In a recent blog post by 8I Education, patience was named as one of the key principles of value investing. But most people equate patience with age – only older people have the patience to value invest.
Pauline Teo, director and lead trainer of 8I Education begged to differ with the typical perception about age and success in investing.
Most people overlook the fact that successful investors are in their older years because of their patience when they were younger – people don’t automatically become a good investor when age catches up.
People like Warren Buffett, Charlie Munger, Peter Lynch or even our Singapore ‘Remisier King’ Peter Lim are successful investors because of the patience and time they’ve put in during their younger years.
It is because they are willing to be patient and allow their investments and wealth to compound over time, not because they gain more wisdom with age about investing.
They are able to make their way to the Forbes Richest List because of their patience when they were younger. And the main commonality between the above-mentioned investors? Value investing.
So we’ve managed to interview Pauline and she gave us some advice for those of us who are learning value investing in our younger years.
*Another article will cover Pauline’s advice for the more matured investors.
How to Train Patience in Value Investing?
If one were to ask one’s parents, “Pa, Ma, how can I train my patience?”, some of our parents – usually Dads – would tell us to go fishing.
But like any other skills we acquire in life, we would tend to start by learning from successful people who had been there and done it well.
Likewise, for value investing, Pauline believes we should turn our heads to successful investors and study their investment journeys – their failures and how they dealt with them.
Ideally, we would want to avoid those failures but if we do (inevitably) meet with failures, we can learn from the successful of how to pick ourselves up from failures.
Like fishing, value investing requires the fisherman, or investor in our case, to be patient and picky – we only pick the stocks that are undervalued but great businesses governed by great managers.
How to Start Value Investing if I’m 25 with $5,000 in Savings?
Learn how to invest before putting your first dollar to test, says Pauline. In other words, before you want to move on to the practical aspect of a skill, learn the theories first.
“There are different ways to learn. Reading is one of the best ways. There are many investing books out there where investing gurus share their investing techniques and experiences.
The other way is to get a mentor to teach you – someone who has been there, done that. My value investing skills were taught by my mentors, Mr. Ken Chee and Mr. Clive Tan, six years ago.
I lost 40 percent of my hard-earned savings in the unit trusts which I invested in from 2000 to 2009. After losing all that money, I decided to invest in my most important asset, MYSELF!
That’s where I started attending programmes and finding mentors to coach me how to invest properly.”
Of course, we can always dive in with small amounts of money to test waters – experience can be the best teacher. But how can we invest if we haven’t started saving?
How to Save – Saving and Personal Finance Advice for Young Budding Investors
Pauline first drew our attention to a “pay yourself first” concept, which she learned from reading Robert Kiyosaki’s Rich Dad, Poor Dad.
“Pay yourself first”, basically, means to pay your savings account first. Allocate at least ten percent of your monthly pay into savings before spending a cent of it.
Pauline personally keeps a strict budget for herself to spend every year, which is adjusted according to her personal income.
She would then decide beforehand how much she can on transport, food, entertainment, education, charity, etc.
Allocating our remaining income – after setting aside the “pay yourself first” amount – into different expense jars allows us to track our expenses.
This is incredibly simple but definitely not easy – many of us know this already but never really put it into practice with discipline.
“Pay yourself first” is very important because you won’t need to worry about savings – an amount is saved by default when our pay is credited into our accounts every month.
If You are Interested in Learning More…
Director and lead trainer of 8I Education Pauline Teo will be speaking at our half-yearly Shares Investment Conference 2H2016 (*Mandarin event) to share more about value investing.
She will be covering topics:
- Importance of Investing
- What is Value Investing?
- The 3R approach to Value Investing
- Understand how to take advantage to profit from the crisis
Click on the button for more details of the event and to reserve tickets. Dr. Chan Yan Chong, renowned investment expert and Daniel Loh, local stock guru and investment trainer will also be speaking at the event