Over the last weekend, I had the opportunity to attend a Value Investing Summit (VIS) organized by 8I Education at the Singapore Expo, where many distinguished speakers from around the world were present to share their expertise and knowledge. As a young investor who has just barely started on her investing journey, it was definitely an eye-opening and enriching experience learning about investing and what one should look out for.
These are my 3 key takeaways from the event:
- Stay within your circle of competence
It is tempting to jump into investment instruments that promise high returns, within a relatively quick period of time when everyone else around you is doing it- don’t, Mohamed Ali-Reda, founder of Darkhorse Capital advised. This statement brought to my mind the investment scams that had occurred in Singapore in recent years, such as land banking and agarwood. These had happened because investors fell prey to the lucrativeness of the investments, but had failed to find out the mechanics of it first before committing.
Staying within your circle of competence also reminded me of the fact that it enables you to follow a critical rule that every investor should follow in investing. Warren Buffett, one of the greatest value investors around, mentioned that the rule number one in investing is to never lose money. Rule number two is to never forget rule number one. Since most people invest to grow their wealth, adhering to these rules would ensure that we can achieve this aim.
Thus, it is pertinent to understand the investment instrument that you are interested in before investing into it. Give the myriad of investment instruments available out there in the market, it is near impossible to understand them all. From equities, bonds, options, REITs… investors are spoilt for choice. Hence it is prudent to have a niche and focus on sectors that you understand, and are comfortable investing in. This way, you will also have a better idea of when to enter and exit the market based on the happenings in the industry.
Ali had also advised investors to stay curious, match their investment style with their own personality, and have a laser focus on one’s investments. He also advised setting Google alerts to keep an eye out for events and happenings that you may be interested in acting upon.
- The best investments may just be the things around you
Clive from 8 Capital had shared a story about Zojirushi, a well-known Japanese brand that is renowned for its quality household products, for example its rice cooker and thermos flask. The company has been expanding its presence in overseas markets such as the United States and South East Asian countries. It also has valuations and financials that are more attractive than its closest competitors, such as Cuckoo, Breville and Supor, with a strong management team to boot. The CEO of Zojirushi, Norio Inchikawa, is the grandson of its founder. Yet, the company’s share price is trading at a discount of 25 to 50 per cent compared to its rivals, thus he termed companies such as Zojirushi as a ‘hidden champion’.
When looking for investment ideas, you may not need to look far to think of one- they may just the everyday products that you use and consume every day without a second thought. In economics, these goods are also known as necessity goods. Given that you need them be it in good or bad times, looking for the companies (aka hidden champions) that produces these items and investing in them can be a good idea.
Of course, the best investment and asset you will ever possess is none other than yourself, something which John Lee, CEO of Wealth Dragons had shared. He suggested reading books to keep acquiring knowledge. Warren Buffett himself had also stated, “I just sit in my office and read all day. Read 500 pages like this every day. That’s how knowledge builds up, like compound interest.” I got to know some of the suggested books that value investors should read, such as Competition Demystified by Bruce Greenwald and Judd Khan, and Financial Shenanigans by Howard M. Schilit and Jeremy Parker.
In addition, John also recommended going for courses and seminars to learn more and meet people who know more than you do. A ‘can-do’ mindset is also essential- shut out the voices in your head that say you are not good enough.
But most importantly, it reminded me of the fact to keep my body and health in tip-top condition. After all, health is wealth, and learning will not be possible with a healthy body and mind.
- The best time to invest is during bad times
With the sluggish economy and the market moving sideways more often than not due to the uncertain outlook ahead, it can be really hard to see where everything is heading towards. Yet, Dr Liew mentioned that bad times of uncertainty and unpredictability present good buying opportunities to snap up good businesses at discounted prices. The greater the uncertainty and unpredictability, the greater the opportunities to make a profit amidst all the volatility in the market, given that good stocks will usually be beaten down unfairly.
This brings to mind another rather well-known quote by Warren Buffett, that as an investor, it is wise to be “fearful when others are greedy and greedy when others are fearful.” Of course, this requires the investor to do homework on his/her part as well, by looking for a business that are in the pink of financial health before plonking in their hard-earned money. Sometimes, the fear that others have may be there for a good reason- you wouldn’t want to fall into a value trap!
Apart from picking up bargain buys at a time when everyone else is on the sidelines, being calm, collected and in control of your emotions is also as essential during bad times. Lauren Templeton, another speaker in the VIS, had mentioned that the key to investing successfully is to never panic in a crisis. Adhere to your investing strategy, stick to your stop-loss and take-profit limits, and you will be fine.
Here is a bonus video of Lauren Templeton who is a Keynote Speaker of VIS2017.
The writer, Peixian Quek is an 3rd year student in Nanyang Technological University. Her journey with money began when she attend one of Value Investing College workshop. She is exceptionally talented in music and enjoys travelling the world.