My investing journey – Step By Step from Stupid & Greedy Gambler to Profitable Investor
Who doesn’t love the idea of living comfortably with only passive income, having the luxury to make choices on how to spend the precious 24 hours a day, and most importantly never worry of running out of money.
“Work because I want to, not because I need to in order to survive.”
This is always my ultimate goal and it was planted deep inside my brain since I was very young. I just hate the idea of trading my time for money every month, repeating the same thing everyday, well maybe it works for others and this bring them a sense of stability and security, but for me its just a boring life and I believe my life should be way more interesting than being an employee.
So I was always looking out a way to make passive income since I was very young. After exploring more than a decade, I would like to share my experience and knowledge here to make this overcomplicated financial world into something that’s easier to understand and begin with for total beginner in my own word. But before I start, I would like to clarify that I am not a certified financial planner or registered fiduciary, I don’t even graduate from a financial background. I am here to share what works for me and please do your own due diligence before making any decision.
First thing I did was very stupid. I worked part time when I was studying and saved up RM2000 in my bank account, no idea what to expect for the return, thinking to place this money somewhere safe and generate a lot of profit. If you had asked me what do I mean by “a lot” that time, honestly speaking, I had no idea and would had pick a ridiculous number out of thin air. So for me, I always think that bank is the safest place to park money in the planet. So, I randomly walked into a bank in my neighborhood and asked one of the consultant sitting by their office desk, “what should I do with my RM2000?” That’s the beginning of my investing journey: buying mutual fund with super high management fees! As I am not interest with those accounting terms and formulas and I am not from a financial background, I never asked what will be my return of investment (ROI), in fact, I don’t even know that’s the question to ask as an investor. I just simply signed on any forms the consultant asked me to and I felt good after coming out from the bank thinking I will be making “a lot” of money in future. And I naively thought that I can live with that passive income and never work for others..
Second thing I did after saving up another sum of money, of course buying more mutual fund, still not knowing I should check on the ROI. But this time I heard of diversification. So I bought a Muslim mutual fund from the same bank, again! One common thing these two funds had: they all charged a high management fees which I still do not know that’s the thing I had to look out for. Yes, another mistake caused by ignorance.
LESSON ONE from these two experiences: if you have no time to do the research on what to invest, investing in fund is one of the way to get started. BUT always choose PASSIVELY MANAGED FUND instead of ACTIVELY MANAGED FUND. Passively managed fund here means like index fund and ETF that tracks S&P500, as it doesn’t required those broker or advisor to actively managed it, its management fee is far less than actively management fund. Good thumb of rule here is to choose a fund that has gross expense ratio less than 0.4%. Never underestimate the measly 1% fee, because in the long run, it eats up your return more than you can imagine. I did a comparison chart for different fee charged: 0.5%, 1.0%, 1.5%, 2.0% below:
LESSON TWO: Always look out for investment with at least 7–10% ROI of per year. For example an index fund tracking the Standard & Poor’s 500 index. If you are curious of my return from the two mutual funds that I bought, this is the result. I earned RM100 in the first fund after two years and I lose roughly RM100 for the second fund after one year. In short, I only breakeven after two years, 0% ROI.
LESSON THREE: Have correct expectation and mindset. Yes I was naïve to think that putting money in unit trust will be the end of my investing journey, trusting a bank to generate passive income and stop learning. In fact, I think this is the most important lesson learned and I am grateful that I learned this in just two years after my first investment. Always read books, always invest myself with new courses to learn new things, always spend time looking for other alternative ways to speed up the process. Set a realistic goal, make an achievable plan, take massive action and work toward it.
Okay, what did I do next after mutual fund? While I was working my ass off as part time salesperson in various industries, roadshows, events, and supermarkets, someone approached me, an insurance agent. Of course he did not mentioned that he is an insurance agent that time, as people will usually run as far away as they could once they heard “insurance agent” that time because these agent did too much of hard sales and makes people felt uncomfortable. He approached me as a financial planner asking me whether or not I am interested with saving plans for retirement. And how those plans works? They use investor’s money to invest in fund that is actively managed and part of the money will be used as premium for life insurance. Yes, another actively managed fund with high fees and a life insurance plan that has little coverage. End up I surrendered after “saving” for 6 years and losing roughly 5 figures from my capital invested. I am not even close to breakeven after 6 years, not to mention on the return.
LESSON LEARNED: Separate My Saving plan & Insurance plan. Never get a saving plan from an insurance company as it usually need to pay certain amount of premium that has little coverage. It’s totally not worth the money. How I knew this? I got myself another insurance plan that have way better coverage with lesser premium after I did my research.
Okay what’s next? As I mentioned earlier, I kept looking for ways to make passive income for more than a decade. Some did earned a little profit and most lose money. I will only highlight those mistake I did which I think will help most people out there. So next thing: Money game or named as MLM. I was one of those, being greedy and stupid. I knew it was a bubble and eventually will burst. But still I couldn’t resist my own greed and throw in some hard earned money, having the thought that I might be lucky enough to breakeven and earn some profit before the bubble burst. Since it was promising 20% return a month and I only need 5 months to breakeven. Then the rest will be profit. Haaa, the opposite happened! It burst right after one week of me throwing in my money. So “lucky”, I told myself that time.
LESSON LEARNED: Obviously, don’t try to chase all these hypes and try to be smart. Because more often it will outsmart you. It could have work much better if I invest the money in myself, gain the knowledge and be real smart.
After “low return high fee” mutual fund, “fake” saving plan, “try to be smart” money game, what’s next? Of course there are more, but I am done humiliating myself so this is the last one I am going to share on my loser. Then I will start “bragging” about my winner. Just joking. Next thing I did: Copy trade from someone that I think more “expert” than me, and who is that, practically everyone can be. Funny thing is no one actually tell me that I could earn money investing and trading myself, so I never have this thought in my mind that I can do it. Yes, it sounds stupid but this is the real fact. People around me kept saying that stock market is a high risk place, normal people hardly earn money because we do not know how to do research and do not graduate from a financial background. I was brainwashed that stock market is all about long screen hour in front of computer, looking at those green and red lines, need to have super computer to do all the analysis, and a lot of people suicide because of losing money they don’t have. As nobody in my family or around me is investing in stock market, so I stupidly assume that I couldn’t do that too, not even spending a little time searching from the almighty Google. So when one of my relative told me that I could just copy trade from someone that’s expert and I only need to pay a small commission to the one that I copied from, I fell into it. Result? I was really lucky enough that this bubble burst exactly the month I breakeven and successfully withdrew my capital, and that was after two years time. Zero return for two years and everything just gone in one day, I can’t even find the broker’s platform now.
LESSON LEARNED: Again, there is no shortcut in this journey. Gain the knowledge and always need to do my own due diligence. Never listen to anyone or any guru out there about getting rich quick or stock tips. Do own research and build the confidence to start investing myself. Knowledge is something others cannot take away from me.
Back then, if someone would have told me that investing simply means paying an amount of money to a company that I believe it will grow and bring me more profit in the future, and all I have to do is find out a way to analyze that company, it would have save me a lot of money and time. I would have an easier and correct way to start my investing journey. Because my mindset toward investing is not right, my expectation is not right, I wasted a lot of money and time. All I was doing back then was gambling and speculating instead of investing. And today I will share step by step of my transformation and hopefully it will help some of you out there.
Step 1: Set a goal. I shared this in my previous post: The 4 Ultimate Financial Plan, set up what I want to achieve and customize my own plan. It will just took you less than an hour to do it as I already provided the spreadsheet for easier calculation. Why this is important? Because without a goal, it is very hard to stick with your plan as you cannot envision what you are going to get as your reward after success.
Step 2: Open account with broker. I opened several accounts as I invested in different countries for diversification purpose. I am not representing any broker firms or getting any commission here, just sharing what I recommend and currently using for those who are clueless on where to start. I used TD Ameritrade for US market. I used CIMB and TA Online for Malaysia market, preferable to use CIMB because of lower transaction fee which is RM8 compare to TA Online who charged RM12 per transaction. And I had an account with UOB Kay Hian in Singapore for Singapore and Hong Kong market.
Step 3: Find out how much is my capital for investment. DO NOT put in every penny you have into investment fund as this is an amount of money that you will not touch until you hit your goal in 4 Ultimate Plans! So, I leave out my emergency fund (at least 6 months of my monthly income) separately. And for me personally, I leave out a sum of money for self investment for example like attending online courses after finding out how much is the course fee needed. You may not need to leave out this money if you intend to learn everything by yourself. No right or wrong here, its just that I prefer to have faster result and guided by someone who already success in what I want to do. DO NOT start investing if your emergency fund is not ready.
Step 4: Customize my own action plan to achieve my goal. After setting up my goal in Step 1, I know exactly how much I need to be financially secured, vitality, independence and freedom. And after Step 3, I know how much capital to start with. As I mentioned above, I would expect a 7–10% ROI per year for total beginner. But if you are as aggressive as me, I target myself to make at least 15% per year. There are some good years which I make way more than that, but just to be safe here, I suggest you to set up your targeted ROI within these range. I created a spreadsheet and calculated how long does it take for me to achieve my goal. So now, I know my goal, my starting capital, my target ROI, and how long will it took for me to hit my goal. Clarity is power!
Step 5: Start learning and reading. Goal here is to identify whether I prefer making money with trading or investing. If you are unsure the difference between these two, here is the simple explanation:
No right or wrong, just try out which one suits me best. For me I started as a Forex trader using only technical analysis. I watched every videos talking about Forex trading from Youtube. Learning all the technical indicators. But eventually I found out that this is not my thing. I do not have confidence to rely on trend and price movement to make my decision and place a trade. I do not have interest to study the fundamental of Forex market for example world economy and how any of the economy events will impact the Forex market. Again, I knew I was looking to make some fast cash here so I stopped myself. Then I realized that I love to study how a company started and how they make money. So I decided to learn how to invest in a company properly and took a course on how to pick good companies using Fundamental Analysis. I do share some information which I learned on my Facebook Page and feel free to follow here.
Step 6: Create my own portfolio that suit my personality and risk tolerance. This is after I understand how to differentiate and good and bad company and know how to analyze which company has high potential to grow and their specific risks. I only look for 10–15 companies to invest in, never more than that as I will lose focus on the one I invested. My suggestion: start with at least RM10,000 for one company. So for 10 companies, you will need at least RM100,000. If you are starting with less than RM5000, save up your money first. Once you reach RM5000, invest in one company that you understand the most and have most confidence in. Continue to top up money into your account and until it hit at least RM10,000 per company. Then invest in the second company when you save up another RM10,000. Continue to do so until you have 10–15 companies in your portfolio. Always reinvest and compound all the profit made. Never take it out until you achieve your goal in 4 Ultimate Plans. That is why emergency fund plays an important role here for any emergency case. While you are saving money, do research and find good company. Once you found them, add them into your watch list for future use. Of course if you are starting with few millions or billion, this is not for you, consult your own registered fiduciary. This is a portfolio for beginner who are trying to build from nothing to first million. One more advise, DO NOT blindly follow stock recommendations or stock tips from magazine, radio, newspaper and those guru from social media unless they show you their own portfolio and past performance, which they normally don’t and you have no idea whether or not they do have skin in the game. So do not follow, do your own research.
Step 7: Continue to top up money into Money Machine (investment fund). Once you hit RM100,000 portfolio, you will see a much better return but do not stop here, continue pumping money and let it compound. This is the number one secret to getting rich fast.
The differences are HUGE! Just do it until you hit your goal, whether you are aiming for financial security, financial vitality, financial independence or financial freedom.
Step 8: Maximize your ROI in a less risk environment. What do I mean by this and how do I do it? I trade options. As value investor, I only buy when the price comes below the intrinsic value. So if the price doesn’t come down to it, I will just hold my cash and wait. No return made while waiting. Feeling kind of waste right? Again after I build up my portfolio, I continue to explore on ways to maximize my ROI and I found out that I can write a Sell Put Option contract in US market to make money while waiting. This was HUGE NEWS to me back then. Then I attended a course to learn more about trading options. I applied those strategies taught and up until today, this had make me a consistent 1–3% RETURN EVERY MONTH for almost two years. And more importantly, my risk exposure was way less than investing in stocks. Do comment below this post if you wish to find out more and I might create some post in future.
Step 9: Learn, Pump, Repeat! Continue learning, Continue pumping money into your Money Machine (investment fund), Repeat the process.
So, these are step by step of me from being a stupid and greedy gambler to a profitable investor. I am blessed that I was able to achieve my Financial Security goal at age 26 following this plan. I am blessed that I had the choice to quit my full time job and currently spending my entire year with my family at my hometown. Maybe after this year I might want to work for others again, but its definitely not because of I need to, but its because of I want to.
Appreciate much if you could show me a little support by liking this post or following me here and my Facebook Page. Lastly, I hope this post helps, bye for now!
