3 Unexpected Ways You Can Become A High-Performing Investor

IMPORTANT: Please read the disclaimer before continuing.

What if you found out today that you likely already have the things you need to become an amazing investor?

Here are some of the replies I’m anticipating:

“Really?”
“How?”
“How sure are you?”

The biggest misconception that most people have is that investing is just all about numbers.

This is why many people who are weak in analysing numbers step away from investing.  As a result, many money-making opportunities are lost when people do not become investors themselves.

And it frustrates me to see it because the younger me was EXACTLY like that!

It was only after many years of investing that I began to develop a different mindset.

While I don’t want to downplay the importance of understanding financial numbers, I want you to understand that you don’t have to be an accountant or someone with a finance degree to become a good investor.

Seriously, I mean it!

Of course, I’m not saying that you don’t have to care about numbers at all.

You will have to understand some numbers, but you don’t need to have the skills of an accountant to become a good investor.

So what is it exactly that makes a good investor?

The 3 things that make a good investor

1. Passionate about life

2. Extremely observant

3. Know your basic mathematics

That’s really it. I’m not messing with you.

For instance, take a look at this chart! 😂

Contrary to popular belief, a competent accountant may not get great portfolio results.

Sometimes, he may analyse numbers too much and even paralyze himself during the process.

The most UNDERRATED trait of a high-performing investor

Personally, I feel being observant is the most underrated trait.

Here’s why:

Sometimes, by being observant, you open your doors to some of the most promising companies in their early stages of growth.

What do I mean by that?

During my secondary schools, I noticed Apple was gaining widespread recognition and people were eager to get their hands on their latest release. Back then, the iPod Touch Pro was straight up the most popular product around.

And even so, Apple continued to release products hits, one after each other.

Back in 2010, Apple’s share price was around $44.

What about today?

As of 13 July 2020, Apple’s share price closed at $381.91.

That is a whopping INCREASE of 8.7x from 2010! An amount of $10,000 would have turned into $87,000!

Here is a contrasting example:

In the telecommunication industry in Singapore, there only used to be three big operators who provided mobile data plans and other entertainment services — SingTel, Starhub and M1.

On first sight, it seems like a good ratio, considering that we have a population size of roughly 5.7 million people.

But we must always keep in mind that Singapore is quite small. Our population simply cannot expand exponentially overnight, or even over a few years.

That also means that there are simply not many customers that telco operator can wrestle away from each other just by offering promotions or lowering their prices.

To make matters worse… the local authority decided to liberalise the industry by inviting more competition to this already saturated industry.

As a result, the existing operators lost many customers to more disruptive competitors such as Circles.Life.

Without going into too many details, the shares of SingTel, Starhub and M1 collapsed due to increased competition in a saturated market.   

Although it may be harder to connect the dots when starting out, as you observe the market, these conclusions will become more apparent to you.

Also, don’t beat yourself up in hindsight if you missed something! Today, I wish I had access to my parent’s brokerage account as a kid. I could’ve bought Amazon, Shopify and Copart at their early stages.

This is why I always feel that the perfect time to buy into a company is when I am about to monitor its progress closely.

Some ways could be looking out for new store openings, new product launches, as well as raving customers.

That being said, a consumer-facing company is always easier as compared other companies.

With this method of investing, my level of certainty and investment results increased.

For my portfolio results year-till-date, it’s about 100%. Even if it might be slightly different today as the markets moves, I am not worried at all.

Next, we will be looking at what draws us to buy products from certain companies and not their competitors.

The framework to identify a good company

Previously, I penned down this framework of using Maslow’s Hierarchy of Needs in my investing journal. I thought it’s appropriate to share this so we can be forward-looking investors.

You see, all businesses are created to fulfill the various needs of any humans.

For example, when we are hungry, this creates a physiological need. We have to buy food and eat it to cure the physiological need.

Or when we want to feel prestige, we may opt to buy a Mont Blanc pen or Rolex watch to fulfill our esteem needs.

PS: If you’re reading this article and you do not have a brokerage account, it’s time for you to open one! For more information, click here!

Why am I sharing this? It’s the psychology behind why and what we buy. This could leave clues on some successful companies that we could be buying.

Whenever we purchase a company, ideally, we want to buy fast growing companies that have close to no competition.

When a company is growing quickly and making a lot of money, it’s a natural hot spot to attract other competitors who may want to have a cut of its profits.

Many companies compete in a lazy way by cutting their product prices, so that they can force the newcomer to drop their prices to unsustainable levels. This causes profits to fall quickly.

In comparison, some strong companies may raise their prices even further in the presence of their competitors to signify to their customers that they are the real deal. There are a lot of psychology effects at play.

Applying it back to Maslow’s Hierarchy of Needs, you would realise that the need for self-actualisation is harder to be met as compared to physiological needs.

Therefore, companies that are selling products to serve self-actualisation needs tend to enjoy higher profits because it’s just more difficult to compete with these companies.

This begs the question of… what is Tesla selling? What is Disney selling? And what is Nike selling?

Ok, here is the answer!

Tesla sells a certain form of prestige (esteem needs).

Disney is selling experiences and happiness (the need to belong and be loved).

Nike is selling an attitude (self-actualization/esteem).

Apple is selling simplicity and a cool attitude (esteem needs).

But don’t take my word for it. Try it out for yourself.

Take a moment to think of some companies you’re familiar with. What needs are they targeting?

Then, make a list of those companies.

You will begin to notice a pattern, that great businesses offer products/services that don’t just serve its functional use… it also offers something more.

Nike is selling clothing to meet our physiological needs – providing cover to our body and enhance our running performance at the same time.

But when you think about it further, we are – at the same time – inspired by what Nike’s brand symbolises. Power. Fitness. A “Just Do It” Attitude. A conqueror.

This caters to our self-actualisation needs.

Let’s look at another example.

Amazon may first appear to be selling a wide variety of products that aim at different needs.

But ultimately, at its core, it is selling convenience.

Look around you today.

What are some innovative companies that are doing things differently?

Look beyond the functional use of the products and dive into your second level thinking mode. How can their products/services fit into the Maslow’s Hierarchy of Needs investing framework?

Conclusion

Coming back to my main point, life is a constant journey of growing and learning.

If you hate to learn and grow, investing is probably not for you.

But if you enjoy observing your surroundings and learning about new things, it is really hard not to find interesting investment opportunities.

Of course, you might also want to learn more about simple financials, so that you know you’re on the right track.

To help you get started, I prepared a list of complete financial ratios! If you haven’t subscribed to my blog, do it TODAY to receive an email containing the PDF link!

If you have made it this far…

Here is my bonus section for you hungry investors who want to GROW!

3 sectors to watch out for:

1. Financial education

It is on the rise. It’s proliferating across different age groups. People WANT to learn how to invest.

How did I position myself to benefit from this? I chose to invest in iFast which is a wealth management platform with a brokerage arm. I liked the numbers and their growth trajectory.

2. E-commerce

This is also on the rise because there is a wider selection, people can do price comparison, an increase in merchant transparency and convenience.

The advent of COVID-19 also forced an accelerated adoption of e-commerce.

3. Payment Services

Another consideration is the push for a cashless society.

It is always difficult to handle money. As such, some countries are planning for and making a transition to a cashless society. This paves way for players like Visa/Masters/Square.

Currently, I am looking at a few interesting Australian companies such as AfterPay. There is a new form of payment called “Buy-Now-Pay-Later” scheme.

In fact, AliPay’s version is called Huabei while Tencent’s is called Fenfu. It offers flexibility to consumers by breaking their purchase transaction down into several payment terms.

In conclusion, I believe there are no short of opportunities in the stock market.

Be observant, be enthusiastic to learn and be diligent!