As I grow older, I begin to think more about what life is all about and realise that at the end of the day, what we all really want is financial independence.
I believe that I cannot achieve financial independence by punting the market as the playing field is not level and the odds are against the investor who is usually at the bottom of the information hierarchy.
I think it is fair to say that the average lifespan for humans is around 80 years. Retirement age is around 60 years old. This gives most of us an additional 20 years of life beyond retirement. Hence, it is good for all of us to be able to plan ahead and do something that we can continue doing for the rest of our lives. However, as we age, there are lots of things that we cannot do past the age of 60. Physically many of us would have aged by then but mentally, I believe many of us will remain quite sharp. This is why I believe that investing is probably the one career that a person can practice right up to the time one is called up.
In fact, as we age, I believe that we would have a lot more experience in business. As well as that, we should be able to control our emotions better as we too have a lot more experience in life. Added together, as we age, we should become better investors.
This is why I encourage all my friends, whether they are professionals or employees, to consider investing as a hobby while they are still working. Investing is an art that is refined with age. Much like wine. One is bound to make many mistakes in his early investing days and the earlier one starts on this journey, the more likely, he will be a better investor in the years ahead.
Investing is really about spending time researching stocks and shares. Going through their fundamentals, technicals and many times, the annual reports over the years. This is very time consuming and is a very lonely occupation. But I have not found any shortcuts to making investments work for me.
A fundamental investor will keep researching and researching and this can be boring. But this is the basis of fundamental investing - patience with researching and researching. A trader usually relies on technical analysis, trading tools or simply gut feel.
Traders are not investors. People who look at charts are mostly traders. They look for signal to buy, and grab without thinking..if price moved up with volume, then they profit, if not they cut loss.
Of course, if one is just starting out, better to test water first and investing in our younger years is more like an education. However, as we age gracefully, investing should be something we take very seriously and passionately to prepare us for the future when we will no longer be so employable.
Value Investing is boring when compared to trading. We buy from fearful and confused investors and then sell to the greedy traders. Once you start to practice value investing, you need patience to see result.
The market is the sum total of human emotions which interestingly is manic depressive. When emotions are good, stock prices zoom like there is no tomorrow. When the feeling is bad, it can hit rock bottom and yet there will be no takers. This is the reality of our markets and to be a fundamental investor in Singapore, one has to be able to take the rough and tough of investing and watch one's fundamental stocks get beaten and bruised. One has to have lots of patience and guts as well during these depressive states.
My investing strategy:
1. Focus on only a few stocks
2. Identify a tipping point for each stock (eg building a train station next to its key property)
3. Buy slowly into any stock (as my timing is usually not good)
4. My investments are long term (This is money I can afford to leave under the pillow for years)
5. Low liquidity is OK (I am a collector and have no intentions of selling early)
For my long term investments, I only have about 5 stocks. My rationale is simple. If I diversify too much, even if a stock rises 100%, it may not increase the worth of my portfolio significantly. My aim in investing is to multiply my net worth. For the stock that represents over 50% of my portfolio value, you can bet that I watch it like a hawk. I look out for announcements on the company and try to understand as much as I can about the industries in which it operates. Good thing about having a few stocks is that you can focus.
As human beings, by nature, we are all risk adverse and when we invest, the natural tendency is to spread our risk all over the place. Sadly, many so called professionals recommend this spreading of risk approach to their clients.
But to me, if I want to invest properly in the stock market, I must be willing to take risks. I reduce my risk by understanding the companies that I invest in thoroughly. I understand their industries and keep myself updated on what is happening worldwide. I do not reduce my risk by spreading my investments as thin as I would spread butter on a toast.
When I am too heavy in a stock position that it starts to affect my sleep, then I feel that I have gone over the limit and the degree of worry is too excessive. Humans should not be deprived of sleep as this will eventually affect our mental wellbeing, which in turn may affect our alertness and we can eventually make mistakes in our investments. As such, when I lose sleep over an investment, I know that I am better liquidating my position regardless of whether the trade is profitable or not.
Somehow, I feel more at ease managing my own money. If I lose money from my investments, I take it as part of investing. Nowadays even when I lose money, my pulse rate remains much the same as I have already accepted the fact that investing means that you will lose money at times. So long as you make money overall, you are fine.
Summary/Conclusion:
As young investors who hold our own full time jobs, investing can only be a pastime which we can pursue after office hours. As such, we should make full use of our time to read up as much as we can on investment, as diversified views on investment as possible. By understanding different theories and methods of investing, we can then form our opinions on which suit us better and from there on, to use that unique method of us to do our own investment.
Investing is a twenty-year college course that will then see you through till you go West. For now, I am just into my first year.
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