13 August 2012

Step by Step in Learning Equity Investing

Thank you for reading my posts related to investment. Today I would like to share with you my experience in investing in equities. I believe most of you started equity investing by the influence from the people around you, such as your family and friends or even your teachers. Majority of them started to realize the importance of personal finance after they started a family. This includes getting married, purchasing the 1st house, and planning for kids' education etc. Seldom are planning for retirement until they are in late 40s or 50s.

I first realized the importance of money management when I was dating with my ex-gf some 10 years back. As a student, I did not have enough money to spend for my dating expenses (smile). I was then getting some part-time jobs and failed my industrial training. It was a horrible experience but I got more time spending in learning equity investing by learning from other people during the period I re-took the industrial training, especially from the Internet. Below is my advices I list down to you:
  1. Read more books, especially for economy / finance / investment related. The 1st book I ever read for equity investing was the book series written by 麦青远 (mai qing yuan). He taught me about the power of Compound Interest. Among the asset classes, equities was one of the best return tools. The 72 rule says that you are able to generate 100% return within 10 years if your compound annual return is around 7.2%. He inspired me by giving Berkshire Hathaways as an example. If my annual compound return is 15%, then I would be able to grow $10K to $10M in 50 years time. You can start your equity investment after learning about financial ratios, the business model, as well as financial statement analysis.
  2. Attend financial investing course. It is one of the fastest ways for you to equip with necessary knowledge in investing. You may consider CFA level 1 course as it is a comprehensive course, from economy to financial statement analysis to portfolio management. This is really useful when you started to find out your portfolio is getting bigger to bigger portion after few years time.
  3. Read newspapers. I love the numbers and that is why I love playing with the figures provided by the listed companies. You can focus on latest news on economies/countries as well as the particular listed companies. The more in-depth you have the knowledge regarding the countries/companies, the better confidence level you have when you invest in it.
  4. Attend investment forms, and get some basic knowledge from the speakers. I found that it is the most efficient way is to get involved in the forum, wether it is online / offline forum.
  5. You may also refer or ask opinions from your remisiers / financial advisers. Some are very good in experience and not hard selling the financial products to you. The longer relationship you with them, the better chances they understand your risk & return preferences and provide a better result in long term investment journey. 
  6. Last but not least, always gain experience in doing your own homework and make decision in equities investing. As this will be a long journey to you (could be up to 40-50 years lifespan). Do not be too worry about the return you make for the first few years, try to accumulate more experience and learn the lesson from it.

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