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 4-digit figures 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. Make sure the statements are not from a demo account! 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.

The financial training (and money management) business has a wonderful business model in the sense that the salesman can make empty promises about future returns without being held accountable. The financial salesman can hide behind the standard disclaimer "All investments carry risk. We cannot be held responsible for losses incurred." Human psychological weaknesses like greed and fear are magnified when it comes to money issues. A skillful salesman, without the shackles of being held accountable for his sales talk and mastery of human psychological weaknesses, can do wonderful manipulation work on his victim. The force is strong in them to manipulate your minds. So, be careful. One way to guard against manipulation is to ask for facts, numbers that cannot be manipulated which shows his past track record for what he is truly worth.

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.


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.

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