How you navigate your journey matters

I’ve always likened investing as a journey. A journey to bring you from point A in life to point B. It is crucial to understand this analogy as it provides us with a basis to start planning for the long term. 

Imagine you want to go to KL for a holiday. You could choose between traveling there by bus/car or simply by the airplane. Of course, there are pros and cons to each option. For instance, going by car would definitely take a longer time than the plane. But definitely also the cheaper alternative. This is also the parallels I would like to draw. There are many modes of investments that can bring you from one point of your financial  journey to the next. And certainly they all have their pros and cons. Thus, it is essential for young investor like us to map out our financial journey and choose the one most appropriate to bring us to our destination. 

There are many investment vehicles out there that we can employ, each of varying risks and rewards. 

• Long term investing in shares (Blue chips) — relatively low risk, but also low return in the short term.
• Short term shares trading — this are people who trade stocks in the market. They tend to only hold a stock for one day or at most a week before they sell away their shares. Higher risk and more capital intensive.
• Contract for Difference — this is another mode of investment where investors purchase a contract with their broker which is not match to any underlying asset. For instance they could buy 10 lots of Facebook but they do not own physical shares of Facebook unlike those who buy from the market itself. Furthermore, within CFDs there are many ways to invest which I myself have yet to understand. Haha. Higher risks and more upfront capital is needed. 
• FOREX — in the FOREX, investors can trade currencies of countries. For instance a typical FOREX investment could be buying an appreciation of the USD against the Sing dollar for instance. FOREX could be traded with CFDs too but let’s not get too far for now. Haha.

And many more… 

Even endowment/ savings plan offered by insurance companies and the CPF scheme is an investment vehicle as well. Thus, the options available to us are aplenty and we must be crystal clear on how the investment vehicle work before delving into it. I will draw up a proper chart to profile some of the common investment vehicles and their risk/reward ratio when I am out of my army camp. Adios!!

3 reasons why young people should learn to invest

Many of us may have heard people talking about investing. Some of them warn us to stay away from it because they feel that it’s equivalent to gambling. While news of others making money in the stock market are aplenty. So what exactly is investing?

To put it simply, it is buying an ownership of the company you are investing into. (Of course this is not inclusive of ETFs, mutual funds etc) You put in a portion of your money into the company and hope that the company can deliver on their results which is reflected in an increase in share price. And of course when you sell the shares of the company, the net gain between your buy price and the market price of the share becomes your profit.

Let’s move into the main topic. So why should young people learn to invest?

1. More time– As we all know the beauty of being young is that we have more time. Having more time means that we have a good runway to learn and make mistakes. You wouldn’t want to be losing your hard earned money in investing when you just started out at 30.
2. The magic of compounding — Like what Albert Einstein said, “Compound Interest is the eighth wonder of the world.” Comparing two individuals, A who starts investing at 25 and B who starts at 35. Given that the amount each individual put in are the same but A only contributes for 10 years whereas B contributes for 25 years. (Compounded at 8 percent annually) A would still have more money at retirement than B due to compounding interest. Magic isn’t it?

   

   Credit: darwinfinance.com

3.   Making your money work for you — Interest rates that banks offer are no longer sufficient to keep up with inflation rate. The value of all your hard earned money will decrease if you allow it to sit idle in your bank account till retirement. However if done correctly, investing can grow your savings at a faster pace than inflation. This will enhance your retirement nest egg and protect the value of your savings.

In conclusion, the power of investing is one that is here to stay. However with great power comes great responsibility. And that responsibility entails doing your research and seizing the right opportunities. Being young therefore gives us ample time to master this power. And that will only happen if you are willing to take the first step.    

A little bit more about me

Hello! I thought that for my first post I should introduce a little bit more about myself. I am currently serving my National Service (from the time of this post) and just started out in the world of investing. I’ve gotten interested in investing when I was 16 and my first foray into the stock market was through Investopedia simulator haha. From there, I continued my research and only started investing with real money in March 2016.

I guess like all young investors, most of us started out with very little capital. In fact, my first trade was only about $300 odd dollars worth and I lost almost 70 percent of my money because I did not cut loss. It was traumatising to lose 70 percent of your money on your first venture into investing. Haha but I picked myself up and analyse my mistakes before making another attempt into another stock.

Yup, it was a very nervy start for me which is why I invite you to join me in my journey together as I share my experiences in the investing world. Also, I welcome seasoned investors who may chanced upon my humble blog to give us advice by commenting on my blog posts.

Ultimately, the reason for setting up this blog is to help young people who may be curious about the investing world to better equip themselves for what’s ahead. So buckle up because we are starting From Ground Zero! (Pun intended :P)

To help you navigate around:

[My Story]: This is where I write about my own experiences and things that happen to me in investing.

[Building Blocks]: This is where I share about some techniques and guides to investing.

[Eye Candy]: This is where I write the investment thesis of the companies that are in my watchlist.

[Portfolio]: This is where I write about the actions I took and updates on FGZ’s portfolio.