How Do You Start Self Directed Investing

How Do You Start Self Directed Investing

How Do You Start Self Directed Investing

How Do You Start Self Directed Investing

Investing is a like taking a trip to a dream destination that you really want to go. You might feel it is nerve racking as this might be the first time you are going to take a long trip. You might also be unsure what to pack and bring. You might also feel anxious as you don’t know if you prepared enough for the trip.

If you have experience planning for a 10 days (or even longer) holiday, the skillset used there can be transferred over to investing. Here are 5 things to prepare before going on your trip.

Special note: Whether you are starting the journey or have already started, I wish everyone a safe journey.

#1: Determine Your Destination.

Many people stumble on this point right at the start. One of the most interesting conversation I ever had was with a friend in university. I remember him saying that he wants to get “many experiences” travelling. However, when I asked him where he wanted to go or what he wanted to experience, he couldn’t give me an answer. He simply stared at me said “anywhere lah”.

In the end, he didn’t go anywhere at all. He just couldn’t decide.

It is the same for investing, you might want to be a self directed investor because you want to make more money but you might not know how much you need to make. Although “the more the better” is relevant here, the lack of destination creates a tension in your mind because your brain don’t know what to do. In the end, most people don’t start.

Knowing your destination is simply require simple mathematics. I’m going to assume the following.

Assumption:

I want $5,000 monthly or $60,000 yearly for my retirement.

I wish to retire at age 55. Since male mortality is age 83 (female is 88), I would require 28 years of $60,000 or $1,680,000.

In this simple illustration, you would have already determined your destination. It is time to start packing.

#2: Buy A Map / Make Sure You Have Google Maps

If I were to ask you to drive from your house to Tuas Crescent 1, would you be able to do it? Unless you know Tuas very well, it would be very difficult and time consuming. This issue escalates for longer journeys. Imagine, asking someone to drive to Four Season Hotel in Thailand, Bangkok without a map.

For self directed investors, one of the most important thing is to have a map. This map is a strategic game plan that allows you to move from Point A to Point B. It is a map that would show you where are the possible danger spots and route to take.

via Gfycat: Looks easy?

In investing, we call this a game plan. There are several game plans out there. Each and every of them will eventually get you to your end goal. Some example of game plans are like ETF dollar cost investing, Robo-investing, Value investing, Growth investing, Value-Growth investing, Options investing, Momentum Growth Investing, Multi-Asset Value-Growth investing or trading. These game plans are created by people who have gone ahead of us and are itineraries that we can consider.

You might prefer certain itineraries to others. Some of more “adventurous”, some take the safer route. However, the lack of tour guides means that you have to take ownership of the trip.

You might find yourself stuck at this stage because you don’t know which is the best route to follow. My advice is to try out any path. This is because you will quickly understand which paths fits you the best ONLY IF you step on that path. You can also change your path along the way.

#3: Get Your Passport

A passport allows to travel across countries. For investing, the passport is your brokerage account. It allows to buy and sell. This is the most straight forward step for self directed investors.

You can consider between the brokerage account in the traditional banks or the new brokerage accounts like Moomoo or Tiger.

There may be promotions at different periods. If you have enjoyed reading this article, I would appreciate if you could register an account with my referral above. Appreciate it loads!

#4: Leave The House

I remember leaving my house for my student exchange in Sweden. There was a mixture of excitement, fear, uncertainty and I missed home suddenly. Of course, that trip turned out to be one of the best trips I ever did in my life.

Our house is our “comfort zone” and in the same way, investing into the stock market is usually outside our comfort zone especially if you have never invested before.

The journey of a thousand miles begins with the first step. It is only when you put in real money into investing can your journey truly begin.

Leave The House Uppsala

Leave The House: One of my favorite photos of Uppsala, Sweden

#5: Keep Track of Your Progress

Nothing is more scary than being lost. One of my first solo trips was to Taiwan. My plane landed in Taipei and I was trying to get to Kaohsiung. In my very silly attempt to save money, I decided on taking the bus to Kaohsiung instead of taking the train.

It took me 8 hours from Taipei to Taichung by bus and I knew something is wrong. My phone battery was going to be flat and I was meeting a friend in 3 hours time. I transferred to the next train to Kaohsiung (in the end, I spent even more money) and landed at Zuoying Station. I happily told my friend that I will be waiting for them at MacDonald. My friend asked me which one? Who knew that there was Zuoying Station and Xin Zuoying Station. My phone battery took one last breath before shutting down.

Luckily~ my friends found me on their first try.

It is the same for investing. Sometimes we do get caught up in the moment and make irrational decisions. It is crucial to acknowledge when you are lost and change directions immediately. It would be easier especially if you have a group of mentors whom are familiar with the workings of the market.

Even if you are on the right direction, take note of your milestones and celebrate them when it comes.

Final Thoughts

Being a self directed investor gives you a lot of control but you have to learn how to control it. It will take both time and effort. Starting is very scary but once you start, I can assure that it will be a well lived life.

Are there any other tools you feel you need to get started? Let me know in the comment below.

Chengkok is a licensed Financial Services Consultant since 2012. He is an Investment and Critical Illness Specialist. Wealthdojo was created in 2019 to educate and debunk “free financial advice” that was given without context.  

Feel Free To Reach Out To Share Your Thoughts.

Contact: 94316449 (Whatsapp) chengkokoh@gmail.com (Email)
Telegram: Wealthdojo [Continuous Learning Channel]
Reviews: About Me

The views and opinions expressed in this publication are those of the author and do not reflect the official policy or position of any other agency, organisation, employer or company. Assumptions made in the analysis are not reflective of the position of any entity other than the author.

5 Principles To Self Directed Investing

5 Principles To Self Directed Investing

5 Principles To Self Directed Investing

5 Principles To Self Directed Investing: Nope, that’s not my arm.

Self directed investing is an interesting journey. I struggle to write this article as the “interesting” journey was not a fun one at all. The old cliche “there are ups and downs” barely scratch the surface of investing with confidence.

As I get more and more requests to teach investment, I realised I keep repeating certain concepts for people who wants self directed investing. These concepts can be summarized into the 5 key principles. These 5 key principles separates investors from speculators.

This article will be more crucial to those who wants to focus on investing rather than speculating. If you thinking of speculating the market, this article may not be beneficial to you.

Disclaimer: The example shown below are not and should not be used as a buy/sell recommendation.

#1: First Principles

I learnt about First Principles from Elon Musk. This term was coined over 2000 years ago by Greek Philosopher Aristotle. Basically, first principle is a basic assumption that cannot be deducted any further.

One simple question that I ask people is what constitute a good company/instrument to invest in? I’m always met with weird stares and raised eyebrows because the answer is typically the flavour of the month. It used to be Cloud, then Electric Vehicles or ESG investing in the recent years. Metaverse is probably going to be a typical answer in the next few quarters.

While they are not wrong, it says nothing about the companies’ underlying business.

When you do self directed investing, you want to find companies’ whose underlying business have a certain advantage over others (otherwise coined as economic moat). This business have to exhibit certain growth potential in the years ahead. If you can’t find a business with an advantage over others, why invest in this business? If you don’t see a growth potential in this business, why risk your money in this business?

When you break investing into First Principles, it becomes easier to understand. However, it takes time to understand a business and it also take time for the company to grow. Ask yourself, are you spending enough time understanding a business and allowing it to grow?

5 Principles To Self Directed Investing First Principles

5 Principles To Self Directed Investing First Principles

#2: Learn The Language Of Money

I remember asking for directions to a famous bakery in France and it didn’t go well. A kind hearted gentlemen (at least I believed he was) asked if I wanted some pain. I will leave it to you to imagine how scared and confused I was. Anyway, pain means bread in French.

5 Principles To Self Directed Investing Language Of Money

5 Principles To Self Directed Investing Language Of Money

You see harmless jokes like these appearing at random times in our lives. We laugh about it because it don’t really impact us that much. However, it is very different when it comes to the language of money. It WILL hurt when we misinterpret this language.

The language of money in investing is basically accounting. Doing self directed investing without learning about accounting is basically suicide. While you don’t need to learn every single word in the dictionary to understand a language, you will need a certain basic level of grammar rules, vocabulary and sentence structure.

This also takes time to understand but it can be learnt quickly especially if you have a trainer or a teacher who can explain to you what the more important jargons are.

#3: The Wait is as important as the investment

5 Principles To Self Directed Investing The Wait

5 Principles To Self Directed Investing The Wait

In the era where everything can be obtained in a snap of a finger, the wait is especially difficult. Amazon’s Prime Now, our 4G internet connection, 24/7 island delivery has made things more convenient but has altered our expectation of waiting. We have to relearn how to wait.

“The stock didn’t move much.” (In 2 days)

An extreme example of a company that “didn’t really move much” is Microsoft. Microsoft is now the biggest company (by market capital) in the world right now. However, it went through decades of underperformance until it finally bore fruit for investors. Even if you have invested at the peak of the dotcom bubble until now, you would have average a CAGR of 9%.

5 Principles To Self Directed Investing The Wait MSFT

5 Principles To Self Directed Investing The Wait MSFT

Thankfully, not all companies are as extreme like this. That being said, we need to relearn how to wait.

#4: The Price To Pay

In business, everything has a certain value or worth to it. I plan to write an article on property prices in Singapore very soon as I note that there are more and more Million Dollar HDB flats in Singapore. Who determines the prices? The buyers? The sellers? The property agents?

The “smart” answer in this case is the market.

Even though the market determines the prices, it does not mean you need to accept those prices. You on the other hand have 3 decisions to make. To buy, to hold or to sell.

The market prices changes every single day which gives an opportunity to buy at a price that you want. Being a self directed investor, it is important to decide what is the price that you are willing to pay for the company. The danger comes when you are overpaying for the company.

5 Principles To Self Directed Investing The Price To Pay

5 Principles To Self Directed Investing The Price To Pay

#5: Seek Other Experts

We specialise in certain topics at a very young age of 16 to 21. We go to polytechnic and/or university and are required to take a certain discipline that we will be sticking to for at least 3 years. We then proceed to the workforce and work on that role for a good period of time.

For me, it was finance and economics. While I’m celebrating my decade in the financial institution I’m representing next year, I’m always reminded (especially during COVID-19) that I have little or no knowledge about pharmaceutical companies.

To understand these pharmaceutical companies such as Pfizer and Moderna, I would have to ask experts in those fields if I ever would want to invest in them.

For self directed investors, it is crucial to reach out to other experts (or a community) especially if you want to find out more about those companies. These experts will probably know one or two things more than you do and that would make or break your investment decision.

Final Thoughts

Being a self directed investor gives you a lot of control but you have to learn how to control it. It will take both time and effort. Are you prepared?

Are there any other principles you feel should be included? Let me know in the comment below.

Chengkok is a licensed Financial Services Consultant since 2012. He is an Investment and Critical Illness Specialist. Wealthdojo was created in 2019 to educate and debunk “free financial advice” that was given without context.  

Feel Free To Reach Out To Share Your Thoughts.

Contact: 94316449 (Whatsapp) chengkokoh@gmail.com (Email)
Telegram: Wealthdojo [Continuous Learning Channel]
Reviews: About Me

The views and opinions expressed in this publication are those of the author and do not reflect the official policy or position of any other agency, organisation, employer or company. Assumptions made in the analysis are not reflective of the position of any entity other than the author.

Why is it not easy to invest in the long run

Why is it not easy to invest in the long run?

In the most recent webinar that I conducted, I asked the participants what are they concerned about when it comes to investing in the long run?

I thought that most people’s answer would the lack of time or the inexperience in the market. It turns out that for most people, they are not too sure if they are doing it right.

Why is it not easy to invest in the long run

Why is it not easy to invest in the long run

If you think about it using a proxy, it is like a person driving on the roads but unsure if they driving properly. If this is not risky, I don’t know what is.

The Why

Fear Of Missing Out FOMO

Fear Of Missing Out FOMO

As we get more plugged into the internet, social news gets spread very quickly. With more people getting stuck at home during the COVID-19 period, we log in more to these social platforms to keep updated on the world around us.

One popular topic is how people are getting rich during the pandemic. Topics like Bitcoin, NFTs, Value Investing or Growth Investing gets thrown around. Because it seems that every Tom, Dick and Harry is doing it, people fear missing out and started participating into these.

Redefine Basics

Investing is the act of allocating resources (usually money) to buy an asset, in hopes of reselling it later at a higher price (Definition from Investopedia).

For most people, they get the concept that they will make money when the price goes up. I believe there is a certain form of Social Investing (a term that I just made up) going around in the recent market. Reddit has made certain stocks like Gamestop pop. Elon Musk has certainly contributed to the popularity of Bitcoin and Tesla. One thing for sure is that prices seems to be influenced by social pressures.

While it has created some millionaires, some people are unsure what they are doing anymore.

The art of investing starts from buying an asset. This concept seems to have lost its’ way in this season.

Our Mind Plays Tricks

Let’s play a game. Find a place to record your answer for Quiz A and B.

Quiz A

Choice #1: You get a 100% chance of getting $50.

Choice #2: You get a 50% chance of getting $100, 50% chance of getting $0.

Write down which one will you choose?

Quiz B

Choice #1: You get a 100% chance of losing $50.

Choice #2: You get a 50% chance of losing $100, 50% chance of losing $0.

In a 1979 experiment by Daniel Kahneman and Amos Tversky, it is discovered that most people choose Choice #1 for Quiz A and Choice #2 for Quiz B.

However, if you understand it mathematically, you should be indifferent between all the 2 choices in Quiz A or Quiz B. The expected value of both Choices in Quiz A are the same (i.e. +$50), while the expected value of both Choices in Quiz B are the same (i.e. -$50), so there should be no difference (at least mathematically) between the Choices in either Quiz. (Thank you Kok Ming for your help)

This tells us that as humans, we feel losses more keenly than gains (loss aversion). That’s probably the reason why you might have taken gains off the table early out of fear and hold onto large losing positions in the hope that they will rebound.

Our minds are not wired to maximise performance but to minimize regret.

Anyway, that’s just one problem. These are other cognitive bias we need to overcome as investors.

Cognitive Bias Investing

Cognitive Bias Investing

So What Can You Do?

Now that you understand that the society and your own mind is against you, what can you do? I would humbly like to suggest 3 steps.

#1: Get financially educated and informed of the investment process.

#2: Focus on the controllable.

#3: Consider a multi asset class portfolio to minimise drawdown.

Why is it not easy to invest in the long run education

Why is it not easy to invest in the long run education

This graph records the S&P500 gains and losses over the past 60 years. The stock market can be considered like the following season (Spring and Winter). The average period for Spring (we love Spring don’t we) is 57 months and the average period for Winter (we don’t like the cold) is 12 months.

IF we are in a crisis now, it typically takes around 12 months before it is spring again. In the more recent COVID-19 crisis, the winter lasted around 6 months (Feb21 to Aug21) before roaring back into Spring again.

It is what you do during winter that determines your financial results. Getting financially educated allows you to prepare for such opportunities.

Dollar Cost Averaging VS Buying the Dips

Dollar Cost Averaging VS Buying the Dips

Let’s assume that you can predict each and every dip (technically impossible) and buy them (further assuming you have the mental resilience to buy at the lowest). Do you know that Dollar Cost Averaging (DCA) beats buying the dip in this time period? Instead of focusing on the unknowns or black swan events, why not focus on what’s controllable which is doing simple Dollar Cost Averaging?

Novel Investor Asset Class Returns TableSource: NovelInvestor.com

As you can see, different asset class performs differently every year. Because our minds are loss averse in nature, we might not be able to weather through each storms if we are only into one asset class. Consider a multi asset portfolio might make it easier for our minds to weather through each storms when it comes.

Final Thoughts

Personally, I’m invested in the long run. In investment, there will be volatility and it is something we have be comfortable with either through education, experience or both.

Do you related to the above? Let me know in the comments below.

Chengkok is a licensed Financial Services Consultant since 2012. He is an Investment and Critical Illness Specialist. Wealthdojo was created in 2019 to educate and debunk “free financial advice” that was given without context.  

Feel Free To Reach Out To Share Your Thoughts.

Contact: 94316449 (Whatsapp) chengkokoh@gmail.com (Email)
Telegram: Wealthdojo [Continuous Learning Channel]
Reviews: About Me

The views and opinions expressed in this publication are those of the author and do not reflect the official policy or position of any other agency, organisation, employer or company. Assumptions made in the analysis are not reflective of the position of any entity other than the author.

Biggest Crash In History By Rich Dad

Greatest Crash In History? By Rich Dad

Biggest Crash In History By Rich Dad

Biggest Crash In History By Rich Dad

You probably would have known him. Robert Kiyosaki is famously known for being the author of “Rich Dad, Poor Dad”. My friends and I religiously read his books and I felt that it was a good place to start off with for financial literacy.

The concepts he came up with was simple, easy and gamified. You might have played his Cashflow 101 game in your pursuit of earning knowledge.

This time round, he has gained media attention again for crying the the market will be crashed in October 2021.

A disclaimer as usual. This is by no means a recommendation to buy or sell any securities or financial assets.

His Predictions For October 2021

His thesis: The Evergrande looming default will spread it’s way to the USA market. Debt positions in the US is worsening. Therefore, he feels like it will be good to buy gold, silver and bitcoin but later changed it to keep some in cash.

The above is a possible interpretation from his twitter.

Robert’s Track Record

If you read his books, you will get an idea that Robert is a big fan of debt. He used debt to create huge amount of passive income by purchasing properties.

He also believes that fiat money is worth lesser and lesser due to the extensively QE. As a result, savers are being punished and that hyperinflation will come in future. He is a big believer in Gold because there is value in Gold and have recently talked more about cryptocurrencies.

The very first time (in my memory) when he talked about market crash was in 2015. He believes that a huge market crash will happen in 2016. Of course, it didn’t really happen.

In 2018, he believes that market is going to get a lot worse and we are heading into bear territory. This was the period of time when the FED was raising interest rates.

In 2020, he believes that COVID19 was the final catalyst for the market to move away from traditional assets like stocks and bonds. However, market has already crashed at the time so there wasn’t any prediction for this.

In 2021, he believes that the market will truly crash in Oct 2021.

It is also no secret that he has been talking about investing into Gold, Sliver and Bitcoin.

Biggest Crash In History By Rich Dad Tweet Gold Sliver Bitcoin

Biggest Crash In History By Rich Dad Tweet Gold Sliver Bitcoin

What I Think About His Predictions

Next year, I will be celebrating my 10th year in the financial industry. I read extensively, upgraded my knowledge and here’s what I think about his predictions.

While there is nothing wrong about having a prediction, I personally feel that Robert has a deep sense of distrust in the financial system and he is extremely bearish in nature.

I don’t know whether he is right about this prediction and I’m in no position to say so. However, his money script (more on this in the articles in future) caused him to react very negatively to money. His focus is on money being money. He will be right if people start to question the existence of fiat money and stop using fiat money altogether. As a results, gold silver and bitcoin may become storage of value then. It is a long shot but who knows.

Over the last 5 years, Gold has been doing relatively okay. If he have bought it 5 years ago (as he said he did), Gold would roughly 38% up or around 6% CAGR depending on his entry.

Biggest Crash In History By Rich Dad Gold Prices Trend

Biggest Crash In History By Rich Dad Gold Prices Trend

Final Thoughts

Personally, I’m invested in the long run. In investment, there will be volatility and it is something we have be comfortable with either through education, experience or both. Are you looking to learn about investment?

What do you feel about Robert Kiyosaki’s prediction? Let me know in the comments below.

Chengkok is a licensed Financial Services Consultant since 2012. He is an Investment and Critical Illness Specialist. Wealthdojo was created in 2019 to educate and debunk “free financial advice” that was given without context.  

Feel Free To Reach Out To Share Your Thoughts.

Contact: 94316449 (Whatsapp) chengkokoh@gmail.com (Email)
Telegram: Wealthdojo [Continuous Learning Channel]
Reviews: About Me

The views and opinions expressed in this publication are those of the author and do not reflect the official policy or position of any other agency, organisation, employer or company. Assumptions made in the analysis are not reflective of the position of any entity other than the author.

My SRS Portfolio Sept 2021

My SRS Portfolio and Thoughts [Sept 2021]

My SRS Portfolio Sept 2021

My SRS Portfolio Sept 2021

We are done to the last quarter for the year. Have you accomplished your goals? Hope that things have been going well for you. In any case, this article is a simple reporting for my SRS updates.

Disclaimers: This is not and should not be taken as a buy/sell recommendation.

If you would like to see my past quarter thoughts, you can refer to March2021 and June2021.

It is also close to the end of the year, you might be considering SRS investment. Please refer my most read SRS article, 5 Things You Need To Know About SRS to learn more.

My Thoughts And Consideration

My SRS Portfolio Sept 2021 Data

My SRS Portfolio Sept 2021 Data

The elephant in the room is the exposure into Chinese Technology Stocks (SGX:HST). It has obviously pulled down the entire portfolio as 50% of my portfolio is invested into it. Unfortunately, this SRS portfolio is still small and there is a concentration risk that I acknowledged.

Policymakers in China announced regulatory reforms that has impacted sectors like construction (think Evergrande), private education (think TAL Education Group) and Technology companies that are handling data (think Didi).

In the case of my SRS impact, it was due to the technology sector. As you can see in the Top ETF holding for SGX:HST, it haven’t been doing well year to date.

SGX HST ETF Top 25 Holdings

SGX HST ETF Top 25 Holdings

I remain positive in this exposure as this ETF is invested into quality Chinese companies that can deliver sustainable growth in the next 3 to 5 years. With high internet penetration in China, I believe the performance of the companies will follow suit.

SGX: BTOU is a recovery play in the portfolio. The recovery will depend on COVID19 recovery attempts in US. I’m optimistic that the recovery towards working in office will come in 3 to 5 years time.

Lastly, I’m still considering if I should inject new capital into the SRS portfolio.

Final Thoughts

Disclaimer: this is not and should not be taken as a buy/sell recommendation. Like what Charlie Munger famously said: the big money is not in the buying or selling.. but in the waiting.

We have be having a 3 parts webinar for last quarter of the year. Feel free to reach out to me for more information.

Chengkok is a licensed Financial Services Consultant since 2012. He is an Investment and Critical Illness Specialist. Wealthdojo was created in 2019 to educate and debunk “free financial advice” that was given without context.  

Feel Free To Reach Out To Share Your Thoughts.

Contact: 94316449 (Whatsapp) chengkokoh@gmail.com (Email)
Telegram: Wealthdojo [Continuous Learning Channel]
Reviews: About Me

The views and opinions expressed in this publication are those of the author and do not reflect the official policy or position of any other agency, organisation, employer or company. Assumptions made in the analysis are not reflective of the position of any entity other than the author.