Investment Success 1 of 3

This post is hard to come by. Strangely, I was staring at the screen not knowing what the topic shall be. I was going inwards looking for answers. “What shall I write about today?” It has been a while since I last post something here, and I force myself to write something here today.

“Wealth” came to my mind. Last week some of my friends were discussing about money management and investing. Probably it’s a sign for this posting.

Then I thought I wouldn’t want to write about money or investing in just one post. I had done that before, and it didn’t add lots of value to others as those “1 post” articles are too superficial. This time I decided to break this into a trilogy. Sharing a lot more information here, hopefully you can gain some benefits in this financial crisis time.

Do you know why you should invest? There are many answers to this question.

“To counter inflation.”
“To retire comfortably.”
“To retire young.”
“To grow my money.”
and many more….

All these answers are correct. But I want to bring these answers further, to allow you to have a more tangible view on investment. My answer is:

“All of us must have at least one million dollars by the time we retire. That’s the minimum. Reason is with inflation, maintaining our lifestyle, increasing health care expenses – a million dollar is just right.

In this first part of the trilogy, you probably find the “MIND” of investment. This post is not about which is the greatest investment tools in the world. Or which investment can get you rich in the shortest possible time. Or which investments makes me most money. This part one is about “YOU” as an investor. My question to you is: “Do you know YOU?”

WHO ARE YOU

What is your risk appetite? Would you be fine seeing your investment going through a roller coaster ride? Are you someone who plays long term or short term? Are you a person who is impatience? You must see growth in few days to few months time. Are you a dramatic or a drama-less person? Do you like the thrill of investing? Would you feel relax having someone managing your portfolio for you?

Discovering yourself is the most important stage of investing. This will decide on the kind of investment vehicles that are suitable for your personality.

I’m am a patience investor with a long term horizon. I enjoy the thrill of finding good investment, but prefer a drama-less investment. I do not like someone else to manage my investment. I like to do it on my own.

I’m a big fan of DIY investing. Nobody is responsible for your money except yourself. Not your financial planner, fund manager or broker. They do not have any obligation to make money for you. Remember whether you make or lose money, they are getting paid. Therefore, I rather do my own investment since those who promise to make money are not obligated to do that.

YOUR INVESTMENT BELIEFS

There are some godly beliefs that can make you bunch of cash. On the other hand there are some deadly beliefs that can make you broke. One of them is “it takes high risk to make high profit.” This is absolutely BS. The world greatest investor of our time, Warren Buffet is someone who doesn’t take huge risk. In fact he’s walked away from risk.

His famous principle to investing is “never lose money.” You can see there is a two different beliefs between the average investor and the top investor. One go into the market to make a killing, the latter protect his downside before going into the market.

I strongly think that this belief causes most people to lose their money. High risk high return, this is what they teach in schools. Can you imagine how many years we spent in schools learning this wrong belief? Investing based on “high risk high return” belief is like going to the casino to play the roulette wheel. That’s a high risk high return investment, don’t you think so?

Top investors will always reduce the risk, ensure that they don’t lose money before putting down their money. They understand the fact that if you lose your chips, then you can’t bet at all. They are using all means to protect their chips. If they can’t reduce the risk, they will walk away. There are many other investment opportunities out there.

When I started investing, I do not understand what do they mean by reducing risk. There must definitely be risk in investing. In the later stage, I gain distinction on risk. We can definitely lower the risk to protect our asset.

How do we reduce risk? How do we protect our downside? In the next part of the trilogy, I will share more of how to keep your money.