A few months ago, I started harbouring renewed thoughts about going into investment. There have been so talk about people making their millions in the stock exchange. The belief is that the bourse is a quick way to make money. But for so many years, I am deterred into entering the market except for some supposedly lucky wins - at some IPOs, which I have had only a miserable two - one still above water and one under amidst the current bloodletting in the financial bourses worldwide.
Then I am challenged by some books which I have read - does high return necessarily mean high risk. A case in point here is the world's greatest investor, Warren Buffett. He has two rules when it come to investing. Rule 1 "Never lose money". Rule 2 "Never forget Rule 1". But yet, he has amassed an astonishing amount of money from the stock exchange.
So I reason that the stock exchange is not necessarily a rowdy place if you know what you are doing, and begin to do some serious research. This post is to share my findings with many of friends who are also interested to venture in this area.
Step 1: Have an Investing Plan
You need to know what you are doing! For many of friends who are in the family stage - like me, this is a long stage and there will be changes made to the family's asset allocation over time. First, set your objectives - 1. to invest for retirement income,2. to provide for children's education; and 3. to clear off any remaining home loan.
Your target here is to try to settle most of your housing loan. After meeting the minimum $20,000 cap in your CPF-OA and CPF-SA account, you may want to consider investing your CPF in a combination of unit trusts and blue-chip with good dividend yields.
Financial Alliance advised that a typical investment portfolio for the family stage could be 30% in unit trust, 20% in stocks, 20% in savings and fixed deposit and 30% in alternative investments (which could include local or foreign property that can generate rental income or foreign currency-denominated savings account.) The unit trust allocation, a moderate-risk portfolio could be allocating 25% in Singapore Bond, 25% in Global Bond, 20% in US Equity, 15% in Europe Equity and 15% in Asian Equity. [Suggestion from Financial Alliance is used as an illustration only. Readers are advised to do own research and make their call accordingly.]
Step 2: Build up Your Financial Resources - Tangibles and Intangibles
For most of my friends who are gainfully employed, my advice is to continue to be so and add more value to your current job. That's one sure way to increase your tangible resources available for investing.
At the same time, do build up your intangibles. For one, upgrade your skills. If you are interested to trade, learn about how to do so.
For me, I have just added the Money Section - especially the part on Bull and Bear Run in the Straits Times in my daily reading ritual. To date, I am seeing good progress in knowledge of how the bourse work. It is also a good starting place before venturing out to read periodicals about stock market as well as investment books. Among the materials which I have read thus far, I will like to share with you, some really good ideas and principles.
One idea which I have got was from Timothy Vick - the author of "Wall Street on Sale". The key lesson which I learnt from Vick is that the stock market operates very differently from our normal departmental store. A case in point is if there is a sale at a department store offering a store-wide discount of say 50%, there will be long queues forming at the cashiers' aisles. Interestingly, in the financial world, it does not work this way, investors or should I say, speculators are all the more eager to buy at sky-high prices and sell at rock-bottomed prices. This is largely a manifestation of fear and greed in the financial bourses.
Three key take-aways from Vick:
1. Do not time the market and chase hot sector stocks. This is more gambling than investing.
2. Do not be overly reliance on forecasts of the economy or the stock market. As the forecast extends in time horizon, it is subject to more external variables that would influence a company's result. Likewise, extrapolating a company's recent growth rate into the future is fraught with dangers - this is one of the downside of using a discounted cash flow analysis except for the most stable fo comapnies.
3. As Mario Gabelli puts it "Buy what is, not what will be."
Next is the seven key elements of value investing from Warren Buffett:
1. View yourself as a business analyst
2. Don't be swayed by share price movements. Over time, price follows the company's growth.
3. Don't be a price taker in the stock market. Price and value aren't always the same.
4. The market doesn't always properly value businesses.
5. Wall Street is designed to sell you something and make you trade.
6. Successful investing is just old-fashioned financial statement analysis.
7. Being a value investor sets you apart from, but ahead of, the crowd.
Hope the above are useful to you. And yes, before you make your investment purchase do your homework studiously.
Then I am challenged by some books which I have read - does high return necessarily mean high risk. A case in point here is the world's greatest investor, Warren Buffett. He has two rules when it come to investing. Rule 1 "Never lose money". Rule 2 "Never forget Rule 1". But yet, he has amassed an astonishing amount of money from the stock exchange.
So I reason that the stock exchange is not necessarily a rowdy place if you know what you are doing, and begin to do some serious research. This post is to share my findings with many of friends who are also interested to venture in this area.
Step 1: Have an Investing Plan
You need to know what you are doing! For many of friends who are in the family stage - like me, this is a long stage and there will be changes made to the family's asset allocation over time. First, set your objectives - 1. to invest for retirement income,2. to provide for children's education; and 3. to clear off any remaining home loan.
Your target here is to try to settle most of your housing loan. After meeting the minimum $20,000 cap in your CPF-OA and CPF-SA account, you may want to consider investing your CPF in a combination of unit trusts and blue-chip with good dividend yields.
Financial Alliance advised that a typical investment portfolio for the family stage could be 30% in unit trust, 20% in stocks, 20% in savings and fixed deposit and 30% in alternative investments (which could include local or foreign property that can generate rental income or foreign currency-denominated savings account.) The unit trust allocation, a moderate-risk portfolio could be allocating 25% in Singapore Bond, 25% in Global Bond, 20% in US Equity, 15% in Europe Equity and 15% in Asian Equity. [Suggestion from Financial Alliance is used as an illustration only. Readers are advised to do own research and make their call accordingly.]
Step 2: Build up Your Financial Resources - Tangibles and Intangibles
For most of my friends who are gainfully employed, my advice is to continue to be so and add more value to your current job. That's one sure way to increase your tangible resources available for investing.
At the same time, do build up your intangibles. For one, upgrade your skills. If you are interested to trade, learn about how to do so.
For me, I have just added the Money Section - especially the part on Bull and Bear Run in the Straits Times in my daily reading ritual. To date, I am seeing good progress in knowledge of how the bourse work. It is also a good starting place before venturing out to read periodicals about stock market as well as investment books. Among the materials which I have read thus far, I will like to share with you, some really good ideas and principles.
One idea which I have got was from Timothy Vick - the author of "Wall Street on Sale". The key lesson which I learnt from Vick is that the stock market operates very differently from our normal departmental store. A case in point is if there is a sale at a department store offering a store-wide discount of say 50%, there will be long queues forming at the cashiers' aisles. Interestingly, in the financial world, it does not work this way, investors or should I say, speculators are all the more eager to buy at sky-high prices and sell at rock-bottomed prices. This is largely a manifestation of fear and greed in the financial bourses.
Three key take-aways from Vick:
1. Do not time the market and chase hot sector stocks. This is more gambling than investing.
2. Do not be overly reliance on forecasts of the economy or the stock market. As the forecast extends in time horizon, it is subject to more external variables that would influence a company's result. Likewise, extrapolating a company's recent growth rate into the future is fraught with dangers - this is one of the downside of using a discounted cash flow analysis except for the most stable fo comapnies.
3. As Mario Gabelli puts it "Buy what is, not what will be."
Next is the seven key elements of value investing from Warren Buffett:
1. View yourself as a business analyst
2. Don't be swayed by share price movements. Over time, price follows the company's growth.
3. Don't be a price taker in the stock market. Price and value aren't always the same.
4. The market doesn't always properly value businesses.
5. Wall Street is designed to sell you something and make you trade.
6. Successful investing is just old-fashioned financial statement analysis.
7. Being a value investor sets you apart from, but ahead of, the crowd.
Hope the above are useful to you. And yes, before you make your investment purchase do your homework studiously.
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