Recently, I sent out an email to share an article on purposeful investing, where I intend to advocate all to invest with a purpose. Soon after, I was replied with an inspiring email from Rama, a fellow reader of mine and it is as follows:
Here is the thing. What is the thing that you are focusing on when you read this email? Is it on the stocks Rama bought in the past, the amount he invested, and how much he gained from them during the period?
Well, to me, as a financial educator, I discover the gems in the email lie in what I had highlighted as shown above. They reveal key traits of how most successful investors built their wealth via investing. Here, in this article, I’ll expound on his email and share how you could attain investment success by following the main pointers above:
Habit 1: Save a Portion of Your Income
Look. If you don’t set aside a portion of money from your income regularly, you wouldn’t have the capital to invest. You have to be intentional about it because otherwise, it wouldn’t work. But, saving is just one half of the equation and this brings us to our next point:
Habit 2: Invest in Stocks
Heard of this phrase, ‘Savers are losers’?
Well, as provocative as it sounds, there is an element of truth in it because cash itself is a fiat currency where its purchasing power will fall over time. Therefore, it is wise to convert a portion of your money saved into vehicles that could hold onto their value or purchasing power or produce income over time. They would include mostly, businesses, real estate and stocks (another form of businesses).
In the context of Rama’s email, let’s stick to stocks. To him, he found that stocks can yield much better returns on holding onto cash itself. It would be true if the stocks he bought are great businesses that expanded their activities and hence, delivered consistent growth in sales, profits, cash flows, and dividend payouts.
Otherwise, it would not hold true. That’s why we move onto:
Habit 3: Research before Investing
Rama mentioned, ‘I read and find out the value of each stock I pick.’
As I read this, I realised how many people do not do research or homework first before buying into stocks. That is tantamount to gambling for they do not know what they are getting themselves into, which to me is the #1 common recipe of how people lose money in the stock market and as well as the property market.
But that is not the case for Rama. From him, he reads to find out as much as he possibly can about the stocks he picks before investing into them. The key word here is before. How often do people study about their stocks or properties only after they have bought them?
But, here’s a question, ‘If researching before investing is such a good trait, then, why don’t most people do it?’
Habit 4: Cautious is Better than ‘Smart’
Rama commented that he wasn’t a smart person but a very cautious one.
To me, I think he is humble as being very cautious in investing is being smart for a big part of successful investing lies not in making profits but limiting your risk.
As I read his email, I recalled a Chinese proverb that I’d learnt in primary school where its full saying is,
I tend to remember only the second half of the proverb that describes how a vessel or a ship can be navigated safely for 10,000+ years if its Captain is cautious or conservative.
Think about it.
Rama bought Ipoh Garden, his first stock in 1981 and had kept it for 20 years till 2001. His investment portfolio has lasted and remained sustainable for the long term as a result of him being very cautious about investing. This is very much in contrast to most people who think that they need to be aggressive or be a ‘high risk taker’ or be ‘very smart’ when investing in stocks.
Do you think people who trade or gamble or speculate stocks in the market can build a portfolio that can last for 20+ years?
Personally, I’m not sure if Rama was Chinese-schooled. But nevertheless, he is a classic practitioner of the Chinese proverb above as he has been a good captain that had navigated his portfolio for decades and had weathered through storms such as the Black Monday in 1987, the Asian Financial Crisis in 1997 and as well as the Global Financial Crisis in 2008.
Habit 5: Continuously Learning
To many people, investing is simply just an act of buying ‘stuff’ with the hope of making money.
But not Rama. To him, investing is a lifestyle which involves continuous learning and this is evident for he gained knowledge and met some prominent people in Annual General Meetings (AGMs) of his stocks. During this period, I’m sure that Rama had picked up some fresh ideas along the way which can be used to grow or enhance the returns on his investments.
This is crucial as what separates successful investors from the rest is the level of investment education, experiences, or skill sets they possess. Speaking from my own experiences, I realised that some of my best investments which have given me the best returns were bought after I have gained some knowledge, wisdom, and insights from years of learning to equip myself to be a better investor.
I like to call it, ‘The Return of My Investment Education’.
The more investment education I have, the better my returns I achieve from my investments.
Conclusion: Why Rama’s Portfolio Can Last for Decades?
I have revealed 5 powerful investment habits that Rama had shared in his email and they are gems of wisdom that enabled his stock portfolio to stay afloat and profitable for decades. However, with that being said, despite knowing that it is possible to build such a resilient portfolio without being ‘smart’, why don’t a lot more people follow Rama’s footsteps when investing in the stock market?
The answer lies in his purposes and they are as follow:
1. To pay for his children’s education fees.
2. To enjoy a good life.
3. To fund his retirement lifestyle.
Rama has a longer term perspective and because of these purposes, would you think that he will be using his children’s education funds and retirement money to ‘play the stock market’? I don’t think so. This also explains why he is cautious in investing and is always learning more to become a much better investor.
So, the question is this, ‘What if you want to learn how you can build yourself a robust portfolio that pays dividends year-after-year?’
Well, you can check out my friend, Ian Tai’s free training online where he shares his background as an investor, how he has built his portfolio and a case study of a stock that he invested that made 100+% total returns (capital gains + dividend yields) for 3+ years.