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Planning before buying or investing is important, because you can have a more balanced and lower risk portfolio. However, why shall be decide how much to invest and what are the consequences if we failed to do so? The rest of the article will list all the scenarios mentioned earlier.

The writer was told that a stock should contained more than 10% of your portfolio but not more than 33%. In this sense, a stock shall hold around 20% of your portfolio, and a total of only 5 stocks even all the cash are invested in stock. In order to do so, investors are required to limit themselves, to only use a certain amount of cash to invest in a stock. For example, you have a total of RM100k to be invested in stock market, and you shall already decide how much you want to spend on one stock. Let say you want to use 20% of your cash to buy Stock A, then you shall strictly only use RM20k to do so, and not a penny more than that.

Why shall we do so? This is because when you failed to limit yourself, you will eventually buy more than what you intended. If a stock keep falling and you are interested, you will buy it continuously, hence spending most of your money on one stock. Deciding a limit can restrict you from doing so, you shall not buy more even if the stock dropped, unless it is only for short-term trading. This means that you have initially spent RM20k on Stock A, but because it dropped too much, you have decided to buy at low price, where you spend an extra RM5k to buy, but sell the stock immediately when it rise back, at the point where you are able to earn around 10% of profit.

On the other hand, why shall we not invest over 33% of our portfolio in one stock? Imagine if you have one stock that hold half of your portfolio, where other 5 only hold 10% each. Your portfolio will fluctuate a lot since most of these up-down will come from the one you hold the most. Obviously, you will earn a lot when the stock that you held 50% goes up a lot, but investing is not “go big or go home”, but to minimize any risk and earn a consistent and decent return.

In short, it is important to plan before investing, to ensure everything will go on plan. Besides, do not invest in one stock until it holds more than 33% of your portfolio, it is unhealthy for your investment portfolio.




另一方面,为什么我们不要让投资组合里超过33%的资金花在一个股上?想象你有一个股是你投资组合的一半时,而其他5个股分别只有10%,那么你的组合便会随着那个占了一半的A股而大上大下。当然,如果你的A股一直上时,你的投资组合很容易赚钱,甚至翻倍,但投资并不是 “要干就干个大的,不然就别干”, 而是让自己的风险降低,同时可以拥有固定且不错的回酬。


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