Here is a question:
‘Do you know if there are ways to invest my money without having to spend too much time studying about it?’
I understand. When asked this question, the answers that most questioners like to have could be a certain stock, real estate, unit trust fund, endowment policy, ASB, ETF, debt or equity crowdfund, a fund run by robo advisors, Bitcoin, and so on and so forth. To me, I find the common ground for the answers above is this:
The focal point is on the investments (what to invest).
Little emphasis is on the investors (what they want to achieve and why).
Hence, when I was asked this question, I’m hesitant in answering it directly and would reply with a question such as: ‘What is your plan?’ or ‘Why do you like to achieve from investing?’. Most people may find this reply disappointing or quite ‘potong stim’. But to me, I believe my reply is one that is genuinely constructive and helpful to the questioners.
If, by now, you feel as such, you may choose to either stop reading this write-up and search for articles with titles such as ‘5 Things to Invest in Malaysia without Studying Too Much on Them in 2020 and Beyond’ in other websites or continue to read on.
Sincerely, I hope you will choose the latter for I will share insights on how we all can become better in investing and 3 things that most people would tend to do if they choose to invest without studying too much on investing.
The Lesson Learnt on Investing from a Trillionaire
We have heard of a millionaire and a billionaire. But, a trillionaire … ?
Presently, the richest man on planet earth by net worth is Jeff Bezos, the CEO & Founder of Amazon Inc. He has a net worth of US$ 113 billion, thus, is a 1/10 of a trillionaire today. So yup, I’m not referring to anyone who is still alive today.
To me, the first person I know that had attained in excess of US$ 1 Trillion in net worth is King Solomon, where his estimated net worth was about US$ 2 Trillion, 20x the net worth of Jeff Bezos. He is known for his wisdom and many travelled from far and near to listen to his wisdom, including the Queen of Sheba.
In his lifetime, King Solomon has spoken 3,000 proverbs and these are recorded in the Book of Proverbs. Imagine this. If you can email the question on investing as stated above to King Solomon, what do you think could be the reply from his majesty, the wisest person ever lived on planet earth?
Personally, I believe you would most likely receive a reply as follows:
In other words, the emphasis is on wisdom and insights over gold and silver. So, if you wish to invest for superior returns and build sustainable wealth, you have to study. Wisdom is the principal thing and is above money itself for money will tend to flow towards people who are wise. Thus, focus on wisdom.
But, with that being said, many hope for a shortcut, a magic pill or a hassle-free method of investing. Their eyes are on gaining money, not wisdom. Thus, I’ll list down 3 major things that most people tend to experience if they invest without education or should I say, wisdom.
#1: More Prone to Investment Mistakes
This is because you need wisdom as a guide to separate good investments from others that are lemons. Let’s talk about stocks. In Malaysia, we have 900+ listed stocks and without wisdom, how would you tell a good stock from a bad stock?
So, without wisdom, most people would resort to asking for stock tips to invest, which is not really investing but gambling as they may not have an idea of what they are getting themselves into and why. This also explains why a lot of people have lost money in the stock market and believe that stock investing is risky.
The same applies to other investments such as real estate, businesses, ETFs and the list goes on. And because of that, people tend to:
#2: Rely on ‘Professionals’ for their Investments
This is because they trust that the professionals should have done more studies and hence, will know a lot more about investing than them. As such, they could transfer the onus of making investment decisions to these professionals such as financial planners, fund managers and robo advisors.
So, is there anything wrong with it?
Well, it depends. Ideally, it is okay if the professionals are genuine investors. For instance, investors who invest in shares of Berkshire Hathaway Inc could view it as a mammoth unit trust fund managed by Warren Buffett, an investment living legend. Many who had their money invested with him for a long period of time (10, 20 or … 50 years) would have built massive wealth with him for he is a very astute, conservative, and responsible businessman and investor.
If so, that is okay.
But what if the people that you had entrusted your money with are none other than traders, speculators, and gamblers in the stock, bond and ETF markets and you are depending on them to build your retirement funds?
If that is so, would it be okay with you?
Let me ask you this. If your unit trust funds, or ETFs, or robo-advisory funds had incurred losses after years of investing into them, who is the one at fault and to be blamed? Is it:
a. The Fund Manager?
b. The Market?
c. The Agent or Financial Planner that sold you the Unit Trust Funds?
d. You, the Investor?
For me, I’m a stock investor who picks my own stocks to invest. Along the way, I made some mistakes and had lost some money. Here is the thing. I have no one to blame but myself for these mistakes because I am the one who made my call and pulled my own trigger. And because of this, I would own my mistakes, learn from it, and gain experiences that will serve me in my next investments.
But, what if you had made a wrong investment decision on, let’s say, unit trust.
What could you possibly learn from it to become better as an investor? Perhaps you could comment below for I’m not into unit trust myself. Sadly, if your major lesson is only ‘to not invest in unit trust’ or ‘unit trust does not work’, then, you have just failed to gain a chance to learn and grow to become better investors.
Let not that be you and let’s move onto:
#3: Reactive to the Markets
Money is a very emotional subject.
If you think about it, most investment decisions are influenced by our emotions and to name a few:
a. People ask for stock tips because they want to make a quick buck (greed).
b. There are panic selling in the stock market because of (fear).
c. Some buy stocks as they are (excited) about their prospects.
d. Some sell stocks as they are (pessimistic) about their outlooks.
Millions of people buy and sell stocks in the stock market every single day. They make their decisions out of different emotions and that is why the stock market is volatile and baffles the logical. This also applies to other investment markets.
As such, without wisdom, you tend to make decisions that are more influenced by emotions. When stocks rise, you may be excited and would like to get into it. Then, when stocks fall, you may become disappointed and dump it to cut losses from it. As a result, you are more prone to lose money for you buy high only to sell low.
What to Invest without Studying Too Much on Investing?
The best for you is to not invest.
This is because the investor is no good, not the investment. If you understand it and refrain from investing for the time being, that itself is a form of wisdom.
Nobody is born to be an investing genius and enjoy immunity from mistakes. All investors that I look up to had their moments of stupidity and had to learn from theirs. The key difference is learning and having an appreciation of wisdom and here, that is what I would like to advocate to all.
So, what is the greatest investment lesson that you had learnt over time?
Please feel free to share below: