Frequently Asked Questions on Investing (Part 1)

This would be a multi-part series on frequently asked questions I encountered. I will attempt to give clarity on why some of these questions are the most dangerous questions one can ask. I will also give clarity on how one should ask the right questions so you can get the answer you want.

Question: {insert stock name here} is rising or falling, buy now or sell now?

When these sort of questions are asked, one might get the following replies:

1) No reply at all.

2) It depends.

3) BUY!

4) SELL!

5) Wait first or wait until it hits $xx before buying or selling.

To the person who asked this question, if the person get the first 2 replies, he/she might feel annoyed because there is no actionable information. However, the person should feel glad instead!

If the person gets the last 3 replies and act on it, the only thing I can say is... Good Luck.. He/she will need it!

First of all, the fact that this question is asked means ALL of the following:

- The person has no idea what he/she wants.

- The person has no clue about the company he/she is going to invest in.

- The person does not know how to do technical analysis or not sure of the analysis.

- The person just plan to follow blindly OR is speculating a.k.a gambling.

Under such situation, it is best not to buy or sell stocks at all, because it is easier to "invest" in Singapore Pools (For non-singaporeans, that is the place where people go to gamble) or visit a Casino.

Investing is not gambling, neither is it a game. It takes education and effort; missing one or both, and the end result is potentially a loss of money.

In order to answer such question, there are 2 IMPORTANT things to do first.

1) The objective or goal of the investment must be clear.

2) The tools available to achieve the objective or goal must be understood.

Knowing the Objective/Goal

Different people have different objectives / goals. For instance, some people want to invest so they can afford to buy a car or put downpayment for a house. Some want to leave a legacy for their children. Some want to retire early and have a steady flow of passive income. Some want to augment their active income with passive income. Each of these objectives will require a different approach. Even if the objective is the same, there are other factors to consider, such as age, starting capital, available recurring income for investment, risk appetite, etc. Therefore, there is no single solution that fits all and the worst one can do is to follow others because their objectives and starting point is likely to be different. This first step is very important because not knowing the objective means there is no destination to work towards. This would result in the person following the hottest topic of the day and make bad decisions such as FOMO[Fear of Missing Out] buying or selling.

An example of a clear objective would be: I am x years old and looking to retire at age x and aim to have $x of passive income monthly. My starting capital is $x and my salary is $x. I can set aside 20% of my monthly income for investment.

Understand the tools available

Once the investment objective is clear, the next step is to understand the tools available to achieve the objective. There are 2 choices:

1) Hire a financial planner. A good financial planner will recommend the right tools to do the right job to achieve the objective. This method is good if the person has no time or energy to manage his/her money or do not have the knowledge to do it and feel safer for someone else with the right expertise to do it for him/her. Many people do this and it is a perfectly legit way to invest. Disclaimer: I do not represent any financial planner or companies, neither do I provide any recommendations.

2) Learn how to use the tools available and manage the money themselves. This is very involved and requires time, effort, energy, and knowledge. People in this group should not be asking the frequently asked question above. If the person still ask such questions, more time and effort is required to acquire the right knowledge. If that is not possible, go to Step 1.

Asking the right questions

So, what is the right question to ask? Good long term investors do extensive research on the companies in their watchlist to look for investable companies. They like to seek other people opinions and viewpoints in the hopes of understanding the company even better and to eliminate blind spots in their analysis. So the right question will always involve an exchange of information. For example: I was studing company X earnings report and discovered that their revenue growth has been slowing down for the past 2 quarters. However, I cannot find any information that seem to indicate that there is any issue with their business fundamentals. Am i missing something or can someone point out information I should be looking at?

For short term investors, they are usually more focus on technical analysis such as resistance and support levels, pattern matching, etc. I am not a short term investors, so I shall not elaborate too much on this as I am not sure what is the right question to ask. Please look for other guru traders and check out their postings.

As you can see... asking the right questions is not as easy as asking whether to buy or sell now! It requires research on why other investors are buying or selling, whether it is geopolitical issues, market over-reaction, company fundamentals changing, etc.

In summary, always start with an investment objective, then know how to use the tools available or where to find help to use the tools. With this first 2 steps completed, such questions will usually answer itself as the person would have done some research and build convictions on the companies he/she plan to invest in to achieve his/her objective.

‌@TigerStars‌