Disclaimer: I’m not a licensed/registered financial advisor. You should read this post, think about it, discuss it with more qualified friends and make your own conclusions.
I’m not sure if I’ve let the genie out of the bottle but recently a couple of my students realised that I invest in equities and the question inevitably becomes, “-Cher, can teach me how to play stocks?*” And I reflexively cringe whenever I hear the word ‘play’ used with stocks because there is a connotation that buying equities is a game or a gamble. It shouldn’t be.  It’s also sad that Singapore retail investors’ participation in equities is a pathetic 8% (something like the lowest in the region. link here) so I guess this is my little contribution to help some people get started.

The other highly upsetting thing is that students then ask me if I’ve read “Rich Dad, Poor Dad”. For the record, I have and I’m not sure how that particular book is useful in getting one started in Investing. Don’t get me wrong. That was the first book I read when I didn’t have a clue on how to make more money and it was helpful in sparking my search for the way most suitable for me to make lots of money but other than creating that initial spark, it was almost entirely useless for anything else. I would say, by all means, read the book if you haven’t got a clue at all about how to get started but don’t even bother to buy the book; Singapore’s public library system is a fantastic resource.

The next step would be to figure out the most suitable way to get ahead. Many roads lead to Rome- some are more suitable to be highly paid employees, some are suitable to be traders while others are more suitable to be investor-types. I think it’s a fallacy that anyone can run a business or be a salesperson if trained hard enough.

But if you are the investor-type, I recommend the following steps to get started:

1) Read up on Investing

Start with ‘The Intelligent Investor’ by Benjamin Graham (with commentary by Jason Zweig) if you have basic financial statement analysis skills. If that proves too tough, then devour some of the books written about Warren Buffett’s investing methods. Usual suspects include “The Warren Buffett way” by Roger Hagstrom or Robert P. Miles’ “Warren Buffett Wealth”. If you prefer a more local flavour, Adam Khoo’s books on investing could work. But don’t stop there! Once you’ve done that, go read “The Intelligent Investor” again.

Other candidates for further reading include:

“One up on Wall Street” by Peter Lynch
“Common Stocks and Uncommon Profits” by Phillip Fisher
“Value Investing” by James Montier (advanced readers)

2) Change your lifestyle

If you can’t even save money on a regular basis, you shouldn’t be thinking about Investing.

Investing is not a game. It is a process and like good bridge players, good investors will tell you that it is the process that matters. You have to be able to withstand the bipolar nature of Mr. Market (read “The Intelligent Investor” to figure out who he is) and let the true value of your businesses show over the long run. Even then, the long-run will prove that some picks turn out to be duds for a variety of reasons. No matter. The correct process will ensure that more picks will turn out to be gems and that will be all that matters.

Those in a situation where debt is unmanageable shouldn’t even bother with Investing first. You have bigger problems.

3) Find a mentor/mentors

This is perhaps the most crucial step. What one reads in the books can be dated or applicable at a particular point in time; or interpretation can be tricky. Experience very often is a helpful friend. Unfortunately, not everyone will be lucky enough to know someone who has been successful in Investing (especially over a variety of asset classes) over a long period of time.

Thankfully, the internet is a great resource. Plenty of sensible financial bloggers exist. In the Singapore context, two of the best are Musicwhiz (now retired but his blog is still available for those who want to learn the fundamentals of value investing in the local context) and drizzt over at Investment Moats. There’s also Valuebuddies.com which is a fantastic community of Singaporean investors.

Ok, that should be enough for a start. Notice I didn’t mention anything about going out and getting a CDP and brokerage account. That, in my opinion, is putting the cart before the horse. Anyone who tells you that you are ready to start investing in equities by attending one seminar is probably being dishonest.

*That’s the typical way a Singaporean student will address a teacher. ‘-Cher’ is short for ‘teacher’.

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