Saturday, July 21, 2012

A good investment book for Singapore context

The best investment a person can make is investing in himself. The safest and most rewarding asset I possess is my knowledge and ability to earn a living. It is safest because nobody can take my knowledge away. Enemies can rob all my physical possessions but they cannot rob my knowledge away.

A good education does not always have to come with a high cost. Reading good books is a cost-effective way to get a good education. I would suggest to kiasu Singaporean parents that after your kids are old enough to read books on their own, encouraging them to read good books is more value for money than sending them to enrichment courses. It will be interesting if someone can do a study on whether the lucrative tuition industry in Singapore has enriched our kids more than impoverish our parents.

In investing, it is even more important to read the right books. Unlike the hard sciences where nonsense can be invalidated through rigorous experiments via the Scientific Method, nonsense teachings on investment can appeal to readers by playing on their sense of greed and fear. This is why so many people, even smart ones, fall prey to investment scams which look downright stupid on examination.

Investors are money-minded people. It is hard to make money by writing books for the small Singapore market. To make more money, it makes more sense for investment gurus to spend time on investment than writing a book on investment. Some authors use their books as marketing material to promote their much more lucrative trading courses which charge thousands of dollars. I do think some of the financial trainers know their stuff and their students will gain some benefit. However, attending expensive trading/investment courses is not a cost-effective way to get educated compared to reading good books, not to mention these authors will withhold some of their knowledge from the books to keep the best for the more expensive courses. It is only fair to keep the best for the best-paying customers.

When choosing investment books, one thing to look at is the background of the author. He should have the right background to know his stuff. He should have a long and positive track record to prove that he knows his stuff as well as to temper theory with practical advice. Lastly, he should be willing to share his knowledge, preferably without hidden agenda. The last characteristic is almost impossible. How can you expect altruism from investors who are money-minded by nature?

I believe Dr Michael Leong, author of the book "Your First Million - Making it in stocks",  comes closest to fitting the above characteristics. He was a successful entrepreneur as the Founder of Successful businessmen are better investors because they know what to look out for in assessing a business. It certainly helps in analyzing companies. Being in charge of a financial media company that supports public-listed companies brings him in close contact with numerous CEOs of Singapore's most successful companies. Very few has this privilege. He shares his insights from these experiences in his book.

In the old days, ShareInvestor forum(no longer visit the forum nowadays) attracted very good private investors to share their special insights. Old-timers will remember wonderful contributors like Mossie and Warren. I believe members of the forum, including Dr Leong himself, picked up some of their investing prowess from interaction with these forummers who shared willingly without expecting much in return simply because they like to talk about investing.

Dr Leong made enough money from his investments to enjoy an early retirement. This is a proven track record for fellow investors to at least read what he writes about investing. The fact that he is retired is one of the things that attracted me to the book. A person who has already made enough money from his investments to retire from the rat race is more willing to share his knowledge without hidden agenda because he has already reached his money goal. If an investment book was written by people like me who still has kids to feed and in constant worry of retrenchment, do not expect similar altruistic sharing. Recently, Dr Leong told me this about his book (in his exact words), "I truly wrote it for my kids as they are not interested in these things currently and I am concerned that when they are, I may not be able then to recall as much as I can now." What can be more genuine than advice to one's own kids?

Readers may consider reading the last chapter of the book "Money and Life" first. It is a chapter on Personal Finance and a person's relationship with money. Not many of us can be rich through investing but most of us can stay out of financial trouble by following basic Personal Finance practices like saving money and not getting into heavy debts. Therefore, the order of learning should be Personal Finance first, then investing for capital gain.

One caveat when reading investment books is that the investment strategies outlined in the book is based on what fits the author best. All of us are unique in our own ways with differing talents and personalities. Just because Dr Leong can be successful with a concentrated portfolio does not mean that his readers can. A concentrated portfolio is actually a highly risky method as compared to investing in a diversified passive index fund or ETF. Readers should not blame the author if they follow his strategy without the same outcome.

Most of the good books I have read on investing were written for US investors. It is refreshing to find a good book like "Your First Million - Making it in stocks" which is written in the Singapore context. I cannot say it is the best because this is the only Singapore-centric investment book I have read so far. I highly recommend "Your First Million - Making it in stocks" for fellow investors who want to invest in the Singapore stock market.

PS: I am not paid a commission to write this promotional article. Dr Michael Leong does not know my real identity. Nobody can pay me any commission because nobody, not even my parents, knows my real identity except my wife but she does not like to read my blog.