Investing and personal finance forum

"Should I invest or trade?"

Can you make more money trading than investing?
Well, this is a question I can't answer, and I believe it's affected by other factors, such as the work you are willing to put in, skill, strategies, experience, and much more.

However, there are some aspects of trading that I have found, and dislike. And I would like to share them with you today.

These are some of the aspects that make trading less appealing to me.

Do you agree with what I have to say? Let me know in the comments and we can start a friendly discussion! :)

Will you be a successful investor if you are smarter than the rest?

For example, MENSA’s members have IQs in the top 2% of the global population. In the 15 years ended 2001, the S&P 500 gained over 15% per year, while MENSA’s US investment club returned just 2.5% per year.

If the smartest 2% in the world are unable to beat the market over a period of 15 years, I think it's safe to say that good investing doesn't require a high IQ.

Instead, good investing requires discipline, patience, and a good framework.

If you develop them well, your investments will do much better. And once again no, you don't need a high IQ to make money from the stock market.

Do you forget the mistakes you learnt in previous bear markets?

Do you find yourself repeating them every time another market crash comes around?

It's important to remember every lesson you learn when investing in bad times, and don't repeat them. Because every time you do so, you might just stray further and further from your financial goals.

Don't delay your financial goals any further by making the same investment mistakes over and over again. Make a note each time you make a mistake. Save it on your phone, or anywhere that's easily accessible to you.

And when the next bull market comes, remind yourself never to make these mistakes again when markets eventually crash.

Save this post for the next market cycle to stop making the same mistakes that cost you money😀.

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Have you ever felt like you had too little to invest?

Then this post is perfect for you! In this post, I talk about how you can invest with small amounts. Below is a list of three main points I cover:
1. Invest in yourself
2. Buy a mutual/index fund regularly
3. Choose brokers that provide fractional shares

❗Please note that this post isn't sponsored by any of the platforms I talk about! These are only some of the platforms I came across and used before when learning/investing!

Do you invest in actively managed funds?

Did you know that in the long-term, the majority of them underperform the index they aim to beat?

This is largely caused by the high management fees you need to pay to stay invested.

Instead, why not consider passively managed funds? Passive funds aim to track an index, not beat it. You won't be able to outperform the market.

But you'll be able to earn higher returns than 83% of funds managed by professionally-trained portfolio managers!

Maybe not trying to outperform the market isn't so bad after all...

Are you nervous when your investments fall in value?

Some of us are. This causes us to make irrational decisions in an attempt to cut our losses in bear markets. This isn't ideal. In fact, it's far from it.

Good long-term investments can be extremely volatile in the short term. Never lose sight of the long term. In fact, volatility can give rise to attractive buying opportunities. Warren Buffett himself amassed some $600 million worth of Apple shares during this year's market decline!

In bad times, don't start panic-selling. Instead, take a deep breath, analyze your investments before making a decision. Don't be too quick to follow the herd!

With so many ETF choices, how can we pick the best for our goals?

In this post, I talk about factors to consider when picking ETFs, so that you can earn a satisfactory return and sleep soundly at night!

What else do you consider when picking your ETF? Let me know in the comments!

Speculating vs Investing.

It's important for us to differentiate the two approaches.

Just like speculators in the tulip bubble, a stock market speculator tries to make a quick profit from a short-term stock movement.

On the other hand, investors take a long-term approach to managing their portfolio.

Speculators often expose themselves to high risk because it is impossible to accurately predict the stock market’s movements in the short-term.

There are countless variables that can affect stock prices over the short run. It's close to impossible for us to forecast each one of them accurately.

That's why investing for the long-term may be your best bet. Do you due diligence before investing, and let time do the rest!

🌷

How did the Oracle of Omaha do it?

By firmly sticking to his investment strategy that earned him a 20.1% average annual return over 52 years, and letting time do the rest.

A 20.1% average annual return is a tall order.

We lead busy lives. We don't have time to scrutinize financial reports, perform valuation analysis, and understand business models like Buffett.

How about a passive strategy that earns an 8 to 10% average annual return? Like investing in the S&P 500?

There's nothing for you to do. No analysis, reading of boring financial statements, or scrambling to keep up-to-date with the company news.

All you need to do is transfer money every month into your brokerage, and purchase an index fund.

How does that sound? Making money without lifting a finger.

Good investing isn’t always about earning the highest returns.

Because the highest returns tend to be one-time hits that cannot be reproduced.

It's about earning pretty good returns that you can stick with. Then, repeat them for as long as you can.

Why not let the power of compounding run wild and start investing in low-cost index funds today?

Heard of earnings yield before?

Many of us are familiar with the P/E ratio, but have you heard of the earnings yield?

The earnings yield of a stock can help us decide whether stock A is a good buy compared to B (similar to P/E).

But more importantly, earnings yield can be used to compare between different investment vehicles. But you can't do that for P/E.

For example, a stock with an earnings yield of 5% vs a bond yielding 5% as well. Which one would you go for, assuming that the stock doesn't grow its earnings?

The bond, because its less risky. That's one method of comparison.

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How can you become a better investor by understanding and using the P/E ratio?

This post covers the definition of P/E (Price-to-Earnings) ratio.

It also gives you a step-by-step guide on how you can value a stock using P/E.

In a nutshell, the P/E ratio is a quick and simple method of valuation.

However, there are some disadvantages to using this method:

1. Mr Market may have inaccurately priced the P/E of the industry

2. Companies may not have the exact same business model

3. Different accounting methods can give rise to inaccurate earnings data

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