INTRO TO STOCKS (PART 1): MY JOURNEY
As the financial year soon comes to a close, I decided to take stock of my portfolio. Excluding dividends, I made gains of close to 25% on paper, on my starting capital in 2017. It has been an exceptional year and I don’t think the results can be easily replicated. On my dividend paying stocks, I’m averaging close to 7%.
I started investing at the start of 2009, about a decade ago. I will never forget the first share I bought. I pumped in almost all my savings and bought 20 lots (1 lot = 1000 shares) at 28 cents per share. In 2 years, the humble $5600 that I invested, doubled to around $11,500 (57.5 cents a share).
Like most investors, my journey hasn’t been smooth sailing. I join ranks with many angry retirees who got burnt investing in certain S Chips (more on that in another post). S Chips are Chinese companies listed on the Singapore stock exchange. Thankfully, it was a small amount but a fantastic lesson nevertheless.
I could have also been more prudent in saving and reinvesting my money but “life happens” and there were certain needs and wants that I allocated to throughout the years.
There’s no lack of information out there so I’m not going to list the 101s just yet. Instead, I’m going to try to be authentic and break it down to simple terms as much as I can.
There are two main groups of people who buy stocks: The INVESTOR and the TRADER.
INVESTORS are people who are interested in the FUNDAMENTALS of the company and are vested LONG TERM.
Fundamental questions investors are interested in:
- In the last 3 to 5 years, did the company make profit?
- When they make a profit, do they pay dividends?
- Is the yield high or low at its current price? (Is the stock overpriced)
- Are there indications of ‘monkey business’ that is going on through the numbers or reported through main stream news?
There’s a whole lot more to this and I’ll cover this eventually, progressing to actual terms used.
TRADERS base their decisions on technical analysis and generally sell and buy within the hour, day or week. They read charts, and analyse patterns and movements in the stock market.
I’m mostly into value investing and I won’t be touching on technical analysis and short term trading. Investing isn’t something that one should do on a whim. A lot of research has to be done beforehand. Here are seven basic points to help get us started:
- Firstly: Focus on paying off any high interest debt (e.g. credit card debt)
- Secondly: Ideally, you should have at least 3 to 6 months of savings that are reserved for emergencies.
- Thirdly: Be insured against major dreaded diseases.
If you haven’t settled these three items (especially the first one), settle them before proceeding. If you’ve these three points covered, you’re ready to start!
- Save a portion of your salary to invest.
- Read articles and books on value investing.
- Do a comparison of the fees that various brokerage charge.
- Sign up for a CDP Account. Click here to find out more.
There’s no right or wrong way so to speak. Some of my friends go through their banks to buy ETFs (basket of index stocks) and some go through their financial consultants. If you’re here, I’m guessing that like me, you want to take the independent route. I’ll be expanding more on this huge topic so stay tuned!
Disclaimer: The views represented here are my own and are for educational purposes only. They do not represent any institutions. Please do your own due diligence (dyodd) when investing.