Young investors, time is on your side

Perhaps what the article means is that younger investors normally do not have the same reservations as those who already got burnt, and therefore they are more likely to take bigger risks. Their earning power is also generally better over the long-term, compared to older people.

The Straits Times
www.straitstimes.com
Published on Mar 31, 2013
YOUNG AND SAVVY
Young investors, time is on your side
You can afford to take bigger risks than people with families or who are retiring

By Joyce Teo

Learning to invest wisely is tough. For a young investor, the investing world may seem like a mind-boggling maze, which is why many shy away from it.

But it pays to start investing early as time is your ally. The young can afford to take bigger risks than those with family responsibilities or who are getting closer to retirement.

Another compelling reason to learn about investing right now is the low interest rates being paid on bank deposits. Rates of below 1 per cent are far outstripped by inflation - and mean your money is losing value.

Yet, for many young people, it may seem like too much trouble to think about now. Wait to accumulate enough savings, you may say. But as you earn more, your spending increases, along with your responsibilities.

Taking the first step is the hardest part. Just remember that it will get easier. To get started, here are some things to consider:

Don't invest all your savings

You may be young with nary a care in the world. Nevertheless, you should set aside a fund for emergencies as you never know when you may need it. Take care of your current needs before you invest for the future, and make sure you first have adequate health insurance.

And then, only invest the amount that you can afford to lose, without losing too much sleep over it. This means you have to understand your financial goals, know your investment horizon and how much risk you can take.

"This is because some investments may be illiquid (cannot be sold easily or exchanged for cash), and volatile," says Mr Abel Lim, executive director of personal financial services at UOB.

Don't be hasty or lazy

You hear your aunty or neighbour talking about that hot stock. It will shoot up in value next week for sure, they confidently predict.

It's all very tempting and all too easy to just buy that stock. But stop yourself.

"Don't listen to rumours and hearsay," says Mr Terence Wong, co-head of research at DMG & Partners Securities.

And, says Mr Tan Shen-Lin, vice-president of OCBC Securities: "Don't blindly follow advice without adequate understanding of the mechanics and risks associated with the stock investment."

Always do your own homework. Find out why a stock may rise, for instance. "Take a course in investing. Understand how stocks are valued," says Mr Wong.

Read books on investing and keep up to date with current affairs. To learn more, you can also join young investor programmes. OCBC Securities, for instance, has the Young Investors Pack programme while Phillips Securities has the Young Investors Group programme.

Do not procrastinate

It's time to get started and no amount is too small. If you do not have a lump sum of, say, $5,000 to spare, start small but be prepared to build it up every month.

Investors can start investing with as little as $100 per month. Find out more about the various products out there. Phillip Securities, for instance, has the Share Builders Plan, which allows investors to buy small bundles of shares for a minimum of $100 a month.

Mr Lim says a good start option for younger investors would be an equity-based unit trust with a focus on income.

"Typically, the underlying equities of these funds are more stable, and possess better risk-reward characteristics compared with fixed income products.

"If the dividend payouts of the fund are reinvested, the power of compounding will accelerate the portfolio returns over time."

Do not lose heart

"Young investors should also recognise that stock investments come with the possibility of losses," says Mr Tan.

Understanding this will help them to manage losses and learn from the experience, he adds.

Remember that markets go up and down. "Investment is not about betting on the next big market mover," says Mr Lim.

"It should be a well thought-out process planned together with a qualified financial consultant to determine your financial goals and the level of risk you can stomach."

joyceteo@sph.com.sg

There is another 1 very good reason to start young. U only have that much to lose provided u dun use leverage. I seriously doubt anyone can learn everything they could before they start paying school fees to mr market. I for once, was burnt twice and return all my gains to mr market. When I am in university, the market went into a tailspin with the sept 11 incident, I bought SIA and it doubled within 15 months. Took profits and felt invincible. I also bought a few blue chips after that when the Iraq war and SARS were scaring the Sh** out of people and again make double digit gains on my investments within a year as beginner luck has it, I almost always enter when the market is at the bottom and it rebound shortly after.

I got complacent, even though I dun really know what is a receivables or equity then, I was giving stock tips to my mum- in- law because I felt all my counters were winners. My first stock tip was CAO and I lost all my savings when the company was suspended till the trading losses. I managed to get back 30% of my investment after they managed to restructure and start trading again. I calculate and realized I have return all my Gains to mr market and paid a school fees of 5k to mr market. ( which to me is not a small sum since I am still studying)

I stay away fro. Equity for a long time, hurt by the experience . But I continue to keep track of the market. When Lehman happens, I start investing again with greater knowledge of valuation, I can understand most items in a quarter report then, and wow, within a year , I make good all my loss and is sitting on paper profits of almost 100% for a few counters. I again got pig head again and start to invest heavily on s- chips whose valuations are ridiculously low. To be fair, my losses will be much heavier have I not made good money from gaoxian, hu an ... But what I made from fuxing, an Chun and china fibre tech and give back and more to mr market. And so now, my record is still neutral again.

A close friend once mock me, that I very Bo Liao, invest and then give back the gains, might as well save the efforts. But I felt the 2 school fees I gave to mr market is worth it as I learn really not to be emotionally attached to the high and downs of the market and I believe my knowledge is definitely is more than it was 2-3 years ago. Most importantly, I now understand I can never claim to have master the art of investing and I believe that on and off, I will still need to give school fees to mr market , I just hope in the long run, as I hone my investment strategies, I will pay less unnecessary school fees.

Hope those who start earlier dun start with a ego like me, which is the biggest mistake ...So that they will pay much less to mr market.

thanks for the sharing, i thought your sharing is way more precious than people around me who's always giving me advice that they hear from others - how others always make big money and yet i refuse to listen

i have also paid my fair share of school fees, and i have learnt to control my gambling/punting nature over the years

(31-03-2013, 04:54 PM)Greenrookie Wrote: There is another 1 very good reason to start young. U only have that much to lose provided u dun use leverage. I seriously doubt anyone can learn everything they could before they start paying school fees to mr market. I for once, was burnt twice and return all my gains to mr market. When I am in university, the market went into a tailspin with the sept 11 incident, I bought SIA and it doubled within 15 months. Took profits and felt invincible. I also bought a few blue chips after that when the Iraq war and SARS were scaring the Sh** out of people and again make double digit gains on my investments within a year as beginner luck has it, I almost always enter when the market is at the bottom and it rebound shortly after.

I got complacent, even though I dun really know what is a receivables or equity then, I was giving stock tips to my mum- in- law because I felt all my counters were winners. My first stock tip was CAO and I lost all my savings when the company was suspended till the trading losses. I managed to get back 30% of my investment after they managed to restructure and start trading again. I calculate and realized I have return all my Gains to mr market and paid a school fees of 5k to mr market. ( which to me is not a small sum since I am still studying)

I stay away fro. Equity for a long time, hurt by the experience . But I continue to keep track of the market. When Lehman happens, I start investing again with greater knowledge of valuation, I can understand most items in a quarter report then, and wow, within a year , I make good all my loss and is sitting on paper profits of almost 100% for a few counters. I again got pig head again and start to invest heavily on s- chips whose valuations are ridiculously low. To be fair, my losses will be much heavier have I not made good money from gaoxian, hu an ... But what I made from fuxing, an Chun and china fibre tech and give back and more to mr market. And so now, my record is still neutral again.

A close friend once mock me, that I very Bo Liao, invest and then give back the gains, might as well save the efforts. But I felt the 2 school fees I gave to mr market is worth it as I learn really not to be emotionally attached to the high and downs of the market and I believe my knowledge is definitely is more than it was 2-3 years ago. Most importantly, I now understand I can never claim to have master the art of investing and I believe that on and off, I will still need to give school fees to mr market , I just hope in the long run, as I hone my investment strategies, I will pay less unnecessary school fees.

Hope those who start earlier dun start with a ego like me, which is the biggest mistake ...So that they will pay much less to mr market.

Don't punt on S-chip. Those small cap China stocks listed on SGX.
There is a reason why consistently numerous counters got delisted with huge losses on unsuspecting investors.

(31-03-2013, 04:54 PM)Greenrookie Wrote: There is another 1 very good reason to start young. U only have that much to lose provided u dun use leverage. I seriously doubt anyone can learn everything they could before they start paying school fees to mr market. I for once, was burnt twice and return all my gains to mr market. When I am in university, the market went into a tailspin with the sept 11 incident, I bought SIA and it doubled within 15 months. Took profits and felt invincible. I also bought a few blue chips after that when the Iraq war and SARS were scaring the Sh** out of people and again make double digit gains on my investments within a year as beginner luck has it, I almost always enter when the market is at the bottom and it rebound shortly after.

I got complacent, even though I dun really know what is a receivables or equity then, I was giving stock tips to my mum- in- law because I felt all my counters were winners. My first stock tip was CAO and I lost all my savings when the company was suspended till the trading losses. I managed to get back 30% of my investment after they managed to restructure and start trading again. I calculate and realized I have return all my Gains to mr market and paid a school fees of 5k to mr market. ( which to me is not a small sum since I am still studying)

I stay away fro. Equity for a long time, hurt by the experience . But I continue to keep track of the market. When Lehman happens, I start investing again with greater knowledge of valuation, I can understand most items in a quarter report then, and wow, within a year , I make good all my loss and is sitting on paper profits of almost 100% for a few counters. I again got pig head again and start to invest heavily on s- chips whose valuations are ridiculously low. To be fair, my losses will be much heavier have I not made good money from gaoxian, hu an ... But what I made from fuxing, an Chun and china fibre tech and give back and more to mr market. And so now, my record is still neutral again.

A close friend once mock me, that I very Bo Liao, invest and then give back the gains, might as well save the efforts. But I felt the 2 school fees I gave to mr market is worth it as I learn really not to be emotionally attached to the high and downs of the market and I believe my knowledge is definitely is more than it was 2-3 years ago. Most importantly, I now understand I can never claim to have master the art of investing and I believe that on and off, I will still need to give school fees to mr market , I just hope in the long run, as I hone my investment strategies, I will pay less unnecessary school fees.

Hope those who start earlier dun start with a ego like me, which is the biggest mistake ...So that they will pay much less to mr market.

Perhaps you should change your investing strategy and philosophy. eg entry and exit strategy, certain principals rules like no s-chips, reits ...

My take for the younger folks is simple, don't read 'The intelligent investor ' first
Read 'The richest man in babylon' first.
Plan your life properly, increase your earning power to build your wealth. Don't think of using stocks to earn fast wealth. History always repeats...

(31-03-2013, 07:56 PM)WolfT Wrote:

(31-03-2013, 04:54 PM)Greenrookie Wrote: There is another 1 very good reason to start young. U only have that much to lose provided u dun use leverage. I seriously doubt anyone can learn everything they could before they start paying school fees to mr market. I for once, was burnt twice and return all my gains to mr market. When I am in university, the market went into a tailspin with the sept 11 incident, I bought SIA and it doubled within 15 months. Took profits and felt invincible. I also bought a few blue chips after that when the Iraq war and SARS were scaring the Sh** out of people and again make double digit gains on my investments within a year as beginner luck has it, I almost always enter when the market is at the bottom and it rebound shortly after.

I got complacent, even though I dun really know what is a receivables or equity then, I was giving stock tips to my mum- in- law because I felt all my counters were winners. My first stock tip was CAO and I lost all my savings when the company was suspended till the trading losses. I managed to get back 30% of my investment after they managed to restructure and start trading again. I calculate and realized I have return all my Gains to mr market and paid a school fees of 5k to mr market. ( which to me is not a small sum since I am still studying)

I stay away fro. Equity for a long time, hurt by the experience . But I continue to keep track of the market. When Lehman happens, I start investing again with greater knowledge of valuation, I can understand most items in a quarter report then, and wow, within a year , I make good all my loss and is sitting on paper profits of almost 100% for a few counters. I again got pig head again and start to invest heavily on s- chips whose valuations are ridiculously low. To be fair, my losses will be much heavier have I not made good money from gaoxian, hu an ... But what I made from fuxing, an Chun and china fibre tech and give back and more to mr market. And so now, my record is still neutral again.

A close friend once mock me, that I very Bo Liao, invest and then give back the gains, might as well save the efforts. But I felt the 2 school fees I gave to mr market is worth it as I learn really not to be emotionally attached to the high and downs of the market and I believe my knowledge is definitely is more than it was 2-3 years ago. Most importantly, I now understand I can never claim to have master the art of investing and I believe that on and off, I will still need to give school fees to mr market , I just hope in the long run, as I hone my investment strategies, I will pay less unnecessary school fees.

Hope those who start earlier dun start with a ego like me, which is the biggest mistake ...So that they will pay much less to mr market.

Perhaps you should change your investing strategy and philosophy. eg entry and exit strategy, certain principals rules like no s-chips, reits ...

My take for the younger folks is simple, don't read 'The intelligent investor ' first
Read 'The richest man in babylon' first.
Plan your life properly, increase your earning power to build your wealth. Don't think of using stocks to earn fast wealth. History always repeats...

let me relate my first serious entry into stock investment years ago and served to validate my future purchases. It was an illequid small cap. Because it was illequid, it took be several months to buy a few thousand lots without causing significant price ups.
And because i entered a few thousand lots which would be worth a high six figure sum, I did intensive research on this company. I could not afford to lose, so knowledge was essential part to reduce my risk. I got to know a lot of the management staff in great detail. I realised I began to love this company.
I knew I had to devoid myself of such "affections" if i wanted to become successful.
I did manage to offload all its shares once it became a two bagger, but I must admit that it was painful after liking it for so long. And similarly, it took me several months to offload everything.
I spent some nights thinking what if??? it became a 3 or 4 bagger?
I stuck to my first conviction and exited nonetheless.
I doubled my money within 3years but it was not easy managing the affection part.

1) Read about the biographies of the rich and famous investors
2) Read everything and anything related to the companies which you are keen to invest in.

Remember Every Investment Has risk. This risk can only be reduced but not to zero, by having the necessary knowledge.

(31-03-2013, 07:56 PM)WolfT Wrote: My take for the younger folks is simple, don't read 'The intelligent investor ' first
Read 'The richest man in babylon' first.
Plan your life properly, increase your earning power to build your wealth. Don't think of using stocks to earn fast wealth. History always repeats...

I agree with WolfT on this.
Read the Richest man in Babylon first.

It is a short read and I sincerely believe before learning how to invest, one must learn to practise prudent financial planning. If one can't even save, there will be no capital left for investment.
It is not a "how to" but rather a "why do so through parables" book.

I dont read any books on investment.

The only books I read are annual reports. To me all books are a waste of time. The best materials for my PHD is the daily newspapers and attending AGMs. In fact, I got so much to read that I simply have no time to read books (that may run into hundreds of pages). Moreover, to me books on strategies may not be applicable to individual risk vs return profile. Everyone is different and there is a need to tailor your own strategy.

For me, investments is a big business. You are your own boss and your business is to pick the right and trust worthy businessman or professional management to run the business for you. Sounds simple but its an art that encompasses top-down (economic) approach and bottom-up (stock-pick) approach.

Lastly, I would like to add - there is no perfect time to be in the market since what matter most depends on what you are looking for at that point in time.

these articles are, in a way, good for the youth since they get them on a track of thinking abt finance/themselves/planning.

but the biggest irony is that one ultimately needs to realise that to get out of the rat's race, one needs to excel in the rat's race first.

the highly recommended book can be found here

http://www.ccsales.com/the_richest_man_in_babylon.pdf

enjoy..

(31-03-2013, 09:02 PM)arthur Wrote:

(31-03-2013, 07:56 PM)WolfT Wrote: My take for the younger folks is simple, don't read 'The intelligent investor ' first
Read 'The richest man in babylon' first.
Plan your life properly, increase your earning power to build your wealth. Don't think of using stocks to earn fast wealth. History always repeats...

I agree with WolfT on this.
Read the Richest man in Babylon first.

It is a short read and I sincerely believe before learning how to invest, one must learn to practise prudent financial planning. If one can't even save, there will be no capital left for investment.
It is not a "how to" but rather a "why do so through parables" book.