Make 20% Profit in Malaysia Share Market Over long Term

Investing in share market is not a risk-free activity, and some losses are inevitable. However, with substantial research and investments in the right companies, it can potentially be very profitable. The “formula system” displayed in this website continued to give me an additional of 20% return every year compared to the overall Bursa Share Market.   

The first rule in the share market is to be realistic in the rate of return. If you have the expectation of getting a return of 5 to 10% every month, this is not the right battlefield for you. Even if we receive some insider news from our high management level relatives or a director friend, it is illegal and it doesn’t happen all the time. If we get tips from the broker or some professional trader in i3investor, we may have luck in the first few times, but it gets burnt eventually. The profit belongs to the first hand manipulator, not the end level like us.

If you think you got the special talent or sixth sense in market timing, and you know when to buy and sell with the simple principle of “Buy Low Sell High”, probably the best way is for you to invest in the derivative market, FKLI. The brokerage is cheaper and you can practice your talent there.

The real or successful share investment tactic is a boring process in which we buy into listed company that made the best profit prospect, have high dividend, and have good quality assets. It rewards us good returns over the long period. The only problem is that it is very difficult to get the accurate profit estimation for listed companies. For example, If Dayang made 10.13sen profit in the last financial quarter, you should not be silly and multiply it to 4 and presume the EPS for the full year is 40.52sen. The profit includes the reversal impairment and some extraordinary items which is hard to give the same amount of profit in upcoming quarter.

The EPS or PER provided in most share website is for the past financial year and includes extraordinary items or under one-time events. The most important factor in shares selection is the EPS or PER year forward under normal circumstances. Unfortunately, most of the research house did not give accurate forecasted profit, mainly to please their clients or to receive overly optimistic report from the target company management. Furthermore, most of the research house is doing the analysis on the same target company. It can be proved with more than 70% of the listed company are not under any coverage from stock analysts. 

In this website, every single company will be evaluated based on their profit growth, dividend, cash ratio, assets quality and trading volume, after the study of income statement, balance sheet, and note explanation. The value is calculated as accurate as possible and I hope it is useful for you to make the right choice in the share market, and to know more about the fundamental of the company. These are the five rating details:

  1. Overall– The overall rating given to this stock, based on the combination of other four rating, prospective profit (highest weight), assets quality, dividend, cash ratio and liquidity (lowest weight)
  2. Prospective Profit– Rating given based of the estimated profit for this company on upcoming years, excluding any exceptional item. The higher the rating means lower PER and higher profit for this company.
  3. Assets Quality – Rating given based on the value of assets in reference to price. This rating includes some debt ratio and profit growth. Basically, the higher the NTA and realisable asset over share price, the higher the rating.
  4. Dividend, Cash ratio – Rating given based on the willingness of company to give out dividend for the past few years and capability of doing so in the next few years. The higher the rating means more likely the dividend given out, and higher cash ratio position.
  5. Liquidity – Trading volume for last three months including minimal factor in profit generated and assets’ healthy level

The actual formula is complex and complicated to be explained as it tries to best evaluate a truthful value of a company. These rating formulas has been proven well for the last 20 years by helping me avoid shitty stock and to buy the right one. This is how the average 20% return is achieved over the years.

However, the system is not an assured win solution, you may still facing risks when the target company made an unpredictable loss in the financial result, announced a right issue, or the overall share market tumbles. You may try these few steps to mitigate the risks:

  1. Spread the risk by buying up to 10 or 25 stocks. Therefore, your capital is preserved and you did not suffer manageable loss if anything goes wrong.
  2. Focus more on the mother share and not warrant or call-warrant.
  3. Don’t take the share margin if you are only holding few stocks. Always make sure your share margin is in a comfortable level, like 30%, half of the margin call limit.

If you are looking for companies to invest, here are the listed companies in Bursa Malaysia.

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