Sunday, 4 January 2015

My investing philosophy revisited

Happy New Year 2015.

I thought it would be nice to recall how my investing philosophy comes about.

Being a non-financial chap,  it was difficult to understand investing in my early years.   Tried as I did, I found the acquisition of this knowledge to be challenging.  I started with various books and often find them useful but still lacking.  Many were written for financial planning, understanding businesses, economics and accounts.

My early years in investing were much guided by my friend.  A kind chap indeed who is obviously very knowledgeable was willing to share his recommendations and I bought his recommendations.  That was in 1993 and the shares that he recommended remain in my portfolio till today and have done extremely well, despite the volatility and turmoil associated with the Asian Financial Crisis, the Sars crisis and the 2008/2009 US subprime global financial crisis.  Yes, buy and hold for the long term works beautifully for selected stocks.

Of course, my pursuit of financial and investing knowledge continues till today.  Post 2000, value investing became fashionable again.  Books on value investing started to appear in our local bookshops.  The internet was a great help.  One could read numerous articles on value investing, on the gurus the like of Benjamin Graham, Warren Buffett, Philip Fisher, Peter Lynch, John Templeton  and many others.  Synopsis and articles on the classical books were readily available in the internet allowing one to continue to build up this financial and investing knowledge.   The classic must read books would include Intelligent Investor and Security Analysis by Benjamin Graham, Common Stocks and Uncommon Profits by Philip Fisher, One Up on Wall Street by Peter Lynch, Five Rules for Successful Investing by Pat Dorsey and many others.   All these readings, carefully and critically sorted, allow one to formulate a philosophy to suit your own investing objectives, your own investing risk tolerance, investing time horizon and  your investing financial capacity.

Guided by a sound philosophy, how can I put this into practice?  How can I approach investing without taking too much effort or time, and yet be productive in my investing?  Here lies the next challenge.  Again, being not so good in computing, I had to learn simple computing and microsoft excel to aid my analysis of stocks.  I searched for various programs that are available online and adopted these to my own self designed program.  Over time, through a bit of effort, some semblance of a simple program to guide and help my investing is realised.  This helps to cut a lot of laborious analysis of past historical data and allow one to see the big picture of the company that you wish to analyse for your investing.

Yes, essentially, you should choose your own investing philosophy.  I have recently met up with my good friend.  He has invested into index funds in his country.  That is intelligent investing too, as I realised he did not have the time nor the initiative to analyse stocks on his own.  He wished to be relatively free from doing all these for his investing; more importantly he wouldn't know how.  Yet, he was wise enough to invest in an index linked fund, knowing over the long term, his investment will be safe and with promise of a reasonable return after taking into consideration the low cost.  That is intelligent investing of the defensive type according to Benjamin Graham.

For those who are more enterprising, well, investing can be fun and exciting.  Embarking on my journey in investing has shown this to be true.  It is easy to get market return, but trying to better the market return can be more challenging than it seems.  But sometimes you are "lucky".   But luck should really not be a big element in your investing should you choose to invest on your own in an enterprising manner.  Learning from Benjamin Graham's Intelligent Investor will put you on the right track,  allowing you to formulate a sound investing policy for the long term.

Best wishes and may your investing be productive always.


Anonymous said...

Are there any index linked funds in Malaysia?
Do they split the portfolio into value/growth stocks not unlike the traditional vanguard funds /tsm Russell 3000 and Wiltshire 5000?
In addition are there any index link funds for small caps?


ronnie said...

Dear Sir,

Could you please share with us and the equities you bought in 1993 that you still own to this day?

investbullbear said...