Kathlyn Toh, a professional investor / trader who is also the Director and Chief Coach of Beyond Insights Investment & Trading Education shares her experience on how to achieve consistent results in stock market.

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MONEY
| SmartInvestor | 07 . 2014
Since 2008, Beyond Insights
Investment & Trading Education
has trained over 1,700 people from
all walks of life on how to generate
returns consistently from the market.
These methods are the culmination
of the extensive research done during
my more than 20 years of experience
both as a part time and full time
investor in the stock market.
In this series of articles, we will
share a concise version of what it takes
to become a smart investor (or trader)
in the stock market. We will start by
introducing a complete framework
Formula For Consistent
Success In The Stock Market
While there is no sure win formula for stock markets, understanding some time tested models can
go a long way in providing consistent returns. By Kathlyn Toh
that everyone can follow in order to
achieve long term and sustainable
success, as well as the knowledge, skills
and critical success factors every smart
investor should possess.
The 3Ms
The 3M pie chart (below) represents
the three areas that an investor or
trader needs to pay attention to. The
size of the pie shows you the impact of
each area on your success.
The Market
We find that a lot of people,
especially when they are new, tend
to approach stock investing from a
narrow viewpoint, which leads to
an unpleasant surprise when the big
picture changes.
When we invest into a stock – we
will expect it to increase in price.
But what actually affects the price?
From our research, stock prices are
influenced by three major factors:
a) Overall market sentiment
About 40% of the day-to-day stock
price movement is affected by the
overall market sentiment, indicating
that the price movement may have
nothing to do with the company’s
financial performance itself.The
obvious example would be the 2008
US financial crisis, which saw billions
of dollars lost in the stock market
worldwide with stock prices falling
across the board.The European credit
crisis in recent years has also caused a
lot of volatility 2-3 years ago. Investors
will need to understand this well
so as to not panic when it happens,
but rather, to take advantage of the
situation. Like what Warren Buffet had
said,“Fear comes from not knowing
what you are doing”.
b) Sector or industry trend
Defined as the trend within a specific
industry or segment, this affects
30% of the price movement. For
example, a company with poor
financial fundamentals may belong
to an industry filled with investor
euphoria, such as the dot-com stocks
of the late 1990’s, where most of the
dot-com stock prices rose because
of investor enthusiasm and optimism

2. 35SmartInvestor | 07 . 2014 |
that undermines the value of strong
financial fundamentals. Perception of
the industry’s competition, and supply
and demand can also affect stock
prices.
c) Company specific performance
or news
This contributes to the other 30% of
price movements. A stock may rise
because of the actual fundamental
performance of the company or just
because of anticipated product releases,or
based on speculation about an upcoming
project or government concession. It is
also common to see stock prices moving
sharply prior to annual or quarterly
earnings announcements.
2.The Method
By “method” we mean the strategy
or rules that one uses to decide when
to take action to enter or exit an
investment/trade depending on your
investment/trading style (long term
investment, mid-term trading, short-
term trading or intraday trading). It
is important to know that there is no
Holy Grail in trading methods.
Many methods can generate money
if used with proper risk management,
but the choice of method will
largely depend on our personality,
risk appetite, experience, as well as
availability of time and capital.
Whichever method one choses,
we advocate the 4-Step Formula as a
guiding principle of what everyone
should learn and apply:
a) Selecting the best – The ability
to find fundamentally strong growth
stock will increase your chances of
success, no matter which strategy you
use.
b) Timing – The ability to recognize
market sentiment and assess the
valuation of the company; in order
to determine the best price to buy
and sell.You can do this based on
fundamental valuation of the company
or the stock chart pattern.
c) Protect – This is the most
important step of all, protecting your
capital when the market turns against
you.
d) Multiply – This step is relevant if
you want to start with a lower capital
or be able to accelerate your rate of
return. This step involves proper usage
of leverage instruments like Contract
for Difference (CFD), Options and
Futures.
We believe that this 4-Step
Formula is a holistic approach that
will make an investor or trader
versatile and successful. We will
describe this formula with more detail
in part 3 of this article series.
3.The Mind
Statistics show that only 5-10% of
people are successful in achieving
consistent results in most major
endeavors, be it in business, multi-
level marketing (MLM), etc.The
statistics also applies to trading as most
people are unaware of the proper way
to invest or trade, which is to have
clear rules on what/when to buy
and sell while adhering to money
management rules.
It’s important to have a proper
coach rather than doing this on a trial
and error basis.As the saying goes,
“You either pay the market to learn or
you pay for a proper education”.
Contrary to popular belief,
methods or strategies are not the most
important success factor.Trading well
requires discipline and the ability to
manage our typical human emotions
e.g. greed, hope, fear, excitement,
impatience and denial. Hence, having
the right mindset and emotional
fitness are the keys to long-term
profitability.
All the knowledge, skills and
aptitude that we have covered in the
3M model are learnable. We believe
that investing/trading is one of the
best businesses in the world, because
if we compare the reward we can get
over the effort we put in, not many
other businesses or career can come
close in comparison.
It’s able to give us financial
freedom, time freedom, location
freedom and freedom from managing
people.
So, keep an eye on the next few
articles in this series, where we will
be sharing with you all the points
mentioned above in greater depth.
KathlynToh is a Professional Investor and
Trader specialising in the U.S. and global
equities market. She is also the Director
and Chief Coach of Beyond Insights Sdn.
Bhd., an institution that offers a complete
curriculum on the subject of stock market
investing.