There is no need to start alone from scratch; learn from the experts by standing on the shoulders of giants.
Investing is not easy. There are no quick rich schemes. If it is easy, everyone is rich. There is no need to study hard and get into university, slog at jobs or start companies.
Everyone invests and trades differently. There are many ways to make money in investing and trading. All great investors have their strategies and principles and they stick to them. There are far too many important nuances in the field.
Trading and investing are all about answering these 6 questions and a good investment strategy should provide good answers to these questions:
- What to buy?
- What price to buy?
- How much to buy?
- What to sell?
- What price to sell?
- How much to sell?
Everyone will have different answers to the above 6 questions even among the great investors. Everyone has their strategies. If we are unsure of our plan or follow others blindly, we can be lost and stressed, especially when the market situation turns different from what we expect (which is usually optimistic with a profitable position). Yes, investing seems easy but it can be confusing.
Self-learning
Books were my first source of investing/trading knowledge. I learned the basics from books. I still read books. There are lots of great books embedded with valuable knowledge and experience. Besides books, there are great investing podcasts, YouTube videos, blogs and experienced investors and traders on social media to learn from
However, from knowledge to profits was a tedious journey for me. The actual investing/trading is situational and the books may not be a good guide to the actual situations. Examples: What should I do? I am having losses with a market crash. The stock I have conviction and a high conviction has been dropping.
Training courses
There are many free and paid courses online and classroom programmes with “hand holding support services” teaching different techniques or propriety stock screens and scanners. It does get easy to be confused when everyone makes claims of their holy grails with very persuasive marketing.
For a start, I took classes. Some were good and have formed a core part of my investing/trading approach. Many were not useful; partly due to differences in investing/strategy approaches.
A cheat sheet to truly jump-start a profitable investment journey: Motley Fool
I have subscribed to several investment advisory services and the Motley Fool has been my favourite. Their investment approach suits me well.
A good way to start is their Stock Advisor. Every month, there are two recommendations (regardless of how the stock market conditions) every month. Subscribers have access to all their recommendations and returns to date from 2002.
David Gardner’s The Greatest Secret of All is a must-read. He also explained the Motley Fool investment methodology well explained in the YouTube video — Motley Fool Stock Advisor: What We’ve Learned After 200 Picks (23 Oct 2018).
Such an investment advisory service provides a good jump-start to the investment process with a list of great companies to evaluate instead of us developing a list from scratch. It shows a world of abundance — there are lots of outstanding companies to choose from. Coming from Singapore, it was especially useful to broaden the usual horizon that may be limited by our specialization, the industries we are working and familiar with, the countries that we have lived and worked in, and the amount of time we have to study and analyze.
Being a Singaporean based in Singapore; many recommended companies are unfamiliar names. Sometimes, the recommended stocks are at their highs with high valuations (high price to earnings and price to sales) which I was not accustomed to. They do have lots of updates and educational materials on the stocks recommended. Motley Fool Live is a very good source to learn about investing and investing mindset. Tom Gardner and all other Motley Fool analysts will keep emphasising a holding period of at least 5 years with at least 25 stocks preferred; they hardly sell and stocks do drop; not all are winners.
How did I start investing using the Motley Fool service?
When I subscribed for the first few years, I was not sure how to use the service. Some stocks rallied strongly and some plunged. I was feeling lost with many of the unfamiliar names recommended.
Start with re-recommendation stocks. I first started to invest whenever they re-recommended stocks. I concluded that whenever they re-recommended stocks (usually at a higher price), there was still a very good win-loss ratio and a high probability of good returns. Yes, they did well and this was how I started.
Start small. I developed my own “rules” to start with: start small to learn and get comfortable rather than going for profits. I start with each position with just 1% or less of the portfolio. For those recommended for the first time, I would consider investing $x. For those that I am not so convinced or unfamiliar with, I may have a lower allocation (say, $0.7x) or skip. For those stocks whom they recommend for the second time or more, I would invest with a high allocation. For some who may drop beyond a certain percentage or stagnate and I am not comfortable thereafter, I would sell to redeploy capital for better stocks. I would also use their recommended stocks to trade when opportunities arise.
Scale-up. I learn a lot from many Motley Fool analysts through their Motley Fool Live, Motley Fool Money podcast and from their YouTube channels and Twitter. Along with what I learn from others, my investing approach evolves and develops my investing strategies which is very Motley Fool at the core.
Do watch Motley Fool Live. Motley Fool Live, started in early 2020, has been a great financial education channel. It has helped me to understand stock analysis further with their deep dives, investing process, and investing mindset. I get to know Tom and David Gardner, and many of their great analysts better. They also invited CEOs and top officers of their recommended stocks as well as well-known fund managers and analysts for interviews. They help to deepen our understanding of investing strategies, the companies, how they analyse, and how we can manage our emotions.
After I was convinced of their methodology, I subscribed to some of their premium services where they use their funds to invest. It gave a good reference to how an investment portfolio can be managed. I find that Stock Advisor and Rule Breakers are good enough.
Take responsibility. Have a growth mindset.
The investing advisory service is NOT the holy grail and/or investing strategy but they are meant to be a good reference. We must have the conviction to buy and hold as well as to allocate the appropriate allocation. Blind faith will serve us badly when the stocks fall.
Just like anything in life if we want to succeed, we have to take responsibility. It allows us to overcome challenges and failures rather than whine and complain, and to find reasons to succeed than giving excuses and finding faults.
My learning journey in investing
Phase 1: Looking for holy grails.
I found a great teacher, my interest in growth stocks and charts. Motley Fool suited me well. I started investing in some of their recommendations with my understanding of investing then.
Phase 2: Learning and following the masters
I learned more about investing with Motley Fool and others, it created a spark. I began to learn about many others mentioned by the Motley Fool (such as Gene Munster, Aswath Damodaran, and William Green) and those mentioning many others (such as Mohnish Pabrai, and Guy Spier).
I began to be able to evaluate their recommendations better and select those that meet my criteria. I began to develop my investing approaches.
Phase 3: Learning, following and being on my own
I continue to learn about investing and improve on my investing approaches. I can do the primary research and pick some stocks on my own. I continue my learning with Motley Fool and their recommendations.
Learning never stops. It is a process of learning, unlearning and relearning. It is also a process of knowing myself better and keep improving my investing approaches.
Investing is possible; efforts are required. Compounding our learning, compound our returns.
My investment methodology
My investing strategy: Buy good, buy low, keep validating and hold long to growing companies to enjoy the wonders of compounding
Related post: Multi-baggers with growth companies (I do update the post as I refine my approach)
A very important component of my strategy is conviction. My allocation and holding period correlates with my conviction. With conviction, add winners and cut losers. With conviction, hold the winners as long as the investing thesis holds.
What makes a great trader is someone whose idea horizon matches their trade time horizon.
Paul Tudor Jones
I’ve learned many things from him [George Soros], but perhaps the most significant is that it’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.
Soros has taught me that when you have tremendous conviction on a trade, you have to go for the jugular. It takes courage to be a pig. It takes courage to ride a profit with huge leverage.
Stanley Druckenmiller
It has evolved with Motley Fool’s investing philosophy and principles as the cornerstone:
- Investing in high-quality companies is my most important criterion for investment and trading. Quality and durability of leadership, management team, and business fundamentals are very important factors in the companies invested. They will leverage, overcome, and pivot from changing economic, political, and competitive environments to emerge stronger. Over time, its growing revenue, profits, cash flows, good use of its resources, and sustaining, and unassimilable competitive advantages are a validation of its superior business quality. These are the winners that should hold on tight and add where opportunities arise to realize the full potential of these outstanding companies.
- Valuation does matter. It is important to buy high-quality companies at attractive valuations.
- Triming the weeds and watering the flowers is analogous to cutting the losers and holding tight to the winners.
- Stock investment is asymmetrical. The most we lost from our stocks is 100% but our gains can be multiples of 100%. You just have to buy and hold tight, be patient. A few multi-baggers will easily erase a few losing stocks.
- Investing is not binary: It is not about whether to buy or not to buy; rather it can be how much to buy or not to buy. A stock represents a small percentage of the portfolio. I focus mainly on growth stocks. The allocation may increase as I add when I become more convinced and with the increasing return from its stock appreciation.
With the list of recommended stocks from the Motley Fool, I can use it with technical analysis which I am good at.
Investment advisory services: What is good?
A good investment course or investment advisory should fulfil these conditions:
- Proven track records It shows a track record of making money over a long period (without leverage). It must be authentic with integrity.
- Proven investment methodology Their stock selection and its volatility, how are they selected, and the holding period must be something you are comfortable with.
What is suitable; knowing yourself
First, we have to know our preferred approach to earning money. The exhibit below is a simplified approach to categorize our approach(es): what type of stocks and preferred holding period. Other factors would be the types of industry, and country of origin of the companies to focus on.
Different people have different and confusing definitions of trading and investments. In short, it is about how long you hold what you have bought. Usually, investing is associated with longer holding periods (months to years) and trading tends to be in days and weeks.
We need to determine our tolerance to risks, have time and interest to trade and analyze, need for money, and investment objectives.
Invest in learning
Set aside some money to invest in ourselves just as we spend so many years and money on education to prepare us for our careers. Why let losses be our only education? Why make the investing journey so tough? Invest, learn, and pivot.
Freebies
There are lots of free materials on YouTube, Twitter, Facebook, and blogs where many share their ideas and analysis freely. However, we must be able to distinguish what is good to build upon our investing approach and discard what is not good.
Illusional holy grail
Like many, I started my investment journey in search of the holy grail. However, I realize everyone is different, and has their thinking and investment approach. There are many ways to make money. To keep searching can end up being confused: Who is right?
Related post: We are all different so will be our investments.
Rather, knowing your preference and establishing a profitable approach to investment and trading is important. Having a trading journal becomes a pivotal part of my investing/trading journey. It provides feedback on what I invest/trade where I analyze the results, reflect, and improve.
Refer to my article: One thing I do that transform my investment/trading journey
Do not keep jumping from one method to another. Instead, learn what is suitable and comfortable and build up. Keep learning to improve and pivot.
Best of luck!
