I am on business trip now in Kuala Lumpur. Good to write my first blog while overseas. I had already blogged about investment in stocks and specific stocks. Then there will be question:
“How do I start investing if I am a beginner?”
I am not an expert, but I will share my experience how I started and learn along the way.
Read a Book
Before you start investing, read a book that introduces basics
of stock investments. Good references are from “Dummies book series” or more relevant to
Singapore market, you can refer to “Handbook for Stock Investors – Goh KhengChuan”
of stock investments. Good references are from “Dummies book series” or more relevant to
Singapore market, you can refer to “Handbook for Stock Investors – Goh KhengChuan”
Internet Resources
Internet is the perfect way to get information free.
However while information is abundant, it is often in bits and pieces here and
there. A good website is “Investopedia”. From there, you can read about
Fundamental and Technical Analysis which are the essences of Investment.
Internet is the perfect way to get information free.
However while information is abundant, it is often in bits and pieces here and
there. A good website is “Investopedia”. From there, you can read about
Fundamental and Technical Analysis which are the essences of Investment.
Of course, it may be difficult to digest all the info. Have your own investment handbook and write notes to help you remember better. Once you become more experience, you will start picking up the key points that are more relevant for the analysis of the company’s financial report.
Attend Courses
Reading allow partial understanding for most people.
Attending courses further reinforce your understanding. For a start, you can
attend beginner courses organize by “SGX Academy” at low cost of S$35. Some are
even FOC.
Attending courses further reinforce your understanding. For a start, you can
attend beginner courses organize by “SGX Academy” at low cost of S$35. Some are
even FOC.
Inspirations
Get inspirations from famous people. Warren Buffett, the
most successful investor in the 20th century is probably a must
know. Other famous names are Benjamin Graham, George Soros, Peter Lynch, and
our very own Singaporean Peter Lim etc. Google and youtube them. Understand
their investment philosophy. Read about their biographies to make your investment learning more interesting rather than just facts and figures from reports.
most successful investor in the 20th century is probably a must
know. Other famous names are Benjamin Graham, George Soros, Peter Lynch, and
our very own Singaporean Peter Lim etc. Google and youtube them. Understand
their investment philosophy. Read about their biographies to make your investment learning more interesting rather than just facts and figures from reports.
Open a Trading Account
Before you trade, you require a trading account. You
can register from institutions like, Lim and Tan, Philip Poems, DBS Vickers,
UOB KayHian, AmFraser etc. If you want to invest in Blue Chips but have insufficient
cash, you can also open an OCBC blue chips account where you can trade in odd
lots, in a regular basis.
can register from institutions like, Lim and Tan, Philip Poems, DBS Vickers,
UOB KayHian, AmFraser etc. If you want to invest in Blue Chips but have insufficient
cash, you can also open an OCBC blue chips account where you can trade in odd
lots, in a regular basis.
Picking Stocks to Analyse
Start with stocks near or associated to your daily
lives. Example,
lives. Example,
- Banks
(DBS, UOB, OCBC etc) - Property
developers (Capitaland, City Developments, Keppel Land, UOL, Ho Bee Land etc) - Shopping
malls (CapitaMalls Asia, Fraser Centrepoint Reits, Suntec Reits etc) - Offices
and Industrial Real Estates (Mapletree Logistic/Commercial Trust, Ascendas
Reits etc) - Food
& Beverage (Super group, Breadtalk, Thai Bev, Yeo Hiap Seng, Auric Pacific etc) - Medical
(Raffles Medical, Q&M Dental,IHH Healthcare etc) - Transport
(Comfort Delgro, SMRT etc) - Newspapers
& Post (SPH, Singpost etc) - Utilities
(Sembcorp Industries etc) - Teleco
(Singtel, Starhub, M1 etc) - Technology
(ST Engineering, Venture Corp etc)
Or even better, pick stocks within your work industry. For example I worked in the Oil and Gas industry, hence major percentage of my portfolio falls in this category. It can be construction, shipping or banking for you.
The stocks listed are not my recommendations, just
examples. Picking stocks associated with your life and work makes analyzing stocks more
interesting.
examples. Picking stocks associated with your life and work makes analyzing stocks more
interesting.
Analysing Stocks
Knowing the business model and the industry dynamics of the stocks are extremely important. How the company earns its money and what are its associated costs? Who is the management? Strengths & Weaknesses? Competitions? Sustainable?
Growth opportunities? Risk?
Growth opportunities? Risk?
“Never invest in a business you can’t understand” – Warren Buffett
Fundamental Analysis
Analyze the annual reports and financial statements using FA technique. Some very
basic questions to ask as follows:
basic questions to ask as follows:
- Income
Statement: Is revenue and earnings increasing over years? Is expenses
increase/decrease proportional to revenue changes? Is it sustainable earnings
increased? - Balance
Sheet: What is the Net Asset Value or Book Value of the company Vs the price? Cash
> liabilities? What is the Debt profile? - Cash
Flow statements. Is operating cash positive? Is operating cash greater than
profits
Then you may hear about intrinsic value of a company and margin of safety (mos). These terms are popularize by Benjamin Graham and his follower Warren Buffett. Each investor has a different way of calculating intrinsic value – real value, which may or may not be correct, and it is notoriously difficult to predict a company’s earnings. Margin of safety provides a cushion against errors in calculation. Typically for Margin of Safety, the potential upside must be at least twice the potential downside of the stock price. But there is no hard and fast rules.
Technical analysis
You can use TA to find out when is
a good time to buy / sell by studying the trends of charts. The trends of these
charts are also representation of behaviors of buyers and sellers of a
stock. I am definitely a beginner in TA, but you must at least know what is candlesticks, relative strength index, moving averages etc.
a good time to buy / sell by studying the trends of charts. The trends of these
charts are also representation of behaviors of buyers and sellers of a
stock. I am definitely a beginner in TA, but you must at least know what is candlesticks, relative strength index, moving averages etc.
This technique require you to look at the “big picture” and then sub-divide them. E.g. is the financial market as a whole doing well? Which countries or market is doing well? Which industries within the market (construction or banking or oil and gas etc) is doing well? The rationale states that in general if the market or sector do well, the associated companies within it must also do well.
Proper allocation is important so that you have a balance portfolio of cash, equities and income, and do not put all your eggs in one basket! Diversify and magic number is minimum 30 stocks. However for a small capital a minimum 10 stocks is good enough.
Start Trading
You must have a plan for investment. For example what
are your desired returns of investment per year, over a period of time? Ask
yourself, which are the stocks you invest for long term and which are the
stocks that are cyclical for few years of investment?
are your desired returns of investment per year, over a period of time? Ask
yourself, which are the stocks you invest for long term and which are the
stocks that are cyclical for few years of investment?
Start investing small with the money set aside that you do not need and
within your means. If you have a savings of 50k and require it for wedding this
year end, please do not invest all 50k and expect your 50k will become 60k by
this year end so that you have more money for a wedding that is more grand. Stock market can be really volatile over short term from global
news such as US policy, Political and Environmental situations etc. Having said
that, companies with good and strong fundamentals can weather the crisis and
achieve sustainable growth of profits over a longer period of time.
within your means. If you have a savings of 50k and require it for wedding this
year end, please do not invest all 50k and expect your 50k will become 60k by
this year end so that you have more money for a wedding that is more grand. Stock market can be really volatile over short term from global
news such as US policy, Political and Environmental situations etc. Having said
that, companies with good and strong fundamentals can weather the crisis and
achieve sustainable growth of profits over a longer period of time.
Apply what you learn from books and courses. Keep
refreshing your knowledge by referring back to notes you made and apply them in
analyzing stocks.
refreshing your knowledge by referring back to notes you made and apply them in
analyzing stocks.
Sleep Peacefully
Aside from the knowledge of analyzing a stock, you
must have the right frame of mind when investing. After careful researching
using all the knowledge you possess, and owning a new stock, you must have
belief in the stocks you own. Do not get too emotionally affected by the
price movements of stock. You must be able to sleep well even with upheaval
price movements.
must have the right frame of mind when investing. After careful researching
using all the knowledge you possess, and owning a new stock, you must have
belief in the stocks you own. Do not get too emotionally affected by the
price movements of stock. You must be able to sleep well even with upheaval
price movements.
Be Patient
Be patient and give your stocks time to grow. Good
companies are not built in one day. Good return takes time.
companies are not built in one day. Good return takes time.
“Our favorite holding period is forever!” – Warren Buffett
Enjoy
Last but not least, you must enjoy the process of
investing and not just for the sake of earning money. Reading annual reports is like reading a story book about a company. When your stocks grow according to your plan over time, you feels good. Investment is a hobby to me.
investing and not just for the sake of earning money. Reading annual reports is like reading a story book about a company. When your stocks grow according to your plan over time, you feels good. Investment is a hobby to me.
“Without passion, you don’t have energy. Without energy, you have nothing”
– Warren Buffett
– Warren Buffett
Wear the “I love Investment Tie” today!
