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.

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#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.  

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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.