[Extract] Psslo’s Investment Journey

Content belongs to the contributors of https://www.valuebuddies.com/thread-8555.html.

Not mine.

June 2016 was life-changing for me. The day most people dread arrived out of the blue for me. My boss called me one night after work & apologetically informed me that the company was downsizing & I had been affected. After 24 years with the company (American MNC) as an engineering professional, this was the end of the road for me. Even though I had been mentally preparing myself for such an eventual scenario one day, I was still an emotional mess that fateful night. I had suddenly found myself out of a job in my late forties. Being the sole breadwinner (single income family) added to the gravity of the situation.

What has this to do with investing you may ask? In a sense, I have been preparing for this day for well over a decade. You see, job insecurity was a major factor that propelled me onto the road to investing.

Finding a well-paying job when you are approaching 50 is no easy task. Thankfully, my investment portfolio can now generate sufficient income to maintain the current standard of living (nothing extravagant of course). Therefore, I now have the choice not to return to the corporate world. As such, I have achieved my financial freedom & independence. 

Key Success Factors for me
With benefit of hindsight, here are what I think are key to my journey:

1. Time is of the essence. Start your journey as soon as you are able. Time is needed to accumulate capital (without getting into debt). Time is needed for compounding to do its work. Time is needed for market experience (mistakes & successes during up/down market cycles), experimentation & emotional maturity which no book can adequately teach.

2. Live simply without over-committing your finances, live well within your means so that you can invest the surplus. Plan a budget & analyse your expenditure to cut out the unnecessary. I am proof that a middle-class family can survive quite well on a single income in Singapore.

3. Find your own investment style. There are multiple ways to profit from the market, and your temperament will likely decide what you are most comfortable with. Personally, I lean towards Benjamin Graham’s school of teaching. 

4. Learn the skills. Learn to analyse companies by reading balance sheets & calculating stock ratios. Learn how to value stocks & set target prices when to sell (Have an exit strategy for every entry). Learn how to generate your own stock ideas. I used to surf the internet (including Valuebuddies) to search for ideas, but what is already public may be too late (from risk-reward perspective) to exploit. A better way is to screen for stocks yourself so you can get ahead of the curve.

5. Put together a diversified portfolio (unless you are of Warren Buffet calibre) in accordance with your own risk appetite, and avoid emotional attachment to the stocks. Having a stake in more companies will also help you get up the learning curve faster.

6. Track your investment performance (preferably with a spreadsheet). Learn from your successes & mistakes to improve. Calculate your returns or losses. Learn where your strengths are & where you are profiting from most (e.g. what industry, company size – smaller caps are more profitable for me). Learn what works for you.

7. Investing in stock is not about getting it right all the time. It is about having the odds in your favour, so that you are correct more time than wrong. Therefore, it is important to buy stocks with as much a margin of safety (low downside & high upside) as you can. Don’t be afraid to cut loss if you are wrong (or if a stock is going nowhere after 1-2 yrs).

8. Master your emotions (easier said than done). For me, fear is a bigger challenge than greed. It can be very scary when you see your portfolio evaporating. Have conviction (hopefully justified), try not to panic & know that the market rebound comes after the storm. You will find yourself growing in confidence after each trial.

9. Market timing is a controversial topic. It did not work for me, so I just focus on hunting for value stocks & try not to be sidetracked by bull or bear. I believe things will work themselves out as long as you are focused on value.

10. Expand your horizons. Once you outgrow Singapore, don’t be afraid to spread your wings overseas. There are good stocks to be found nearby, eg HK & Japan. 

I write in the hope that a younger generation can benefit from my experience. To bless just as I have been blessed.