Stock Market Terminologies “Investors” Should Know

With the global credit crunch, stock market meltdown and economic crisis, whatever you want to call it, I revisited the ghost from my past. The year was 1988. The Kuala Lumpur stock exchange was having a brilliant run. Everybody’s fishmonger, vegetable peddlar and pork seller had a stock market tip or two to share. And those who bothered to listen and bought some would have laughed all the way to the bank. Those were the times of “buy what make what.”

And then the market peaked. Stock prices tumbled. Those who still bothered to listen to the hawker dishing out char koay teow and stock market tips at the same time would have cried all the way to the bank. That was the time of “buy what die what.” The benchmark Kuala Lumpur Composite Index (KLCI) seemed to be freefalling into a bottomless abyss. Those were harrowing times for people who were still involved in the stock market.

I got burnt together with ten of thousand of other investors. To call ourselves investors is to put it nicely. We were actually greedy speculators who wanted to make money with little or no effort at all. If you are curious, yes, I am still holding on to some of the shares that I bought from those times. Ten years is a long time to be holding on to stocks that have depreciated 90% in value. I have learnt my lessons. I am now just a spectator despite the very attractive price of stocks such as Genting, Resorts and even IOI Corp. As for those shares that I still hold, they are now vestiges to remind me of a time when I was foolish and reckless with money and a stern warning not to repeat the same follies again.

It was during those trying times ten years ago that I compiled a list of stock market terminologies from various sources in the Internet. These classics are still relevant one decade later now.

STOCK: A magical piece of paper that is worth $33.75 until the moment you buy it. It will then be worth $8.50.

BOND: What you had with your spouse until you pawned his/her golf clubs to invest in

BROKER: The person you trust to help you make major financial decisions. Please note the first five letters of this word spell “Broke”.

BEAR: What your trade account and wallet will be when you take a flyer on that hot stock tip your secretary gave you.

BULL: What your broker uses to explain why your mutual funds tanked during the last quarter.

MARGIN: Where you scribble the latest quotes when you’re supposed to be listening to your manager’s presentation.

SHORT POSITION: A type of trade where, in theory, a person sells stocks he doesn’t actually own. Since this also only ever works in theory, a short position is what a person usually ends up being in (i.e. “The rent, sir? Hahaha, well, I’m a little short this month.”).

COMMISSION: The only reliable way to make money on the stock market, which is why your broker charges you one.

YAK: What you do into a pail when you discover your stocks have plunged and your broker is making a margin call.

Lessons To Be Learnt From The Stock Market Crash

The KLCI dropped 56.24 points or 3.99% to 1352.36 in the morning trading session. I remember the last time the Kuala Lumpur Stock Exchange plunged like this. It was a decade ago. The market was very bullish prior to that. That was the time when housewives, hawkers, aunties, uncles and men-in-the-street were dishing out stock tips like latuk-kong dishing out 4Ds. That was the time when “buy what go up what.” There were no fundamentals to it. All were mere speculations and hearsay from remisiers, friend”s friend and syndicates.

I have learnt my lesson well from the 1997 crash. The stock market cannot go up forever. There must be an exit plan. We must never get too greedy. When we have made enough, it is time to cash out and enjoy the fruits of the winnings. When the market starts to tumble, that is the time to cut loss. We cannot get too sentimental. Shares are neither pets nor girl friends. It has no emotions. Nobody will pity you for losing the inheritance from your grandfather or the money you saved with your wife for that dream house. When it gives it gives generously. When it takes, it has no mercy.

From the time the KLCI hit an all time high of 1524.69 on January 14, it has nosedived to 1352.36 when the market closed for lunch just now. Punters and greenhorns who jumped in at the highest point and are still holding on to the stocks hoping for the market to make a U-turn must be peeing in their pants right now. Believe me. I am very familiar with that feeling on the slippery path down. Sell also die. Hold also die. For those who took a beating in this market crash, there is no point crying over spilt milk. What has happened cannot be undone. Lick your wounds and move on. Sometimes, we need to pay to learn. This will teach us to manage risks better the next time.