10 June 2013

Factors that Determine Your Investment Return(s)

I have to acknowledge that I am influenced by the intelligent investor, Benjamin Graham. A famous quote by the Great Investor - Warran Buffett is "Rule #1, Do Not Lose the Money, Rule #2, Remember Rule #1".  So to increase the chances of winning in the investment game, you have to be very conservative in managing your money to invest in something you are very sure of the real value is. 

I have met with a lot of investors who are quite savvy in their investment products. Some become millionaires through real estate investment / management, some become millionaires through Equity Investment, and some through leveraged products etc. To become a successful investor, you have to be very sure (at least in your mind) that you can be rich through investment. 

Having gone through some 15 years of experience in investing in Shares, I believe that there are some Magic formula that you can be rich in shares investment. Some of the factors that I would like to share with you are listed as below:

  1. Understand your risk & return profile. When I was in early 20s, I can simply put 100% of my cash in equity market. This is not because I am very brave, but because I know that I can put 100% of my cash there as I have little commitment on my family, until I have to set aside my assets in Aussie Dollar FD in my late 20s to support my younger brother to further his studies in Australia. Always use the excess cash in investing in higher volatile market to ensure you are not affected by the short term risk but can enjoy longer term return via capital appreciation and dividend returns. 
  2. It is all about asset allocation. You can put 100% of your money in single asset class like equity, or you can diversify to different asset classes. To me, I am now diversify my portfolios to Real Estates and Equities, which I think the correlation is a lesser than 1.0. Correlation is a term to compare the trend of different asset classes. The lower the better. In traditional portfolio management, Fixed Income and Equities are two most important components, while alternative investment like Commodities & Real Estates is getting popular in recent market. 
  3. Do a lot of homework in the investment that you are holding in / thinking to invest in. It is just like your babies. You have to fall in love with it and putting a lot of attention to ensure it bear the fruits in later stages. You have a lot of ways to do your homework. In equity market, the homework you can do is to read the annual / financial reports as well as the news related to the counters that under your watch list. Try to experience yourself in investing so that the more experience you have, the better result you will get later. 
  4. If you are too lazy to do your homework, at least you can hire someone who are having such characteristics - integrity, hardworking, expertise in the business / wealth management. In long run, you can still beat the others who just park their monies in Fixed Deposits or in Banks. 

3 comments:

  1. Absolutely agreed. As an investor, must do own homework to determine the intrinsic value of particular stock you intend to enter into position. Tips and recommended target price only serve as a guide. Fundamental is still the key.

    ReplyDelete
  2. Be wise in anything we started. We can invest with the help of our family members. Together, you can do business more accurate for the benefit of your Real Estate business. You should be focused in anything that you would like to do for your business.

    Real Estate Investments

    ReplyDelete
  3. It is important that we learn different things that we can use for our real estate business. Continues learning is the key to our success. Make sure that everything that we do will be helpful for our business.

    Property Investing

    ReplyDelete

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