F1 Again….This time in Kuala Lumpur (KL)

Renault team once again won in the tournament held in Kuala Lumpur. As I mentioned in the previous post, in the tournament, the race team equipped with the best accelerating engine would not necessary guarantee the triumph. To be a winner, you got to finish 56 laps with some curve turnings along the way. The race car equipped with the best accelerating engine such as McLaren team has an advantage when the circuit way is straight, but its advantage diminished when it comes to the curve turnings. Along the race, the car needs to stop by in the pit stop for some maintenance and fuel pumping and the moment is critical. Once the decision made is wrong, it would ruin the entire race. That’s why the driver is always communicate with the team of controller in order to decide the best moment to stop by at the pit.

In the investment world, there is no difference. To determine the success of the investment is not judged by one or few times success. After all, for such short moment, luck plays an important role. For example, when there was a technology boom time, chip manufacturers enjoyed a handsome return. It also applies to other commodity type companies such as Steel manufacturer where it enjoyed a handsome return during 2004. The problem of this commodity type companies is they lack of competitive advantage and its boom solely depend on the cycle of the industry. They would spend much for the capital expenditure (capex) to expand their production when there is a boom time. With the products with enjoyed no loyalty by the customers, the only consideration by the customers is PRICE. Capex by manufacturers during booming time will flooded market with excess supplies for the same products. As a teaching of economics, when the supply is more than demand, ultimately the price will drop. This will put the suppliers into dilemma – the excess products they produced no where to go since the demand is less than supply. Thus, it will initial a price war that is never ending and erode the margin of the suppliers. The cycle repeat again and again. Same scenario could be seen in the racing circuit, the car which leads during 10th, 21st, 32nd….lap does not mean it is the winner of the race. The winner only comes out after it completes the entire race, which is finish all 56 laps.

That is why whenever salesman approaching you and promoting his fund and shows you outstanding 3 months, 1 year, 3 years or even 5 years results of the fund does not guarantee that the outstanding results of the fund will be continue for next 10, 20, 30 or 40 years. After all, there are many ways to boast the results for short term but the tricks used will not long last. The character of hoping to grab short term profit or is patience enough to grab the long term profit is the character that distinguish between speculator and investor. Both are greedy – Investor is greed for long term while speculator is greed for short term. Which character are you belong to?

Technorati Tags: Formula 1, F1, Kuala Lumpur, Investment, capex, Renault, McLaren

Need for Speed – Formula 1 (F1)

A new season of Formula 1 began yesterday in Bahrain and the winner is Alonso who drives a Renault engine racing car. If you observe carefully, you would notice that the car is not the most powerful car in term of pick up, meaning that if the race is on the straight line course, the car will lose out in the race. This is because the most powerful car in term of pick up is a racing car powered by Mercedes engine. If Bahrain race course is a straight line course, without any curves, there will be no doubt that McLaren team will win in the race.

The observation could be apply in the investment world. Assuming the investment world is like a racing course and you are a driver of the car, by choosing the most powerful pick up car like Mercedes does not assure your winning. After all, the investment world is not straight line – it’s full of curves, holes, and your ride will never so smooth as riding on the well maintained tar road. Sometimes, you got to struggle on the dust road and when it’s a rainy season, the road will become more challenging as the road will full of mud. When this happens, insisting to drive F1 car on this road would be stupid or insane. Instead, you should change the car to 4 wheel drive car. By adhering to the blind faith would be disastrous. In the ever changing investment world, the one with Firm Character equipped with vast knowledge
would play a role – his investment objectives and visions would still intact but using his intelligence to suit the changing environment. Though, F1 is a race for speed but it does not mean you must accelerate all the times. By knowing when to break is as important as knowing when to accelerate. How to turn according to the curves is vitally important. When you go to stop pit to change the tyres, fuelling up the car are no less important. Only an experience driver knows this. Last but not least, knowing yourself whether possess a winning driver characters is important as well. The world is only one Alonso, if you want to win, leave the car to him. But, be careful if the driver’s interest is not aligns with yours.