Wednesday, September 1, 2010

Investment Lessons

In February 2010, Personal Money, one of the leading financial magazine in Malaysia interviewed me on how to be a better investor. In order to help more young investors to know more about share investing, here, I would like to share with you part of the interview contents.

Personal Money: "Personally, how did you learnt to be a better investor? What are the experiences that you went through (mistakes you made) that taught you the “better” ways?"

Pauline Yong: I had some rough rides before but I’m glad that I started young as those experiences help me to become a better investor now.

The first lesson that I learned was back in my high school. One of my school teachers was an ex-broker in stocks, so he liked to talk about shares in our class. Under his influence I bought the first stock under my relative’s account. I had no idea what the company was doing and I didn’t bother to find out either. Then I went to overseas for my education and when I came back the value became less than a third.

So lesson No.1: Never listen to rumours. We should do our due diligent.

Subsequently the 1997 Asian financial crisis was another great lesson in my life. It was in 1996 that I just graduated from university and I received RM10,000 from my father as a gift. As a young and eager finance graduate I opened a trading account and started investing.

I invested all my money into three counters, all construction related as they were enjoying the economic boom during the “Four Tigers Era”. And soon the Asian financial crisis struck, there goes my investment. At present, one of them was de-listed, one was sold at break-even and I’m still holding the third counter at paper loss.

Hence, lesson No.2: Never invest all your money at once. We should invest in stages; and

Lesson No.3: Never invest all the money in one sector. We should practice diversification.

After all those hiccups, I was not discouraged at all. In 1998, I kept buying and I have learned the most valuable lesson in the stock market.

Lesson No. 4: It’s a cycle – what goes down will come up; and what goes up will come down!

I bought Public Bank at RM1 and sold at RM3, I bought Public Bank again at RM2 and sold at RM4, I did that to other stocks too - “buy low, sell high”. This strategy works very well when the stock market is on an uptrend.

As I was getting “hooked” on the “buy low, sell high” game I discovered the next lesson:

Lesson No.5: Do not over-trade as it will turn us into highly emotional.

I realised I was very emotional, I suffered from heart palpitation and nervousness as I was always guessing the next move of the market. That was not investing, that was speculating! Emotional investing will turn us into a loser in the long run.

It all boils down of being a better person. That means that you should improve your attitude because it does reflect or influence your performance in share investing. Don’t be afraid of making mistakes, mistakes make us grow. What is more important is to foster a positive attitude which makes you decide things objectively and to control your negative emotions better.


twc said...

Well Pauline. You are fantastic; you turned adversity into opportunities through your deligence: see how you made in Public Bank although you did make a number of mistakes earlier on, even blowing away the 10k gift! Well I admire your hard work, perseverance and tenacity of purpose in stock investing.
Your two books are excellent; I have a great deal to learn though I hahe been in the market for more than 20 years! Chiam Tah Wen( at CIMB talk on Saturday March 5 2010)

twc said...

Learning from Pauline's lessons in share investing is a first step toward achieving success. In this respect,a positive mindset is crucial in turning adversity to opportunities!


twc said...

Good lessons learnt Pauline. We can all learn from you especially in developing a positive attitude to stock investment

Pauline Yong said...

Hi Thank you Mr. Chiam. Btw, can I have your email address again because my email to u was returned.