Tuesday, November 27, 2018

Learning through cheap books/internet versus expensive training courses

I have never attended any trading/investment courses before. Not even free ones which are usually sales preview. I declare upfront that I am personally biased against training courses that charge more than $1000 and last only a few days, since I used cheaper alternatives such as books and internet to pick up financial knowledge. I cannot make fair comments about the quality of these courses since I have never personally attended any myself but one thing I can say objectively is that they are certainly much more expensive compared to books and internet resources. My financial education was mostly gained from free books borrowed from the library, free educational materials from the internet and online interaction with other investors/traders. I have benefited from many kind people on online forums who have generously given their time free of charge to share their knowledge without personal hidden agenda. So far so good using this cheaper approach.

In the past, I have written a positive review free of charge on a 1-day investment course based only on its course content as I did not attend the course in person and it was priced at SGD98. Short courses that are priced above $1000 are more expensive than even expensive MBAs on an hourly basis. Maybe some people learn better in a class setting instead of reading but do be mindful of the price you are paying versus the value you are getting.

If a person is prepared to pay thousands to go for a short course to learn how to invest in the financial markets, it means he is serious to become a DIY(do-it-yourself) investor. He has to answer this question first "Does it make sense to DIY? Are you financially better off buying cheap passive equity index funds/ETFs such as Straits Times Index instead of managing money yourself?" Most professional fund managers perform worse than cheaper passive equity indices. What makes you think you can outperform the equity index when professional fund managers with more time, more resources and more knowledge are unable to do so? A DIY investor has to spend a lot of time if he is serious about it. He will surely fail if he is not willing to put in the time. He will still face high odds of failure even if he is willing to put in the time since most full-time professional money managers underperform the indices. Time is a limited resource. When you spend lots of time on DIY investing, you have less time for your career and family. You may miss that promotion and bonus because you got distracted by DIY investing. You may end up making less money despite putting on a lot of hard work. Your family relationships may suffer as well. I believe most people should not be DIY investors in the financial markets. Having said that, I am a DIY investor myself. This is because I saw bleak prospects in the industry that I worked in when I started out (turned out to be correct) and I love the process of managing my own money. If I do poorly as a DIY investor, I will view it as expenses for indulging in a hobby I like. If it turns out well, the skills acquired can serve as a backup protection for my family finances in case I get retrenched as a middle-aged engineer. This was my reasoning when I started out as retail market player.

Among the people who attended the expensive short courses, one commonly cited reason is that short courses speed up their learning process. They say reading books take too much time. If that is the attitude, then they will most likely fail. A person cannot expect success if he is unwilling to sacrifice the time to master a craft. No short-cuts to success. If they are willing to put in the time, then they should ask themselves the question if it makes more financial sense to use cheaper alternatives such as books and internet resources instead of expensive courses.

If Renaissance Technologies is willing to open up their money-making formula in the Medallion Fund in a 3-day training workshop, I am more than willing to pay a fortune for the short course. These are proven strategies that cannot be found in books and internet. But would any money manager with secrets to produce consistently high returns yearly like Renaissance be willing to teach their secrets to outsiders? I am personally skeptical of trainers who claim to have wonderful track records and want to reveal their secrets because it is their passion to help people reach financial freedom and they want to give back to society. If a trainer boasts about high, consistent returns that matches top hedge fund managers, please ask for his brokerage statements that show his past transactions. The past transactions must include all the losers and preferably long enough to cover 2 boom-bust cycles. If he wants to teach for a fee, it is reasonable to ask for evidence to verify his claims. Know your rights as a customer.

A close friend shared his experience about a financial trainer who tried to portray himself as someone sincere about helping people reach financial freedom through his courses. He felt his intelligence was insulted and I absolutely agree. If someone is really sincere about helping people reach financial freedom through education, there are cheaper ways like sharing their insights on forums, websites, youtube videos, self-published ebooks which can be accessed free of charge. Why charge a four-digit sum for a short course and claim it is your sincere passion to help other people reach financial freedom? It is absolutely fine for a businessman to charge whatever price he wants for his product/service. He is running a business and it is fair to expect him to charge the optimum price to maximise his profits. I will do the same if I were in his shoes. However, please do not use noble-sounding reasons like I am doing this to help you reach financial freedom so that you can quit the job you hate. Customers should be on their guard when someone claims he wants to help people reach financial freedom but charges a exorbitant price for doing so, given that there are cheaper alternatives. As for the chances of reaching financial freedom through the markets, most people are better off not touching the financial markets themselves anyway. I wish potential customers of these financial courses are peppered with realistic warnings and not sold to unrealistic hope before they seek their riches in the financial markets. This is particularly so for financial courses where students are taught to use leverage. Failure could mean financial destruction and following that, family falling apart.

Not every action taken is driven by money. I have been touched by the kindness of experienced traders/investors on online forums who sincerely shared and helped without expecting any payment. The late Dr Michael Leong, founder of shareinvestor.com was one of them and there are others too. In Dr Leong's words,

For those of us who make money directly from the markets, we know how difficult it is for the novice investor to start investing. The least we can do is to show you the ropes free of charge. We will never want to take any part of your savings just to show you the ropes. This money is needed by you to start off your investment journey. Hence, my conscience will certainly not allow me to take such money. I rather share freely, or not at all.

http://pertama.freeforums.net/thread/77/real-investors#ixzz406iJZvsr

It is not hard to spot these rich and kind people. They are usually people who have made enough from the markets and have gone full-time because it is their passion. They spend most of their time trading/investing and not training. Indeed, when a financial player spends most of his time training instead of trading, where do you think he makes most of his money? Businessmen will gravitate towards the activity that generates the most money. When someone spends most of his hours training instead of trading/investing, he probably makes most of his money from training.

Ray Dalio said he has reached a stage in life where he feels the responsibility for passing on his knowledge. He does not sell expensive courses. You can download his latest book "Big debt crises" free of charge. I truly believe his sincerity. On the other hand, if average nobodies like me say the same thing, you had better be skeptical.

PS: I understand there are people in the financial training community who will be unhappy with this post. If I make unfair comments in this post, please convince me I am wrong and I will edit accordingly. This post was motivated by bad experiences suffered by people close to me.

Sunday, December 10, 2017

My favourite charities as a selfish person

I am a selfish person at heart. My saving grace is that I am not hypocritical about it.

My number one favorite charity as a selfish person is buying term insurance. The lucky subsidizes the unlucky. The lucky ones are those who do not need to make claims because nothing unfortunate happened. The unlucky ones are those who met with some unfortunate events that cost a huge sum but were saved by the insurance claims. Without "charity" from the lucky ones, the unlucky ones will have to absorb the full financial cost of their bad luck. Nobody starting out in life will know how their luck will turn out later in life. So, I try to be selfishly charitable by donating to "charity" to help the unlucky ones in case I turn out to be among the unlucky ones later.

My number two favorite charity as a selfish person is investing in the shares of great companies which make plenty of money and create lots of social good along the way. If the "charity" turns out poorly and I lose all my money, fine. It is charity anyway. If the "charity" turns out wonderfully well, it is "charity" at its best. The "charity" makes money. The customers are happy to pay money because the value provided by the product/service is worth more than the money paid. Suppliers make money. The employees make money. (Isn't this better than simply giving money to the jobless poor who still remain jobless with shame and no dignity?) Most important of all, I make money :)  Being charitable is good, particularly when it yields benefits to selfish people like me :)

Hopefully, my selfishness will wear off later in life. As a person grows wealthier, he actually becomes less selfish. No wonder the world's greatest philanthropist, Bill Gates, is also the world's richest man. The world's greatest capital allocator, at one time the world's second richest man, has decided to selflessly allocate the bulk of his wealth to the world's richest man's philanthropic foundation. These two selfless charitable donors really put selfish "charitable donors" like me to shame. I feel like a selfish bastard and rightly so. However, I assure everyone not to be wary of selfish people like me. If one day, I suddenly say things like "Money is not important. I just want to help people and make this world a better place. Helping people is my passion blah blah ...", then you really have to be wary of me. Be very careful of people who talk like selfless do-gooders and have yet to earn their big pot of gold. 

One of the big social risks today in the world is the huge inequity in the wealth distribution of the population. Too much wealth in too few hands for those who don't need that much money while the many who need more are starved. We all start off as being selfish looking out for ourselves and family only. That is perfectly normal human nature. After some make it, it is also human nature that some of them will follow the shining examples of Mr Gates and Mr Buffett to give back to society. I hope I have the goodness in me to behave as well as these 2 gentlemen after I achieve 0.00X% of their wealth. If I am indeed that blessed but still stay like a selfish bastard, here is a gentle reminder to myself to read the history of the French Revolution and study what happened to the rich when the many who were poor revolted. I promise to let the poor eat more cake at my expense if I am blessed enough so that my head does not end up in the pike. Hmm ... being selfish again?

Sunday, November 12, 2017

In memory of Dr Michael Leong, founder of ShareInvestor

This is a very belated post. Dr Michael Leong died on 12Feb2016 after battling colon cancer for more than a year. I still remember him for his helpfulness to his online readers.

I have never met him in person but he was kind to an online stranger like me. When I was jobless in 2012, he sent me an email to extend help.

Hyom, I read about your retrenchment in your blog. I understand that you
are from the electronics industry and from the way you write, I assume that
***. Sometime back I was told that *** maybe
on the lookout for ***. If you are keen, do let me know and I
will try to put you in touch with them.


I was touched because he was a man of reputation in the business world. He puts his own reputation at risk when he makes a referral for someone whom he has not even met face-to-face. He could have looked like a complete idiot. I did not take up his offer because I already found a job. To this day almost 2 years after his death, I still remember him for his kind act. The least I did was to send him a wreath on his funeral wake, together with a group of grateful ShareInvestor customers who benefited from the community that his company ShareInvestor created.

It was in Dr Leong's DNA to share his investment insights freely and generously. He had no financial agenda in sharing. He had already achieved financial freedom through investing in the financial markets before he sold his successful company (Shareinvestor) to SPH. There was no need for him to make money in conducting investment courses. What better person to learn from as a novice? He was highly qualified with a long and successful track record, willing to teach, happy to teach and yet not asking for teaching fees.

God bless all the generous, rich investors who have been willing to share their insights to newbies like Dr Leong.

In Dr Leong's own words,

For those of us who make money directly from the markets, we know how difficult it is for the novice investor to start investing. The least we can do is to show you the ropes free of charge. We will never want to take any part of your savings just to show you the ropes. This money is needed by you to start off your investment journey. Hence, my conscience will certainly not allow me to take such money. I rather share freely, or not at all.

http://pertama.freeforums.net/thread/77/real-investors#ixzz406iJZvsr

This is not to say he was against trainers who charge for conducting trading/investment courses.

I still feel that one needs a different moral compass from mine if one charges thousands of dollars for a get rich quick scheme. Of course I am not against those who charge generally accepted rates for teaching. Put another way, an honest day's pay for an honest day's work.

I have blogged positively about investment courses that charge less than $100 for a day's work.

However, for courses that charge 4-digit figures, the student should consider free alternatives such as library books and online forums. I speak from personal experience that books and forums work just as well. I have never paid for any investment course or even attended a single free investment seminar. A budding novice should read all he can about all kinds of investment styles/methods while keeping an open mind, pay the necessary school fees to Mr Market and tweak his investment style to something that suits him personally as he progresses in the school of hard knocks. After experiencing at least 1 boom-bust cycle (5-8 years), there should be a long enough track record to assess if he is suited for this game. If he is not willing to put in the hard work which may not pay off anyway, passive index ETFs/funds are his best bets based on historical performance data. Even hiring expensive under-performing professional fund managers is better than investing on his own if he is someone who only loves the money but not the game.

While Dr Leong was generous and successful, I think some of his investment methods are not suitable for the majority. Dr Leong made a fortune from a concentrated portfolio and he once said "Put all your eggs in one basket and watch that basket carefully". It worked for him but this is dangerous for most. He had a unique background. He was a successful entrepreneur and his CEO position in Shareinvestor gave him access to the wisdom of other successful entrepreneurs. He was also highly intelligent given his medical background. His entrepreneur background gave him an edge in picking the right businesses to invest in. Concentration which worked for him will probably be harmful for most. I humbly admit I am not as good as him, so I did not follow him on this. I believe that most of us are better off with diversification and if you have no reason to think you should be better than most, stick with diversification.

Dr Leong's intial investment strategy which made him a fortune was similar to Benjamin Graham's net-net strategy. It is akin to buying companies selling at well below their liquidation value which is supported by solid, tangible assets such as properties, marketable securities and cash.

He later tweaked his strategy to invest in top entrepreneurs. He had bad experience investing in net-net companies run by entrepreneurs who did not treat minority shareholders fairly. He later changed his style to invest in top entrepreneurs like Elon Musk, not intelligent but conservative "care-taker" management executives. The Elon Musk type of entrepreneurs are less concerned with adding a few more zeros to their bank account and more interested in changing the world for the better with their products/services. "Care-taker" management, in my view, are more like "wealth managers" who invests in safe businesses, avoid rocking the boat, averse to taking big risks and not keen to see bad things happen under their watch. These people are usually very smart (surely smarter than me) but as a Singaporean, I hope to see more of our leading local companies led by trail-blazing "entrepreneurs" and not "care-taker" clever managers.

Again, I find Dr Leong's new strategy unsuitable for the majority of investors. This strategy suits his entrepreneurial background but it is very difficult to execute for the rest of us. His earlier net-net strategy was not only easier to execute but much less risky as well. What an investor need to execute the net-net strategy is the ability to read a balance sheet. This can be easily picked up by almost anyone willing to spare the time to learn basic accounting.

Even if a person has the good fortune to meet a helpful "mentor" like Dr Leong, he needs to have the humility to admit that what works for others may not work for him. Conversely, he also needs the "arrogance" to try and succeed at what most people failed if he thinks he has got what it takes. If a person thinks he can succeed with a concentrated portfolio and/or possess the sharp eye like Masayoshi Son to spot great entrepreneurs such as Jack Ma who had no business plan and revenue at that time, why shouldn't he give it a try?

Dr Leong was a devoted family man. I recalled that he remarked that the most stressful period of his life was when his son was hospitalized. Given that he was the founder of a successful start-up, I am sure he had very stressful periods in his life but his son's hospitalization topped it all. When I asked him how did he manage to find time for his family and yet have a successful career, he replied that he was lucky to have found a job with IBM that allowed him to work from home. He admitted there is no easy solution. I guess Dr Leong must have found a good wife who was a wonderful mother to his kids and also gave him the free time to focus on his business.

Although Dr Leong has passed away, the Shareinvestor business that he left behind is still making a difference to customers' lives. I have been a subscriber of Shareinvestor for > 10 years. His legacy has taken on a life of its own. I think the emotional satisfaction from being a successful entrepreneur is higher than a successful investor. Besides money rolling into the bank account, the entrepreneur gets additional satisfaction that his product/service is making a difference in his customers' lives, on top of the jobs created for his employees and sales for his suppliers.

Dr Michael Leong led a meaningful life. I am sure his family is very proud of him.