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Should I Start off with Trading or Investing?

This is one of the questions I get the most from new traders and investors, who cannot decide whether to start learning trading or investing.

Most people end up only focusing on either one their whole lifetime, without realising that combining both is essential to building long-term wealth, and achieving it faster.

But how exactly do you combine both these skills?

Enjoy the video! 😀

3 Crucial Lessons From Jesse Livermore – The Greatest Stock Trader of All Time

Jesse Livermore is known to be the most prolific stock trader. Several books have been written about him and his trading track record is legendary. His profits were so great that he was reported to have owned mansions in various places around the world, each fully staffed, complete with limousines and steel-hulled yacht for his holidays.

Some of you might have read that Livermore was worth $100 million after shorting the 1929 great market crash.

Above: Some of the books about Jesse Livermore, available in major bookstores.

What Guidelines Did Jesse Livermore Follow As A Trader?

Among the many quips he had about trading and investing, I’ve picked out some of the key ones that could make or break your trading account.

While many complain about the difficulties in trading forex, stocks, or commodities, there is a good minority that makes consistent profits in the markets.

What sets Jesse Livermore apart from his peers?

 

  1. Buy rising stocks and sell falling stocks.

The above seems obvious, but many people fail to adhere to this rule. Many people like to ‘pick tops’ and ‘pick bottoms’. Now, professional traders do occasionally try to pick tops and bottoms, but they do so with very strict risk management, and always have a contingency plan for when the trade doesn’t work out.

Beginners often makes the mistake of trying to trade against the trend. While this can be profitable for some, talk to anyone in the trading industry and they will tell you that trend-following is the major money-making strategy that every trader uses. It’s simple, easy to add positions on, and it’s stress free. The problems come when beginners make a buck from trading with the trend, and start to explore ‘new ways’ to trade and invest.

 

2. Keep trades that show a profit, end trades that show a loss.

Jesse Livermore is famous for his humongous profits, but behind every profitable trader is the admirable ability to deal with a string of losses. It’s one thing to know that you need to cut losses, but it’s another to actually cut your losses when you are wrong. George Soros famously quips that it is not how many times you win or lose, it’s how much you make when you win, and how much you lose when you are wrong.

Cutting losses is a psychologically hard thing to do in modern society. We’re ingrained to be always correct, and never admit that you messed up, because it reflects badly on you as a person. However, with investing, no one is marking you for the number of losses; the profit that you make is the final report card that matters, and that’s where we want to be focusing on.

 

3. Never average losses by buying more when your stock has fallen.

Too many people refuse to be wrong on their investments or trades.

I have heard of people say this statement: “Even if the stock drops a lot, I’ll just keep it because I’m buying for ownership and dividend cashflow, not just for capital gains.” Sure, but what happens if the stock you hold drops by 70%? 80%? You’ll buy more?

Buying more when the stock has fallen is a sure-way to get your trading account to zero. It’s taking more risk when the odds are against you.

 

Think About This: Which of These 3 Guidelines Have Brought You Losses in the Past?

Many traders soon realize early in their career, that their trading accounts could have been profitable if not for silly mistakes. Avoiding these silly mistakes requires experience, maturity, the correct knowledge, and of course, proper mentoring.

I was lucky to be mentored by veteran traders early on in my trading career. Their advice, based upon thousands of hours of market experience, contributed greatly to who I am today, and I never fail to mention, during trading seminars or public events, that by tapping on their experience, I was able to quickly attain a level of success that kept me profitable.

If you’re currently struggling as a trader, ask yourself this question: “Which mistakes have I been making?”

Acknowledging trading mistakes is a continuous process of learning and growing.

6 Little-Known Things that Rich People Do Differently that Give Them an Unfair Advantage

Many people do not realise that small things add up. Like how a small river can cut through rock and form grand canyons, small habits can add up over time to produce vastly different results. This means that quite often, a small change in the way we do certain things can result in huge leaps in improvement. So here are some things that rich people do differently:

1. MAKE MANY SMALL & FREQUENT WINS, NOT A FEW BIG WINS

1

Trading is boring. Ask any seasoned trader in a proprietary fund, and they will tell you the same thing. It’s all about doing the same thing over and over again, and it is surprisingly difficult to do something simple over a very long period of time.

Some of the richest people I know own very humble businesses. One example is the typical food hawker; it’s unexciting, it’s repetitive, but hey, it gives a very stable source of income, week in, week out. It is virtually impossible for good food to become irrelevant to the typical consumer, and hence this source of income is one that will last a long time.

In trading, it’s the same. Small wins add up over time, and instead of being diligent, many aspiring traders choose to take the easy way and just look for that one quick way to make money. Although the news always glorifies the one-hit wonders, like Zuckerberg and other billionaire tech founders, the majority of the rich are not overnight successes, and they know this rule best: small wins add up over time.

 

2. THINK IN % ROI, NOT DOLLARS OF INCOME

Compounding is the way to go. Although you might be nauseating because this is probably the 100th article on the power of compounding, it really works. Just take a moment and think with me:

Nobody would learn trading if you claim to make $10 a day. They want $100 a day, $1000 a day, but forget that it starts with $10 a day.

That’s why most people fail to achieve financial success. They measure monetary success in dollar terms, and fail to consider that ROI is what brings true riches over the long-run.

Thinking in ROI is a very huge barrier for many people, and it actually benefits you because when you finally do make a substantial sum of money, you will still be thinking in terms of ROI and not be overwhelmed by the huge amount of funds on your plate.

I’ve seen many traders do well on small accounts, only to blow up with larger accounts because they have not drilled the ROI concept deep into their minds.

If you can make 3% a month, that’s $30 for a $1000 account, $300 for a $10,000 account, and $3,000 for a $100,000 account. Go figure. If your focus is on % ROI, you will not have an issue growing your wealth quickly.

 

3. STAY AWAY FROM ALL FORMS OF GAMBLING

This point is probably the easiest to write about:

Gambling = negative expectation

Investing/trading = positive expectation

I bet I can stop gambling!”

Gambling gives you hope, which is false and always gets dashed.

Investing gives you certainty, which is true and rewards the skillful.

I think that’s enough said. If you’re gambling for the thrill, treat it as expenses. As a trader I always think in probabilities, so since the expected return from gambling is negative, the rational decision is to not participate at all.

In addition, 1 in 5 gambling addicts attempt suicide. It destroys your family, your friendships, your sense of sanity, and your work ethic. I think it’s enough to let you realize it won’t get you rich; even the seemingly innocent TOTO or 4D that you buy is not a rational attempt for someone to earn big money.

 

4. TIME IS WORTH MORE THAN MONEY

Quite often, people will go to great lengths to save money, for example spending hours hunting around for cheap shopping deals, when all you save for your hours of effort is a mere $10-20. Rich people know the value of their time.

One important question to ask yourself is, “what is the $ value of 1 hour of your time?” If 1 hour of your time is only worth $2, then spending an hour queueing up for free ice-cream might make sense. However, if one hour of your time is worth $200, then taking a $20 cab ride to save an hour of transport will make a lot of sense. You get the idea.

At this point, you might have realised that one if the key ways to increase your net worth is to gradually work your way up by increasing the value of your time. After all, everyone has 24 hours in a day, but the more value you can create in one hour of your time, the higher you will be paid for it, and the higher the value of that hour will be.

 

5. DON’T WASTE MONEY ON CHEAP STUFF – ONLY BUY QUALITY GOODS

It’s sad that most people are thrifty in things that do not matter, but silly when it comes to investments of thousands or hundreds of thousands of dollars. I’ve seen people scrimp on their daily meals, yet when it comes to investments, blow $50,000 on an investment fund they do not understand, or buy into a multi-currency deposit that doesn’t even make sense.

Home purchases, which make up the bulk of most people’s expenditures, tend to be bad decisions. People buy houses that they cannot afford, spend money on renovations that don’t matter, and waste money where it doesn’t bring returns.

1Most people are smart with small sums of money, but unwise on big decisions

Rich people buy things that appreciate in value, while poor people don’t. Electronics generally don’t appreciate in value. If you consider buying electronics, buy quality electronics, and keep them in tip-top condition so that you can resell them at a decent price. And… just because it’s the latest gadget doesn’t mean it’s quality. You’ve got to do your research and think about your purchases if you are serious about your money.

Wine does appreciate in value, and so do quality branded goods. Some Louis Vuitton bags appreciate in value, and it would do you well to consult experts if you are intending to use these products.

Other things that are not worth spending on include:

  • fast food
  • low-quality makeup
  • gifts that don’t really matter
  • alcohol
  • bottled water
  • cheap shoes/clothing that you throw away within 6 months

Yes. It might hurt to read this, but if you need a total personal finance audit, then it helps to do a reality check on yourself.

 

6. LASTLY, RECOGNIZE THAT PERSONAL DEBT IS A SHACKLE

Personal debt chains you from spending on what really matters. In the U.S, many undergraduates end their college years with US$100,000 and above in personal debt. How in the world would they be able to start a family, much less get a home to live in?

In my opinion, the only useful loan is the humble HOME LOAN. Yes, a loan for the house you actually live in, not the house that you would not live in. It is essential to have a roof over your head that you own, because when your business fails, when you lose your job, you still have somewhere to rest and find solace while you sort things out. The worst thing you can find yourself in is having no house, no money, and no one to support you at your lowest moment. Using debt to buy additional houses is a bad idea unless you are a real estate investor by profession and you know what you are doing.

Car loans are unnecessary. Unless you have a dire need for a car, buy the car in cash as much as possible, or just take a taxi everywhere since you can afford it anyway. Credit card loans are the jaws of death for many; stay away from them, and just follow the simple mantra of  spending below your means”. 

Spend below your means, but also look to expand your means.

Too many people get stuck in the “spending below your means” mentality, and fail to consider how they can acquire more sources of income. In fact, having no personal debt frees you to make decisions that allow you to work towards financial freedom, which may require you to have no income for months or years in a row.

 

WHAT SHOULD I DO?

I hope that these 6 tips will get you toward your goal of financial freedom. Keep at it! Remember, if you change your habits, you will change your outcomes. Live like the rich do, and you’ll soon be living the life that the rich do.

Reading this article without putting the tips into practice is like looking into a mirror and forgetting what you look like. It might hurt at the start, but changing the way you live could very well change your destiny!

Wishing you all the best in your journey!

 

RESEARCH SOURCES & REFERENCES

sbr.com.sg/commercial-property/commentary/state-industry-rise-self-storage-in-singapore
businesstimes.com.sg/hub/property-2016/self-storage-industrial-space-poised-to-expand
nreionline.com/self-storage/self-storage-sector-maintains-steady-growth
alternet.org/how-gambling-can-kill-you-faster-drug-abuse-or-alcoholism
wondergressive.com/20-biggest-wastes-money/

The 10 Financial Milestones that Every Millennial Needs to Aim For

Many people want to attain financial freedom, but most have little to no idea what it takes to get there. In today’s post, I will be sharing the 10 key financial milestones that every Millenial should be looking forward to, and it be a good chance for you to see how many you have achieved!

First things first…

Before one goes marching along the road of financial success, he has to get his house in order. Put it another way, he has to have a clean, honest audit of the current state of his financial health.

Also, the road to financial freedom is marked by progress. Overtime, as the person attains more and more milestones, he gets closer to his goal.

Some of these milestones are very critical; they can cause you to lose wealth in the future if they are not dealt with right now. Amassing wealth is great, but another key activity is preservation of wealth, which we are going to discuss in detail.

Here are 10 things that financial milestones that are often missed out in most people’s financial planning:

#1 HAVE A CLEAN CREDIT HISTORY

Paying personal bills on time is a great chore for many. However, the financially-free person has to attain mastery of this.

It’s quite simple really; don’t buy what is beyond you now. I’ve heard of startup founders who slept in basements to save on rent, bunking in with 4 other like-minded nerds who didn’t mind the initial shame for the future glory.

For many of us, truth be told, we are financially far-more secure. Even if we have debts, most middle-class families are able to get by and secure some savings each month.

Easier said than done; don’t spend what you don’t have.

Of course, business loans do not count, because they are much larger than personal loans.

Have you done a thorough audit of your personal debts? Getting a good credit rating is one big green tick on your financial health. Pay all your bills on time, avoid penalty fees, fines, and you can get a higher credit score on the CCRIS.

#2 LEARN THE SKILL OF BUDGETING

Before wealth is massed, one must learn how to manage small amounts of money. If he can be entrusted with little, he will be entrusted with much.

Budgeting is a simple skill, but truth be told, people don’t keep to their budgets. They adjust their budgets like their exercise schedule, their weight-loss plan, their study plan, and whatnot.

Budgeting without keeping to the budget makes budgeting useless.

The ability to keep to your budget is part of the skill of budgeting. No point having a great budgeting plan, but no resolve to get down to it. And you only have yourself to blame is you are unable to abide by your budget.

Parents have to instruct their children in this regard. If budgeting is taught to people when they are young, the attitude remains, and even when the amount of money gets bigger, the discipline keeps the person financially healthy over the long-run.

#3 BE A PROFESSIONAL TIME-INVESTOR

WRONG question to ask: “I have $10,000. What should I invest in?”

Anyone who asks this question is out of his mind. It’s not what you invest in; the correct question to ask should be “What skills should I acquire to become a proficient investor?”

Time is all you need to acquire skills. Many people complain about the lack of solid financially education in schools, but they remain at the complain stage. Being a professional investor of money requires you to first be a professional investor of your own time.

If you spend most of your time watching YouTube, great. If it makes you happy, great. But if that’s not what you want, do something about it.

Even after trading for many years, I make it a point to read good books, and stimulate my thoughts. They can be self-help books, trading-related books, or even fiction. You’ll be surprised how much you can learn from good, beefy fiction books!

#4 BE FINANCIALLY-INDEPENDENT

If you are still living off your parents, it’s ok. It’s nothing to be ashamed of, for all of us start that way. But you have to have a plan to get financially independent, where your livelihood is no longer dependent on who gives you money.

Many young people are truthfully still holding on to the security that their parents will save them if they mess up. That can be true, and no parent would want their child to suffer financial catastrophes. However, we all need to come to a place where we take responsibility for our finances, and keep track of where we are.

#5 ADEQUATE INSURANCE COVERAGE

As a responsible adult, your job is to not just protect yourself financially, but also the lives of those you love. You cannot compromise on insurance, because your life does not revolve around you alone.

Having a solid financial backing when something tragic happens will show your financial responsibility. It demonstrates that you have a clear plan for emergencies and know how to respond.

Investment-linked policies, in my opinion, aren’t really investments. Like I said above, invest your time, not in insurance policies. Take up the necessary protection, and that’s all you need. It gives you a peace of mind. You’ll be surprised by how uninformed most people are about insurance, and this is one key milestone that will set you apart from many others.

#6 HAVE AN ACTIVE PLAN TO KEEP YOURSELF FIT

Many people don’t even consider physical fitness as a key financial milestone. For what use is it to gain all the wealth you want, yet be unable to enjoy it?

Keeping fit is simple, but difficult to do.

Just like budgeting, many people know what to do, but don’t do it. Get yourself in shape if you want your financial health to be in shape.

#7 OWN THE ROOF OVER YOUR HEAD

Although there are stories of young people who’ve made it big, purchased a mansion with the $150 million they got from selling a company, most people don’t have that luxury. 

The majority of young people work their way to owning their first house, before getting anywhere major in life. When it comes to financial freedom, owning the roof over your head is the least you could do, because when an emergency strikes, you won’t be forced on the streets.

#8 MONITOR YOUR ACTIVE AND PASSIVE INCOME

Financial freedom involves having active and passive income. Monitoring them every 3 months or so is a good way to keep yourself up to date with your progress. It also gives a reality check every few months so that you won’t end up skiving.

A simple excel sheet will do the job. It’s just as easy as monitoring your expenses; most simple apps on the Apple Store of Android Store would do fine. It’s the discipline in keeping the routine that needs to be drilled in.

#9 KEEP 6 MONTHS OF EXPENSES IN CASH

Another defensive safety net; if you don’t even have a 6-month warchest, don’t even think about attaining financial freedom. It takes lots of effort and risk to achieve the goals that you want to set out, and the last thing you want to be worried about is whether there is bread on the table or milk in the fridge.

#10 MEET INVESTORS REGULARLY

If you are a pokemon card game fan, you probably spend most of your time around fellow pokemon addicts. That’s fine if you want to be Ash Ketchum, but if you want to be an investor, hang out around real investors.

Go to events, meet like-minded people, network like crazy, and find out what the scene is like. Know what is trending, what is out-dated, what people are interested in, and by spending time with these people, you will be in sync with the world of investments, and this expands your thinking greatly.

For example, when I first heard of options, it blew my mind; you can actually make money when prices do not move. You don’t have to bet on a rise or a fall; you simply collect premium. I won’t go into much detail, but this opened my mind when I was much younger, and kept me hungry to learn and explore.

Many people fall into a comfort zone once they reach their 30s-40s. It’s normal because the trials of life and the painfulness of toil takes a hit on people, but if you really want that fulfilling life you have, you got to step out and behave like you are going to live a fulfilling life.

Here’s a useful quote for those who are just starting out in the investment community:

If you’re 25, behave like you’re 35. Be mature, sensitive, patient, and be kind in your dealings with people.

On the other hand, if you are a seasoned veteran in your are of expertise, here’s a quote for you.

If you’re 55, behave like you’re 35. Be excited, passionate, willing to change, and accept young people for who they are.

In the past, I was criticized for spending too much time on my phone. Guess what? I now spend most of my time on the phone trading and analyzing charts, and I’m not confined to a desk in an office in Raffles Place. The things which society didn’t really accept, can actually become mainstream in a very short time.

stonesHave you got these 10 mile-stones laid out?
Image Source: Dimitri.co.uk

WHAT’S YOUR DECISION?

If you’re going to make any headway in the path to financial freedom, it had better start today. Make a plan. Go to your drawing board. Stop complaining about the past, and live a life of possibilities. Don’t know where to start? Look for help. Ask, learn, and seek.

But first, make sure you’ve got these 10 financial milestones set up. Of course, you could forgo a few initially, but to be really stable, you’ve got to build up your foundation very strong.

When the storm comes, would your financial house stand strong?

Here’s to a great month ahead, cheers! 😀