The holy grail of investing (Part 1/3)

I’ve only been trading and investing in the stock market for 4 years or so, so I wouldn’t call myself an investing expert or anything of the sort. I don’t have any financial background other than the things I self taught myself over the past 4 years. Though if we were to consider my initial rendezvous with real estate, then that would give me about 5 to 6 years of ‘investing experience’. So just as a disclaimer, you should take whatever I say about investing with a pinch of salt, and I’d really appreciate if you’d correct any mistakes and improve anything that is lacking.

That being said, there have been a few things that I picked up over the years from all the youtube videos that I listen to, all the blogs and websites I read, and from the discussions on telegram groups and channels and with my investor/trader friends.

Like a lot of you (I assume), one of the things that I have been looking out for was the holy grail of investing. The secret formula to getting rich (preferrably quick), the technical indicator – or complex combination of indicators – that can give you an edge over the rest of the world.

My short experience at least has taught me that no such thing exists. At least not on a reliable scale.

One of my current holdings. Tadmax Bhd, KLSE (4022). I entered in 7/2019 based on TA and very basic FA, and am still holding till TP based on TA.

Of course, that doesn’t mean that I think technical analysis (TA) and fundamental analysis (FA) are useless, on the contrary I believe that any self respecting trader and/or investor should try to educate themselves about them (among many things). And I use a combination of both TA and FA to make my investing and trading decisions.

Although I haven’t found any ultimate formula for getting rich quick and easy from investing, there are a few things that I found to be very important in helping us make the best investment choices for ourselves.

‘A method that can get you to where it is that you want to be, and that can make you profitable no matter what analysis or indicators you use or don’t use’

If there is a holy grail of investing, I’d say that these ‘3 core steps an investor should take while investing’ come pretty close (yeah sorry I can’t come up with a cooler term like value investing or swing trading)

Step 1: Define clearly what you really want in life

Before you start trading or investing, or doing any combination of them… Or even before you do anything in life for that matter, I think it important that we ask ourselves ‘What do I really, really, really want in life?’… ‘What is/are really important to me?’

A number of people I think, discover trading (this usually come first) and investing (we ignore the boring stuff initially, and re-examine it later) in their search for a way out of their 9-5 jobs because they want more freedom to do the things that they love or because they hate their jobs, or maybe a combination of both.

For me it was more of the former. I hated my job. A job that I spent decades to get and for which I took a massive debt. Then like an idiot, I took another big loan for this job that I loathed. Ok to be fair to my former self, I made this idiot decision before I had any financial sense so maybe I can be forgiven?

I’m a medical doctor. I took a RM250K ‘debt’ to get into medical school (the official term is ‘scholarship’ but I think that this is a devilish little lie to tell children. Debt as in – it can friggin ruin you if you’re not careful! is a more honest term). That’s only about USD60K which might not seem much for people paid in USD or SGD or Pounds, but I only make RM7K+ or so a month after 8 years of working. That’s lower middle class in Malaysia I think. This debt is either paid off with 10 years of service, or spend a large part of the remainder of your life paying it off. 10 years may not seem like a long time if your life is all clear and rosy, but if shit happens, this debt hanging over your heads can be a real burden.

Even after knowing that I hated this job, I took on another debt to pursue a masters degree, this one with a 7 years service contract or RM165K FULL payback if the contract is breached. That’s like selling a naked PUT option for a stock that has peaked, is treading on flimsy support and has all the signs of jumping down a long and steep cliff.

So now I have half a millions worth of debt (I also took a personal loan to invest in real estate) and am forced to work a job that I don’t like to pay it off. Does this sound almost like you?

This is why when I discovered the stock market, and later on options trading and the massive returns they promised, I chose to take the higher risk, higher reward path of short term trading and long options trading. I even dabbled with day trading for a while.

My goal at the time was ‘to make as much money, as quickly as possible, as easily as possible so that I can quit my job, pay off my debts and work as a full time trader’.

Trading is fun, and the adrenaline rush of day trading is exhilarating. It was something that I loved. And even to this day, my hobby is to draw charts and analyse technical indicators. But trading also had its price. The only form of trading that could realistically (though not very probably) get me to where I thought I wanted to be was short term trading. Longer term trading techniques and investing methods were not going to make me half a million in a few years or support my monthly spending requirements. That is, unless I had a few million off the bat which I don’t.

In order for me to trade, I had to sacrifice time with my family. I needed to focus alone while trading. That might have been workable (trade a few days, meet my quota and then spend time with the family) except market conditions also affected me out of trading hours. I spent hours off market reading news and rechecking my analysis. It was a job that took me away from my family even more than my current job.

Trading, among several things made me realise what I really wanted: to be able to be there for my family whenever I am needed.

I didn’t hate my job. I hated the fact that it kept me from spending time with my family.

This was true in the first 2 years when I was a Houseman but not so much after that.

And full time trading, or even part time from what I had experienced was not going to give me this.

So if what you want is time freedom (isn’t this what we all want?), then maybe trading isn’t the best way.

It can be a complement to your income, especially if like me, it’s something that you love and would do anyway. But to make it an indispensable source of income that you and your family depend on – that’s just trading your 9-5 job for another 9-5 job or worse.

After you have decided on what you really want in life, only then can you clearly define your financial aim. And only then can you decide on the best methods of trading and/or investing that suit your needs.

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