[6 min read]
Written by Sherwin Chan, edited by Jackie Tan.
How I got lucky with boredom
Before you read on, what I have written below is more on how I got started with stock investing and some snippets of suggestions inserted based on my personal experience. It won’t be a long read but neither will it be short. Hopefully, I can provide prospective investors with some peace of mind of what to expect. I’ll follow this article up with another one that will help you understand the different types of financial opportunities and how some will not suit you.
I started investing due to boredom.
Now hear me out, it is not that I do not have the awareness that early financial planning would be beneficial in the future, but rather the reason why I first picked up a book related to investments was merely due to boredom. I started investing when I was in the army doing my national service; I was a clerk and was fortunate enough to stay out (go back home daily). Since my daily duties were not physically exhausting, by the end of the day, I had sufficient energy to engage in my hobbies – binge watching my favourite shows.
As time grew on, I got bored of the routine where I just “consume YouTube videos like there is no tomorrow” lifestyle and decided to read more educational non-fiction books instead. This led me to non-fiction books that eventually brought me to topics like economics and investments. I decided to pick up the book on “Stock Investments for Dummies” (I was a dummy then so I might as well start from the book designed for me) and was pretty apprehensive about it at first but still gave it a shot.
Me giving a shot at the book led me to spend the next four months intensely devouring its contents. I studied my book as if I was taking A Levels and learned lots of stuff from it. Now, I’m not promoting the book but merely telling you how I felt when I first dabbled in a topic that I did not know. I was like a caveman seeing the fire for the first time; everything was new and too exciting for me to pass. I’m sure that’ll be the case for you newcomers as well.
Suggestion #1: Your first book should give you the general idea of where to begin
While we are on this note about what books to start with, I suggest newcomers pick up a book that covers the different forms of investments. I started with “Stock Investing for Dummies” (more specialised to stocks) partly because I already knew I wanted to try stocks first before others, but also because I couldn’t find the “Investment for Dummies”, the more general one, and was lazy to go find it on other bookstores. For beginners, always know what choices are available to you first before picking one and going to learn more deeply about it. This means knowing what a bond is, what are ETFs, what are REITs and all the other possible investment products available out there for you. The more you know about each type, the better you can invest based on your needs. Ultimately, if you don’t know anything about investments, it’s best to start with the definition, scope and depth of it first! I will be covering more the different forms of investments in the follow-up article that will be so stay tuned!
Creating my first account
Apologies for the slight digression above but that’s how I am going to place my suggestions. They are all just snippets of useful information, that will be inserted wherever appropriate. Going back to my story…
I eventually got into the process of creating my first brokerage account with DBS Vickers Securities, and it was at this point that I felt that I should have done more. I was naïve then and just assumed that a good brand name for a company was all there is to a brokerage account; I’m not saying that my experience DBS Vickers is terrible, in fact, my experience so far with them has been positive. All I am saying is I did not do the necessary research properly before choosing my brokerage firm. I was lucky that DBS is an excellent firm with a strong reputation, but for other first-timers into the investment scene, I shall create a short to-research list about the brokerage account in the follow-up article (otherwise we would never end this article). For now, let me just share with you my experience when I created mine.
When I first wanted to create an account, I was not eligible for a full trading account (above 21 years old) and signed up under their young investor scheme (18-20 years old) instead. They explained to me what the benefits of having their trading account was and gave me a short risk-profile test and sizing my investment knowledge. Which basically went like this…
Well, the picture might have slightly simplified things but what I can say is that they do all the assess you in a natural flow of conversation that helps keep young, apprehensive investors like me at ease. They also informed me that the brokerage account is different from your usual bank account and how to top up money into it to start trading. They also explained the different avenues which they can help me improve my knowledge of investments. I eventually got my brokerage account and SGX CDP account (requirement if you wish to trade in SGX) created at one go in 15 minutes. With this, I finally had a powerful platform to start my stock picking.
Now doing all the above will only give you the platform to start investing. The other, more difficult portion is knowing what to buy. What I’ve learned over the past couple of years is the importance keeping up to date with industry, economic, political trends and random information off the news. During the whole course of the journey, it is essential that you know everything and anything about the stock you want to buy or already have. Only when you know the latest trends, predictions in the future can you be “in-the-know” about what stock to buy, whether the industry is expanding, threats to your company etc.
Suggestion 2: Start reading early
You don’t have to have an investment account to start knowing what is happening around the world. A lot of news event around the world occurs in a sequence of events; they don’t happen singularly. For instance, predictions you hear about quantum computing doesn’t just come from the wild imagination of a tech geek, these futurists often have seen information and news from around the world that gradually roll out. If you don’t expose yourself to this small but gradual steady stream of information, you will never be able to analyse trends yourself and must always rely on others. What I’m saying is if you’re the kind of person that doesn’t have the habit of reading news regularly, it’s difficult to follow what is happening in the world and that puts you at a considerable disadvantage over other investors in the market. You’ll always be behind the curve. So, start early!
Choosing the first stock
The first stock I picked was a company listed in SGX. It was G92: China Aviation Oil and getting to this stage where I decided my first stock took me two weeks of research. How I went about choosing my first stock was looking at things from a macro to a micro perspective. Firstly, I analysed the country and the sector that I thought had growth potential. In this case, I chose China’s booming aviation sector. After which, I decided on the industry within the sector, and this was the aviation fuel supplier business which China Aviation Oil was engaged in. I mean, planes need fuel to fly so being in the aviation fuel business would suggest that this industry would be part of the booming sector. After choosing the industry, I narrowed down to the different companies and set a price target to buy & sell. Once I felt the price was sufficiently low and had excellent earnings potential, I bought the stock.
How I chose my first stock may seem easy but trust me, it was tough. Firstly, there are many booming industries and stocks with high potential and narrowing it down to one was hard. It is always best to have a few shares in mind eventually and pick one with the most earnings potential based on the current and future market price. There is a reason why I took two weeks to do this because there were many considerations and it is okay to feel lost during all the research. After all, the companies and industries on the list are probably those that you never heard of so take your time to understand as much as you can!
Suggestion 3: Don’t limit yourself
You may have heard from your parents, investment gurus that blue-chip stocks (large established firms) are stable and provide excellent earnings. While it is true they are stable; they may not offer the BEST gains. Don’t just limit yourself to a particular type of stocks, countries, industries etc. Always keep an open mind and do your stock screening well. Always remember to do your research correctly and BELIEVE IN YOURSELF! It’s better to make mistakes when your starting capital is small than make an error in the future when your wealth is more substantial.
Suggestion 4: Test whether your pick survives the different ways of picking a stock
My method of going from macro to micro can be a way which you choose shares. However, there are many other strategies which people employ. Pick an approach first and once you have a few companies narrowed down, test them with different strategies and see whether they survive the litmus test and is still worthy of a purchase. The stock doesn’t have to endure all approaches but the more the better. Also, don’t pick a plan that does not align with your goals and needs.
What’s next after you purchase your first stock?
Be patient. That’s the number one key. I know it is tempting to sell your stock when you see a sizable increase in its value OR a sudden decrease in value but always stick to your price objective. In the meantime, it is essential to check the value of the stock at regular intervals to monitor for sudden price changes. Sudden price changes might mean there is new information that may affect your stocks current and future value. During all these, never stop keeping yourself up to date with the latest trends and keep an eye out for the next opportunity. New information in the market can change your price objective and remember to re-evaluate the present and future value of the stock regularly.
My journey from picking up the first investment book to purchasing my first share took me a total of 4 months. It may seem long but in hindsight, the moments I had when I felt lost was invaluable because it taught me many things about how to do and not-to-do things. Trying to establish a sense of direction was arduous and painful, but I’m glad to have gone through this journey. I am now more financially independent and able to help my fellow peers. I am continually learning and from my experience, the critical thing I can share is TRUST YOURSELF.
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