market. In a bear market, the Old Fools will be lurking around, looking for bargains. In a bull market, there will be many New Fools thumping their chests. To succeed in the stock market, one has to be an Old Fool. In fact, every investor should aim to be an Old Fool as fast as possible. Why ?

What is a New Fool ? Almost all investors and traders start off as New Fools. This is the stage or period where the investor or trader pays his or her school fees to be educated by the stock market. It certainly can be expensive. It often coincides with a period when the stock market is filled with tips and rumours. And being new or gullible, the investor or a trader believes almost every story, every concept, every rumour, and every tip thrown his or her way. Unfortunately, it is also a period where it is easy to make money, a period where there are many stock market geniuses, a period where compound returns of 10, 15 or 20% per annum are scoffed. Not surprisingly, it is a time where serious research and analysis is mocked at and ignored. Alas, it is a period where many New Fools are born. Every bull market creates many of these pitiful souls. From being a New Fool, one can graduate to become either an Old Fool or a Regular Fool.