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Beginner’s Guide To Investing

Class 1

Can You Really Make Money In The Stock Market?

The Stock Market Is A Big Casino

It is true, most of the people in the stock market are just gambling. This is happening both among retail investors and institutional investors. It is almost like a roulette table, with people betting on random stock codes when they have absolutely no idea what the company is. As with all games of luck, some will definitely win big, but most will lose.

But just because the stock market is like a giant casino, it does not mean real serious investors would have to play the same game as everyone else.

For example, in a casino, there are a group of people who are good at counting cards in the game of Black Jack. Many are so good at consistently winning money that many casinos have banned them.

In the stock market, there is also a group of investors that is constantly making money. This group of people is the value investors. And the greatest of them all is an investor by the name of Warren Buffett.

Value Investing is a proven strategy that allows long-term investors to make money in the stock market. The first thing to know about investing in the stock market is the key difference between investing and trading.

Investing Vs. Trading

The stock market is just a place for people to buy and sell stocks. However, we must differentiate what is investing and trading in the stock market. For us to successful grow our wealth in the stock market, we must become an investor, and NOT a trader or speculator.

INVESTOR

TRADER

  • View a stock as a part-ownership of a business
  • Think like a businessman
  • Not interested in the stock chart of a company
  • Want to take part in the future of the company
  • Willing to understand the business and assess the risks and opportunities
  • Know how to value a company
  • Invest for the long term, view investment in term of years
  • Treat stock as just an instrument to speculate on
  • Has no idea about the business behind the stock
  • Focus on stock charts
  • Always looking for short-term profits, view trade by minutes, weeks and months.

Often what we heard on the news or from friends who are trading in the stock market are short term gains that had happened out of the blue. Sure, getting a 10% gain in one day is exciting and give the impression that making money is so easy in the stock market. Yet these short-term gains are almost never sustainable. This is because the gain is typically a result of luck. And luck can go both ways. Having luck as a strategy is not sustainable. I called it “Hope Speculating”.

Yet, what we do not hear that often is how people who have invested in a company and kept it for years, without doing anything, can end up becoming very rich. The most extreme example is investors who have invested in Warren Buffett’s company, Berkshire Hathaway since 1964. According to news report, a $1,000 investment in Berkshire Hathaway in 1964 would be worth $10.5 million by 2014. What is interesting is such examples are not the anomalies. Even in Asia, you would still be getting these outsized return if you have invested for the long term.

Does Long-Term Investing Works In Malaysia?

In Malaysia, if you have invested sum of RM15,000 in each one of these companies since 1992 and just reinvested your dividends, you would be a very rich person by today (May 2017).

  • Public Bank Malaysia – RM15,000 to about RM1.7 million
  • Nestle Malaysia – RM 15,000 investment to about RM 560,000
  • Carlsberg Malaysia – RM 15,000 investment to about RM 450,000
  • Heineken Malaysia – RM 15,000 investment to about RM 336,000
  • British American Tobacco Malaysia – RM 15,000 investment to about RM 280,000
  • Allianz Malaysia – RM 15,000 investment in 1992 to about RM 225,000
  • Dutch Lady Milk – RM 15,000 investment in 1992 to about RM 2.01 million

Does Long-Term Investing Works In Singapore?

We are able to see similar examples in the Singapore stock market as well.

In Singapore, if you have invested sum of S$15,000 in each one of these companies since 2000 and just reinvested your dividends, here’s what you might end up with (May 2017).

  • Raffles Medical Group – S$15,000 to about S$230,000
  • CWT Limited – S$15,000 to about S$300,000
  • Genting Singapore* – S$15,000 to about S$110,000
  • SPDR STI ETF# – S$15,000 to about S$40,000

*Data for Genting Singapore started in 2003

#Data for SPDR STI ETF is since its inception in 2002

Does Long-Term Investing Works In Hong Kong?*

Again, there are multiple example to show that investors would be profitable if they have invested for the long term.

  • Ping An Insurance Since June 2005 to June 2017: HK$15,000 to about HK$130,000
  • CK Hutchison Holdings Since June 2005 to June 2017: HK$15,000 to about HK$80,000
  • China Mobile Since June 2005 to June 2017: HK$15,000 to HK$60,000
  • Tingyi Holdings Since June 2005 to June 2017: HK$15,000 to HK$45,000

*Data from Shareinvestor.com

And the ultimate example of this strategy is Tencent Holdings. A HK$15,000 invested in Tencent Holdings since June 2005 would be worth about HK$2.8million by June 2017.

So, it seems that you can indeed make money in the stock market, globally. The key is to invest for the long term. The stock market is not a place for you to get rich quick. I highly doubt there is any place where you can get rich quick.

However, if you have the patience and the desire to grow your wealth in a more safe-proof method, then investing is the right skill for you to have.

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Now Available On Book Depository

Our Course is created based on some of the materials discussed within the book. Our book will take you through a more detailed study into how to apply value investing concepts in Asia.

And Amazon.com

“The book is a great contribution to the investing society. Stanley and Mun Hong have been able to put together the valuable experiences and wisdom of many Asian outstanding fund managers!”
Dr. Tan Chong Koay

Executive Chairman, Phiem Asset Management

“This is not just a book about value investing. Instead, it is a manual for value investing with an Asian twist that investors with an eye on the fastest-growing region in the world will reach for whenever they have questions that need answers.”
Dr. David Kuo

CEO, The Motley Fool Singapore

“Stanley Lim and Mun Hong have skillfully weaved three things together in this book for the Asian investor: the key principles of value investing, where to identify the investment opportunities and the mine fields to side step in Asia. With these skills, the investor can start investing in Asia.”
Mr. Wong Kok Hoi

Founder & CIO, APS Asset Management

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