First and foremost I would like to make it very clear that I am not an investment guru. I am just a
prudent investor who tries to find opportunities to make money legally over the
years and took action when I found it.
If you know me personally, you know that I'm just a normal next
door girl. Nothing extraordinary. A simple girl with simple tastes and a simple
lifestyle.
So for this chapter I will simply let you know the investment
principles that I try to live by. You then have to decide yourself which
investment principle suits you and do research to determine which type of
investments you wish to do.
There are a few property investment gurus that I admire such as
Robert Kiyosaki and Malaysian born, Azizi Ali. I've read their books and love
the knowledge and the ideas that they shared with the readers.
I am however a great fan of Warren Buffett. A bit odd actually because
I don't invest in shares! But I find him truly inspirational.
He is a billionaire who drives his own car, does his own taxes,
and still lives in a home he bought back in 1958 for $31,500! I think it was
his simple unpretentious lifestyle that endears him to me, on top of his
brilliance of course!
Note:
From this point onwards, Warren Buffett's quotes are in bold.
Warren Buffett's number one rule of investment is "Never lose money" and his number
two rule is "Never forget rule
number one". Don't you just love the guy?
The first principle
that I subscribe to is "never
invest in a business you can't understand". A logical
statement that a lot of people unfortunately refuse to take heed.
How many of us are guilty of investing in something just because
somebody you know did it? As I mentioned earlier, you should not buy a house
just because your BFF bought one.
Please keep this in mind, it is easier to make money in something
that you know than in things that you are not familiar with. If you're
interested in property investment, make sure you learn everything about it
before you put even a cent of your hard earned money in it.
Likewise if you wish to invest in shares or unit trusts.
If after all the effort you put to learn about it, you still
can't understand how it works to ensure that you will never lose money
(remember Buffett's rule number one), then avoid it at all costs.
Second principle is "start small". This
is to build up your confidence. Once you are familiar with how the investment
works then you can grow your portfolio. Remember "risk comes from not knowing what you're doing."
Third principle is "believe in yourself". Don't let
anybody convince you that you are not smart enough to make tonnes of money. As
Warren Buffett aptly said "You
don't need to be a rocket scientist. Investing is not a game where the guy with
the 160 IQ beats the guy with 130 IQ."
"I always knew I
was going to be rich. I don't think I ever doubted it for a minute."
Listen to the man!
Fourth principle is "be
passionate". "Without
passion, you don’t have energy. Without energy, you have nothing."
Please keep this mantra alive in your head: "plan without
action is worth nothing".
Fifth principle is "do not be overwhelmed by greed".
"Be fearful when others are greedy".
If the return is too good to be true, chances are it is. So steer clear!
Sixth principle is "good discipline". Remember always
that "Only when you combine sound
intellect with emotional discipline do you get rational behaviour".
Even the best laid plan will go awry if you do not have discipline to follow it
through.
Seventh principle is "patience".
"Someone's sitting in the shade
today because someone planted a tree a long time ago".
Always remember that "no matter how great the talent or efforts, some things just take time.
You can't produce a baby in one month by getting nine women pregnant."
Nothing good will come easily. If getting rich is easy,
everybody will be rich.
Eighth principle is "keep it
simple". If your investment gets too complicated, stop for awhile and
think. Is it really complicated or it is just me who made it complicated?
"There seems to be
some perverse human characteristic that likes to make easy things difficult."
Make effort to simplify it. It is easier to manage non-complicated stuff.
Ninth principle is "monitor your investment closely".
According to Mr Buffett, it is not necessary to diversify your investment
extensively thus making it complicated to manage.
"Diversification is
protection against ignorance. It makes little sense if you know what you are
doing". You can stick to a few investments that you are
very good at but you must keep an eagle eye on it.
"Keep all your eggs
in one basket, but watch that basket closely."
Tenth principle is "get the low hanging fruits" first
before you even think of going for complicated investments.
"I don't look to
jump over 7-foot bars: I look around for 1-foot bars that I can step over."
Eleventh principle is "always on a look
out for the best value". "Price
is what you pay, value is what you get. Whether we’re talking about socks or stocks, I like
buying quality merchandise when it is marked down".
You must however know the difference between "good
value" and "too good to be true value". The former is to be
embraced, the latter is avoided!
Twelfth principle is "learn from your
mistakes and know when to cut your losses". "In the business world, the rear view mirror is always
clearer than the windshield".
Sometimes we get emotional attachment to a certain investment.
We like to believe that in time the investment will improve. This is Mr
Buffett's advice if you were caught in that situation "The most important thing to do if you find yourself in
a hole is to stop digging".
Cut your losses and bail out! "Should you find yourself in a chronically leaking
boat, energy devoted to changing vessels is likely to be more productive than
energy devoted to patching leaks".
Thirteenth principle is "be very careful
from whom you get your investment advice from". Only get advice from more
successful people than you. "Wall
Street is the only place that people ride to in a Rolls Royce to get advice
from those who take the subway".
Never ask advice from people who wants to sell you something.
"Never ask a barber if you need a
haircut."
Sometimes you will encounter people who answer you with no
answer. You can feel it in your gut that they don't really want to help you but
are too polite to say no to your face, so they go round and round the bush.
"Honesty is a very expensive gift.
Don't expect it from cheap people."
Fourteenth principle is "surround yourself
with positive people". "It’s
better to hang out with people better than you. Pick out associates whose behaviour
is better than yours and you’ll drift in that direction."
Avoid whiners and complainers like your life depended on it!
Finally, you must “know your strength and
weakness”. If you have weakness in following through with plans, then do something
drastic to fix it.
"Chains of habit
are too light to be felt until they are too heavy to be broken."
There are thousands of books written about investments. Read
books, blogs and ask successful people. Arm yourself with knowledge. More
importantly - take action!
"Writing a check separates a commitment from a
conversation."
Good luck in finding your right kind of investment.
Remember that "you
only have to do very few things right in your life so long as you don't do too
many things wrong".
So go and find your Mr Right!