Wednesday, 27 August 2014

When Taking The Easy Way Out Isn't Always Wrong.

So, I've come to a conclusion that after only helping 2 people who expressed interest in obtaining a copy of the book I recommended in my previous blogpost is that people simply don't want to spend their time reading through a hundred plus pages contained amongst several chapters.

They want the easy way out. They want to know the main points and then customise that to fit their existing strategy or devise a new one. Sigh...so typical of human nature. Guilty as charged, including me. We all simply want the easy way out.

But who said the easy way was wrong? Even Warren Buffet took the easy way whenever he could!



Let me share some tips with you. They may or may not help you or even enlighten you in your quest to financial freedom and learning more about the world of investments but they MIGHT. And that's enough for me.

1. Know Your Level of Market Exposure


When you choose an index fund, you're essentially exposing yourself to different companies in different industries. However, if that is unappealing to you, you can also decide to track and purchase specific kinds of stock. Maybe you wanna buy shares from Telcos, like Singtel, Starhub or M1. Or maybe you wanna purchase something more technology related like Apple, Microsoft or even Facebook! In general, know what type of exposure you want. Choosing an index fund may be diverse and lessen your risk but it also lessens your dividends. Choose wisely.

2. Selecting what is best for YOU.


This is very important. Why? You are the one in charge of your own future. It's like would you purchase a milkshake when you're lactose intolerant? Same concept. Know what's suitable for you and go for it! Maybe you're in the oil industry, or the shipping industry. Owning a couple of REITs (Real Estate Investment Trusts) could be beneficial for exposure. However, say your good friend is working in the real estate industry or quite possibly has much of his portfolio connected to several purchases in the industry. Would it make sense to purchase REITs too? Maybe yes, maybe no. Ultimately, only you know what's best for you.


3. Don't believe everything you read or hear!


Source: http://www.barchart.com/stocks/hotstocks

You must see it all the time. The latest financial magazine or a random website telling you the hottest stocks to buy! BEST FUNDS OF 2013/2014/2015! TOP 30 STOCKS YOU MUST BUY!

Deep down, maybe you know that advice, when given out to thousands and possibly millions of people will have little value. But most of us still follow, why? The dreaded "Get Rich Quick" Syndrome. The thing is, these are all marketing strategies to increase sales of their magazines and increase subscriptions.

4. You're highly emotional, too emotional. You let your heart, your feelings sway your judgement.


Major recipe for disaster. Say you still believe that you can pick stocks choose the best. And maybe you do! You purchase a stock at a price of say $4. It rises to $10 soon enough. You sell to lock in the profit! All's good. You see it rise to $20. You kick yourself for not waiting. At least you made a profit!

Now, say you purchased 1 stock at a share price at $4. It decreases to $2. You hopefully believe it will go up in the near future. Meanwhile, you just keep losing money...and waiting...and losing...

You waiting for the price to go up...still waiting..


5. Approach any investment decisions with caution.

Why is this important? Because you don't want to make investments on the spur of the moment. Remember emotional? Don't invest on a mere whim & regret your impulsive actions later. Read up on the stock, know what you're buying into. Buy with caution and stick to your decisions once done.

6. Monitor your portfolio closely but don't play with it too much.

Buying and holding is good for the long run. Tweak it once a year or so to adjust to you needs. But try not to modify , buy or sell every damn day. The costs from trading pile up sooner or later. *shudders*


Do I advice going for international stocks? Why not? Singapore is a small country, you can always invest both locally and internationally. Let me know what you think.

Signing off,
Teenage Investor

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