Being a young noob who has never heard of investing until in my mid-20s, I started to research on how to multiply my money. The investible money didn’t amount to much then, but I was on fire and wanted to see how I could maximize my money and retire early be the world’s first trillionaire!!!
Sounds familiar right? I’m pretty sure we’ve all somewhat been through that phase before as well.
Then we’d discover that investing generally falls into two camps: trading, and investing.
The traders would be those guys who stare at candlestick charts all day, squinting (and sometimes crossing) their eyes to find patterns and shapes like wedges, cup and handle, head and shoulders, nivea, gatsby, etc.
Then on the other end of the spectrum were the investors, those number nerds who believe that true value is found somewhere between the lines in the financial statements and whether or not the CEOs are paid according to the numbers of hours he plays golf or by actually being productive.
Both camps have made obscenely loads of money, occasionally slinging mud at the other, but the most important thing to us was this: we had to choose who we wanted to be.
I, for that matter, chose the investing route. Being someone who’s been in various appointments in different non-profits before, I really appreciated the fact that there was a investment model that favoured things like good and capable management, as these were intangibles that couldn’t be reflected in charts. Furthermore, as I read up more and got a better sensing on human psychology (note: do check out the Reading List section to see what I’m reading), I’ve found it’s a lot easier to predict human behaviour than the somewhat irrational movement of the stock market.
And so all went well and dandy, and I’ve bought and sold countless amount of shares from doing due diligence and burying my face in annual reports, thankfully making more money than losing over the years.
But sometimes I’d get lazy, and start to make nibbles based on gut feel and what some keyboard warriors were saying in local investment forums. And guess what? Sometimes these made money too, and for a couple of counters, even made more money than the ones bought from using hard analytical work.
And then we’d also go through to the next phase, thinking: how does the other world look like? What happened if I actually went over to the dark side? What happened if I started to trade?
Of course, this goes counter to what we consciously chose to become in the first place, so that made us feel uneasy.
And so what I started to do (and I still do) was to incorporate both technical analysis and fundamental analysis into my approach to investing. I’d find good companies via fundamental analysis, and finding a good entry price using the technicals. Is it working out?
Yeah, it has for me so far.
But it didn’t totally get rid of the itch.
So I just told myself to take a chill pill and to just take the plunge. Thus I set aside a wee small pot of money, something which I could afford to lose, and just have a go at things I usually wouldn’t do with my main pot of money. Just to see how things are like over there.
Just to try.
Of course, it was a whole new world for me. I’d make some money. I’d lose some money. I’d feel totally lost and insecure most of the time. But that’s okay. It was just to clear that itch.
My main investment approach is still 100% value investing, and I wouldn’t have it any other way. My risk appetite is to go easy and slow, and I’m already past that phase in life where I crave a mental high from a single-digit bps increase, more so than from the actual profit I’ve just attained. I also learn that I get a bigger kick from crunching numbers and playing with excel spreadsheets discovering undervalued and under-appreciated companies. As a giver (quoting from Adam Grant’s book), I feel happy to ‘help’ by investing in them.
But I still keep a small pot tucked aside, just in case.
Will it work for you too?
Well, you go try and tell me.