Friday, March 10, 2017

My Investing Philosophy

Finally I decided to dedicate a post for my investment journey in my little infamous blog.
I still have a strong sensation on the 1st day when I bought my very first share back in September 2013.
I must admit that there are still plenty of knowledge to be learnt in investing after almost 4 years of investing experiences.

Despite of most elderly who have bad image towards buying shares due to two very dramatic economic crisis back in 1998 and 2008. A lot of people burnt their hands and end up with bankruptcy or even worse, committed suicide. It happens worst in Hong Kong.

Today, the investing systems has became much easier, and safer. Thanks to few investing policies and technological advance. As I say so is because, there are limits in buying shares and you can buy shares just with a click on your smart phone (without the need to call remisier). Hence, today's information is more accessible and transparent for all.

My understanding about investing in share market is to become a shareholder or an investor in the listed company, although the portion of holding shares is really insignificant. I realise that it could bring me happiness and excitement when the company has growing financial results despite of its share prices. In response to the excitement, I believe that was the sense of achievement by being one of the "boss" indirectly in the company. I will never forget Tambun and Homeriz. These 2 companies were the very first two companies I bought. The profit margin was really promising. There I began to invest more.

In the past 3 and half years of investing, I went through good and bad moments, Ups and Downs.
Some share I bought performing really well, some of them, really suck out my bloods. Frankly, most of the losing counter, were those I bought with rumours and recommendation from these "sifu". Most of the time, I lost pretty badly with my greediness.

There are tons of investment books, articles and some so called "sifu" in the social media. However, most of them were really unprofessional and always encourage their follows based on their self interest (most of them, not all). Majority of them were using similar Financial Analysis (FA) to analyse the company.

I was pretty "noob" the day back in 2014 and 2015. Looking at those Annual Report and most of the time end up with confusion and a lot of question-mark.  However, in mid of 2015, I began my journey in Master of Business Administration (MBA). I'm fortune to say that this program has covered Financial Analysis, and for the first time, I met a really good FA professor who guide us how to calculate all types of financial ratios and understanding on the financial outcome tabulated by the accountants.

Today, the full cost of the MBA course has covered by the profits I made in investment. I'm absolutely grateful to the achievements and really wanted to write down some of my investing philosophy in the little page, because I think it means something to me. Unless most of my previous losing investment, now, there are five rules before I decide to invest on any company, and like what Warren Buffet said, Patience is Virtue, Never Break your Rules.

1) The company must has positive financial result (earning money). Not just that, it must have growing momentum in profits. The management must have good future plans to boost the sales so that the company's profits raise with time. This rule is the very first rule out of the five rules, it's very risky investing in company that consistently losing money.

2) The company must pay yearly dividend that exceed the interest paid by fixed deposit (3.5?). I'm not sure what's the fixed deposit rate at this point. but it hardly exceed 4%. With that on mind, the company must pay more than 3.5% dividend yearly and consistently. A company without profits will not pay dividend, so when rule one has failed, rule 2 fails too. The reason for rule 2 is that a dividend paying company is a company that values their shareholders. Most importantly, even that the share price has remaining same, you will get your interest too simply by holding the shares of the company.

3) The business of the company. I will as well understand the business nature of the company. Type of business and future prospect of the business. This implies your business sense toward the business industry. The key questions to myself are, is this business sustainable? or do they have demand in future due to increased competition rivalry and digitalis-ed world that we living in?  Are they having competitive advantage towards their competitors?  These are really hard to decide without business sense, however, by deep understanding the business sustainability, you always can choose the a good industry to invest in.

4) The current PESTEL your country. The external factors can be derived from PESTEL: Political, Economic, Social, Technological, Environmental and Legal.  Before investing, I also look at the "timing" and current situation of my surrounding,  there are really a lot of aspects, and most of the time, we can't really make a good analysis report out of it, at least not for individual casual investor like me. However, we can still look at newspaper, articles from politicians and latest economic updates from any sources we get. By obtaining a bigger picture on the world, you position yourself at a better place. By experience, most investors always frustrated when the good company has consistently declining share price due to unknown reasons/ bad market sentiments. That's the time you really need to jump out from the share market despite of the FA.

5) The share price is NOT over priced. After the above rules, the last rule is that YOU DON'T buy shares that's over priced! This is really one of the most difficult part of it. As Warren Buffet will say: "that's the trick of it". So, a good company might as well over-ed price even though they pay good dividends and business is really sustainable such as Digi and Maxis. A company that's over price or has no much momentum, that's not a choice of investing too, because there's no point to buy a product that cost more than it's price. COMMON SENSE? There are few methods or really a lot of them to calculate the fair price for the share, the correct word to use is "Intrinsic Value" (IV) of the company. Depending on the business nature, the methods of calculating the IV is totally different.

I'm still considering myself as a beginner, there are plenty of knowledge to be learnt. I'm also putting little portion of the capital into rumours shares (a company that doesn't fulfil any rules). Honestly, sometimes it makes more money than all my other shares, or I also can end up losing really high percentage of profits out of it when I bought it at bad timing. BUT the rumours share will never exceed 10% of my total investments.

There are many investing activities outside the world, while I have chosen to invest in share market, because I love the transparency of it (touchable, observable). Sometimes, I felt really good seeing the Pavallion 2 is in a fast progression of completing at Bukit Jalil. or I felt like saying thank you to the over-crowded customer buying shirts at Padini. That's simply funny and I kept it in myself.

Investment is fun, it's not just FA related, it's also business related, external factors related, and many uncommon factors.
It's part of my life. I put myself in condition where I always think critically and out of the box.

In reality,
I will remain really humble and teachable.
I know there are plenty of things that I don't know.
and I always wanted to know more.

Not just in economic,
In health, In family, In business and more.

Let this piece of memory
be a good one in my late 20s.

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