Martin Lee @ Sg
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Stock Investment Beginner

Question for Lion Investor

Dear Sir,

I would appreciate some advice for a complete idiot in stock investment who wants to take the first step in stock investing. What are the “must have” knowledge that one must pick up before taking the plunge?

Thank you.

Frank

My Comments

Before you even start to invest, you need to make sure your financial position is fundamentally strong. This means having a few things:

  1. A postive cash flow every month.
  2. Putting aside some cash that will tide you through in case of any emergency. Typically, this is 3-6 months of your salary or expenses.
  3. Money you don’t need in the short to medium term that can be used for investing. We shall call this your investment fund.

Once you have your investment fund, you have to decide on an optimal asset allocation for it based on your needs. This will detemine what percentage of your investment fund goes to stocks, bonds, alternative investments, etc. You might want to do some reading on the topic “Asset allocation”.

Let us look more at stock investing since you asked about it here. There are two main schools of thought when it comes to stock investment.

The first group of people are the traders. To them, the stock market is like a casino.

Traders focus more on price movement more than anything else. If you intend to become a trader, you need to read up on technical analysis and trading methods.

The second (and smaller) group of people are the investors. They treat buying a stock as buying a business. If you think about it, that’s what a stock market essentially is. It provides a secondary market for the buying and selling of shares of companies.

At any one point in time, the quoted prices might be worth more, less or equal to the intrinsic value of the business.

The returns you receive will thus depend on both the performance of the company you bought, as well as how it’s price changed relative to its business value.

If you are going to focus on being an investor, a good place to start is to read Warren Buffett’s annual letters to his shareholders. They contain a chuck of his investing insights and ideas.

You will also need to be familiar with accounts so that you can analyse the financial reports of the companies you are researching.

For both groups of people, some economics macro background will also be useful.

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6 comments
felix says 8 years ago

Hi sir,

as normal guy, my will power to invest is way bigger than my capital power. how much minimum amount for a very beginner investor you suggest to invest to avoid loss on fees impose by the brokerage or CDP… initially i interested in MCT, but reading the CDP fee and amount i intend to buy will eventually drain all my money.. i decide not to.

please enlighten

thank you in advance for your advice

best,
felix

Reply
Rozy says 9 years ago

Hi….

I am a newbie in investing. I was wondering if there are classes I could attend as a Beginner in Investing..

Hope you can shed some light in this.

Thanks.

Reply
wiseinvestor says 10 years ago

Like what someone said, fundamental investing assist in deciding what to buy and technical investing assist in deciding when to buy.

I believe that when it comes to stock investments, one really have see stocks as businesses, and not stocks as stocks. In addition, Buffet style of value investing (fundamental analysis) is what I recommend for myself and others.

As I don’t want to spend my life watching stock tickers like traders.

But nevertheless, concepts from technical analysis may help in deciding on when to buy.

Reply
lioninvestor says 11 years ago

Hi Frank,

You are welcome.

There’s about 30 years+ worth of Warren Buffett’s letters to be read, so you should have your hands full. 🙂

Reply
    Depp says 10 years ago

    Hi Lion ,

    Firstly , I would like to thank you for yr help to advise on the right issues matter.

    I m interested in stocks investment too . I did invested during time frame ( June 07 – Jan 08). however the result is negative . however i m not disappointed because i learnt more about stocks TA , FA and time Frame … and etc.

    May i know yr current views on the SGX stocks ? overbought annd unrealistic pricing ?

    Reply
Frank says 11 years ago

Thank you very much. Look like I have a lot to learn. Warren Buffet’s report is great, offering a lot of insights of a great and wise investro and businessman.

Reply
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