If it were easy to get rich, most of us would be rich after working 5-10 years.
I have a friend who actually came from nothing, and yet got rich. He is just 40 this year, have a wife and 3 kids, and does not have to work another day. The secret to this success is that he is an incredible investor who has the foresight and wisdom to start investing as soon as he started working. And still, it took him 15 years.
I can tell you that he is not teaching any ‘proven’ way to invest. In fact, he is not teaching anything at all. We Singaporeans need to wake up to the fact that very few successful people go around teaching courses! They have enough money as it is, and they are living the best lives they can, doing the things they enjoy. They’re not teaching ‘proven success’ investment courses! Think about it – if you have found your way to success, would you upload your face to Youtube, babble on about investing, and risk your relatives begging you for money tomorrow?
Those people who take your money for courses are probably using your money as their stock market money! They get richer, not you.
What you should really know about successful investing
The key to profitable investing is through picking the right funds or stocks or bonds, and committing to invest consistently over the next 10-15 years or more. Yes, the secret ingredient is time! With time comes the power of compounding, which leads to actual growth.
Lets see what happens if you manage to get 5% growth each year over 5 years, committing to a $6000/year investment.
Year 1 : $6000
Year 2: $6000 + $6300 (Y1 + 5%) = $12300
Year 3: $6000 + $12,915 = $18915
Year 4: $6000 + $19,860= $25,860
Year 5: $6000 + $26, 853 = $32,853
That’s an extra $2853 from a $30,000 capital, or 9.5%! That’s the power of compounding. And this is just 5 years!
Don’t just buy what’s hot
(1) In the 1940s – 1950s, airline stocks were thought to be hot. In 1970, despite new highs in technology as well as people travelling, airline stockholders lost $200 million (USD) that year alone. In the long run, airline stockholders lost money.
(2) Then came the fever of internet stocks which you came to know later as the ‘Dot Com Crash’. Some of these shareholders went bankrupt.
(3) Just a few years back, the crypto market imploded after a few high profile crashes. The owners of these coins are now criminals hated worldwide for wasting people’s lifesavings!
Things don’t become profitable just because people think they’re hot. Especially when the general public has become aware of how hot they are. Confidence alone does not make for good investment.
How to invest safely then?
This part is not our advice actually. It should be credited to Benjamin Graham, the mentor to Warren Buffett.
(1) Each company selected should be large and conservatively financed.
(2) Do not buy when Price-to-earnings ratio (PE ratio) is over 25. You can find this ratio easily on most trading apps and online.
(3) Dollar cost averaging. This means to buy consistently the same stocks over a time period, to even out the ups and downs of stock prices.
If this part is too difficult, we advise you to find a competent financial advisor. Fill in this form, and we will assign you an advisor registered with MAS-approved institutes.
