Wednesday, December 23, 2009

The Important Lessons I Learned On Investment

I learned about managing finances when I was a child from my parents especially from my dear mom who has given me life and also taught me how to be prudent with money. I modeled my mom in several ways. We were not rich then, my dad was in business debts and I have to give tuition at age 13 to pay for my school fees and other expenses. However I thank them for giving me a fantastic learning environment ,virtues and values which has helped me in my later years.

Although I do high risk investment at times, I believe I am conservative as I usually invest with what I have. My mom’s investment rule is never borrow to invest & she is successful in investment, owning houses & stocks without debt , getting good passive incomes for retirement. My opinion is that it is ok to borrow from the financial institutions, in fact most investors and businessmen leverage on the banks too; it depends on our risk appetite and how well we manage it.

For me, I tried to keep it low because of my mom’s teaching. Also, I believe that greed and fear are buddy, it comes in a package. When we make friend with greed, we accept fear too. As I find fear draining my energy, disturbing me and making me lose my focus for bigger things in life, I choose to stay away from greed as much as I can.

Whether my approach in investment suits you or not will depend on individual. It worked well for me and I hope my sharing will help you too .By the way, I am not trained ininvestment and I have no background on crunching financial data, I learned through the many mistakes I made and they are my best mentors. My passion is on leadership & personal development.

Although investment is a different subject altogether, I find what I have learned in self development helps in my investment’s strategies and also in other areas of my life. I believe it is the attitude, character, belief & value system that make or break us. Luckily, all of these can be changed if we have a willing heart…

Firstly, I learned from the books I read that my hard earned money need to be protected, further I also need to make it work harder for me rather than sitting in the bank.
Lesson 1: Never Believe in “lobangs”

The no 1 lesson I learned : “Never hear say some lobangs and jump into it”, only a fool does that. Always do homework, there is no free lunch and we have our part to play if we want to be an investor . I saw people attracted by the money in the stock market or property market and follow blindly. When the investment fall apart, they usually lay blames. When we justify our self, we learn nothing. Take charge of our own action and be responsible. Instead, review what are the lessons we gain. If we got the right answer, we will soon be on the road to winning and success in life. God gives us a great mind to think, do not store it in the store room or backyard….

Now assume we did the homework and understand the investment well, do not start yet unless we want to lose our money. Understanding the ups and downs, features and options of an investment is an external exercise; we also need to do the internal exercise which is our self. Most of the investment’s consultants talk about checking our capital, our risk level, to invest long or short term etc which I called technical stuffs, I find understanding our attitude, belief & behavior pattern in different situations and outcomes are equally important.

This is the psychological part of a human being and we react based on the experiences, expectations ,values & beliefs. This is important because when there is sudden change ininvestment ’s climate , or so called good lobangs etc, our emotion will decide how we play the game, our logical mind no longer take control under such situations.

For eg, we can be easily influenced; if most of our friends had did it and make money, I believe you will not want to be left behind. When so called “opportunity” strike, even low risk takers are convinced to park their money there and expect to flip it soon… Knowing our self well is like knowing our enemies in the battlefield as quoted in the Sun Tzu’s Art of War. Ininvestment, we are our biggest enemy,it is crucial to know our self well so that we can discipline our thoughts when necessary
Lesson 2: Never invest with the attitude of gaining big overnight

Lesson no 2: Never invest with the attitude of gaining big overnight. Big gain comes with big risk…and unless we are well prepared for that. Maybe we strike it right the 1st time but believe me money that comes easy, will go easy too. There are people who were destroyed by their previous success and ended up worst than before. And I can assure you, more people lose money ininvestment than winning from it. If investing is as easy as 123, there is no poor people around. If you win it big overnight, it is luck and I suggest you to keep the money properly and be really careful in futureinvestment
Lesson 3: Invest to Win

Lesson no 3: Invest to win. The confidence of winning must be 75% and above before we put the money in. Why do we want to play a game that has 50% or probably lower chance of winning? Isn’t this like gambling ? Yes, I agree ininvestment , there is risk and there is no sure win, but we do have our choice not to play the loser game ( 50% or lower is loser game for me) . I saw many doing this…when the market is hot, they rush in, worry they may miss it…When the market plunge, they panic and dump it. They have no idea where the market is heading… they react because of fear. Actually, fear can only attack us when we do not have confidence or we lose our confidence for the future. If we have confidence with the company, the industry and the economy outlook, what will we do instead? Robert Kiyosaki has recently said in an interview that such economy downturn has got little or no impact to professional investors; it only gives them more opportunities. The professional investors do value investing, and they don’t fizzle out when the investment’s climate change. They invest with confidence and there is only one reason for them to invest, that is to win.
Lesson 4: Perpare to make mistakes

Lesson no 4: Prepare to make mistakes .Even professional investors make mistakes, so do we. Accept it and see if there is anything for us to learn from the experience. Here, I like to share one of my past experiences of having an invitation in year 2000 to participate in a pre-IPO private placement by Robert Kiyosaki’sinvestment team as I get to know one of them while helping them facilitate the popular cash flow game. The company was in the mining industry preparing for listing. Will you jump onto the opportunity since they are gurus? IPO is a hot subject then… is it risky? Very! But want to take it? why not, is a rare chance to tag along professional investors.

I was ruled by greed, believing they can’t be wrong and I jumped in with little information on the industry plus never familiar with the listing criteria in the Canada Stock Exchange, all the information I had were hear say….The IPO never succeed (so guru make mistakes too) I held a paper loss and has written it off long ago. Is the experience painful? Well, actually I am glad I had a chance to learn my stupidity at my early age; otherwise the losses may be bigger now. There is no sure win, the question here is can we afford to lose when we make a mistake ? Do we move forward or dwell on it ?
Lesson 5: Action

And last but not least, lesson no 5: Action. I saw some friends who done every checks but still worry so much when fear start to take control. This is what I shared previously on taking actions. If we stay in our comfort zone, definitely it will not be the track to success; in fact it is a fast track to nowhere. Start small if we are fearful…, my opinion is that, it is good to be fearful so that we can be prudent with our money, however, do not let fear paralyze us. If we have done our best to check out what we don’t know, let’s have faith, step out with courage and confidence. If we want to change our current lifestyle, changing our self is inevitable; let’s embrace change with the right attitude and I assure you, the speed of your change in the right direction will determine the speed of your success in life.

I hope the above sharing helps, but if you are looking for professional tips on investment, I afraid I might have disappointed you. The above are valuable lessons that I have learned and it has helped me make wise decisions for my investments.


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