Updated: Jun 27, 2018
Read This Before Starting Your Journey
Whatever stage of investing you are at, it’s important for you to read this article! There are many “investors” who have been on the market for years, but not making a single cent…in fact some in losses.
All this is because they started off on the wrong foot, and had no formal training and mentoring to do the right thing in the stock markets! Hence this article “Investing for Dummies” was written so that some critical ground rules and principles can be laid.
Since you’re reading this article, it can be assumed that you’ve already realised the critical importance that investing plays in our lives.. especially for developing countries like Malaysia, where living costs are pretty high! It is important for us to invest prudently and build a fund for retirement, instead of letting our savings get eaten up by inflation.
And not to sound condescending…but Investing for Dummies literally means Investing is for Dummies! Because
if you follow the right system and approach, there’s no reason why stock investing cannot be profitable for you.
Here are 5 key understandings of the stock market and some actionables for you to get started:
1. Stocks – What are they?
It is very important for you to recognise that Stock market is all about businesses. A stock is simply a company that is publicly traded, whereby members of the public like you and I can go in and buy up their shares.
It is important for you to understand it’s a business you are putting your money into, therefore, understanding the business model is important for success.
2. How to identify a good business to invest
Good businesses can be found in all nook and crannies, and they are all around us. You can identify them by looking at track records of their performance, their management skills, presence of business protections called economic moats and business model. There’s a systemic way to do this.
Warren Buffett made 70 billion by investing into great businesses!
3. When to buy a good business
To maximise your profits, you should always buy a good stock when it is trading at a bargain. Usually some bad news, or economic downturn gives you the most precious of opportunities to make money as an investor!
4. How to Buy a Stock?
To purchase your first stock, you need a brokerage account. In Malaysia, there are many, ranging from CIMB Securities, Ambank to others. You can pick any of these reputable bank brokerages to get started!
5. How long should I hold a stock for?
Well, your strategy that you employ influences your time horizon. For Value Investors, we are always big picture investors that are not bothered by short term price movements up and down. Not only this dramatically improves your results, it also gives a much better balance to you psyche, simply by understanding that short-term price fluctuations are hardly inconsequential to the trained investor.