Is Demo/Paper Trading a Mistake?
Imagine yourself being the manager of an airline company.
Would you allow a junior flight school student to fly a real plane for you, even though this student may have read and understood the theories on how to operate a plane?
By now, you may be thinking:
āRidiculous, of course no!ā
Hey, I figured the same too.
Iād throw this fella into multiple flight simulations and make sure that this flight school student is able to follow standards & procedures for a flight.
More importantly, Iād not want this soon-to-be pilot crashing my real planes if he/she canāt even handle landing the plane safely in a simulated environment.
Make sense, right?
I hope I have made my point of this article by now, but if not, here it goes:
Putting a junior flight school student into simulations is exactly the same as you going through the demo or paper trading phase when you first started investing or trading.
Essentially, you are doing yourself a HUGE favor by making sure that you can follow the rules and strategies consistently in a risk-free environment.
Hereās the thing:
At the beginning of your investing or trading journey, itās not about making a lot of money. Itās not even about having a āfeelā with putting in real money into the market.
Itās about you having the discipline to follow the rules and processes and learn the foundation properly without additional emotional baggage.
Honestly, if you canāt land a plane safely in a simulated environment, what makes you think that you can land a real plane in reality ā before crashing a few costly planes and hurting yourself (and others) badly in between?
I believe Iāve made my point clear.
p.s. Related Read: Here's What Iād Do if I Had to Start My Investing Journey All Over Again
Rogue One is a new weekly 1-min article series where I share my random thoughts and ideas.
The Art of Working for Yourself
A lot of people have the dream of firing their boss and start working for themselves.
Thereās nothing wrong with the dream.
Whatās wrong is their unrealistic expectation on this matter, especially at the start:
Sleep and wake up anytime you want.
No deadlines.
Freedom of time.Ā
Unfortunately, these ideals are far from the truth.
Instead, these are whatās going happen when you start working for yourself:
The constant guilt of waking up late and realizing that you have lost half of your workday.
Trying to squeeze multiple deadlines into a week, and/or feeling totally useless when you are not doing anything.
You have the FLEXIBILITY of time, not the FREEDOM of time. This means that working on weekends is totally normal.
Working for yourself is an art.
The art of self-discovery.
The art of self-discipline.
The art of finding structure when none exists.Ā
p.s. Art takes time.
Rogue One is a new weekly 1-min article series where I share my random thoughts and ideas.
How I 5x My Investing/Trading Experience with Every Trade I Take
Huge Warning: If you are here thinking of looking for a shortcut to milk money out of the market, this article is NOT for you.
However, if you are looking for mini-routine hacks to help deepen and internalize your learning, I think you will find this post surprisingly helpful.
Regardless if you want to improve as a long-term investor or a short-term trader, it will require skill development. Skill development though, demand for our time and experience.Ā
For most investors and traders, one trade* typically transpires into a single moment of experience.
What if there is a way for you to turn a single trade into 5 times worth the experience. Interested?
*The verb ātradeā is used in this article to reflect a position that you take in the market, regardless if you are investing for the long-term, or trading for the short-term.
You will be surprised that there is no secret recipe here.Ā
The key to amplifying your experience from every single trade you take is through a systematic post-trade learning routine, all of which I will share with you below:
You did your pre-trade preparation and took a trade ā that was 1x experience.
As a long-term investor, you placed a trade after doing your overall research on the fundamentals of a company.
As a short-term trade, you spotted this breakout pattern and placed the trade.
Either way, these transpired into ONE experience.
For most people, their journey ended right there ā time to go and enjoy a good movie time, right?
What else is there for you to do?
Make detailed notes in your journal ā thatās 2x experience
For me, I will write down WHY I took a particular trade.
As an investor, what are the characteristics and risks involved in the company that Iāve just invested in?
As a trader, what is the if-then context and price action setup that made me took that trade?
Putting my trades down into a journal makes doubled my experience with that particular trade.
Discuss trades with like-minded people/community ā thatās 3x experienceĀ
One thing that I like doing is to discuss the trades that I took with like-minded traders and investors.
These are the people and communities that, to a certain extent, understand how I make trading/investing decisions.
As an example, they might notice a certain part of the companyās fundamentals that Iāve missed out on in a financial report.
As a result, I can receive feedback on what Iāve missed or maybe a certain perspective that Iāve not considered in that trade ā which is extremely helpful.
Visualize your trades ā thatās 4x
I canāt emphasize how powerful this routine is to your experience accumulation.
Replaying a particular trade in my mind ā what happened, what went right and what couldāve been done better, contributed to my growth tremendously.
Visualization helps in reinforcing the right habit & execution in my subconscious.Ā
In return, this will make my execution better if there are any similar opportunities in the future.
End-Of-Month Review ā thatās 5x
Many investors and traders have the impression that once a trade is taken then thereās nothing left to learn for the trade.
However, thatās clearly not the case.
For me, reviewing my past trades every end of the month/quarter has been extremely beneficial.Ā
Reason being, it helped me to again reinforce the good trades that Iāve executed and how I can do better moving forward.Ā
Now, I know what I can do better with my breakout trades.
No Money Lahās Verdict ā Multiply Your Growth with Systematic & Mindful Learning Routine Ā
Now, I want to end this conversation by pointing out the obvious:
Investing and trading are not easy to master. More often than not, it involves a deep learning curve thatāll take time to develop.
Hence, you will need all the feedback from the market to help you deepen your learning experience.
Good or bad, winning or losing, every trade is a learning opportunity.Ā
In fact, every trade can be more than ONE learning opportunity. Using the methods above, and you can 5x your experience for every trade you take.Ā
All you need to do is to just tweak your routine a little. For a 5x growth of experience per trade, Iād say the effort is pretty worth it.Ā
Part of this article is inspired by the book One Good Trade by Mike Bellafiore. Bella is the founder of SMB Capital, a proprietary trading firm in New York.Ā
He is one of my favorite trading coaches that I follow online which has been giving back tremendous value to the online trading community.
I found that some of his approaches to trading improvement, which has inspired me to implement and write this article, are equally useful in oneās investing journey as well.
"Do You Have a Plan B?"
āDo you have a Plan B if you fail in what you are doing right now?ā
I often get asked this question by well-meaning friends, seniors, and relatives when I left my first full-time job to do what I am doing right now.
To be honest, I suck when it comes to forming any āPlan B (or C or D)ā for the important things and goals in my life.
In fact, Iād still tell you that I do not have any Plan B if you were to ask me today. Ā
My goal is to become a successful trader (I am not one, YET).
Whenever I hit a certain plateau in this business, I will tweak my approach, my mindset, my routine, and seek mentorship.
My passion is in sharing and words.
Whenever I feel stuck in my journey, I will adjust my perspective, ask better questions, and seek clarity.
I believe the mini little progress that Iāve been able to make today is not because I am anything better than anyone else.
Itās because I simply do not have any great āPlan Bā or ābackup planā to fall back on if I fail.
If you put that chocolate bar in the fridge 'just in case' you get hungry at night during your diet, chances are the chocolate bar will not stay there for long.
If you pursue a goal with a well-defined backup plan in mind, youāll almost always settle for the backup when shit happens.
In contrast, when there is nothing else to fall back on, the only way is to charge forward and make things happen.
Rogue One is a new weekly 1-min article series where I share my random thoughts and ideas.
Your (Boring) Journey to Mastery
If there is a sport that China held clear superiority over every other country in this world, itās table tennis.
By winning 28 out of all 32 available gold medals in the history of the Olympics, one can only assume that there must be a secret recipe with the training & drills that China athletes undergo in their daily routine.
Last year, I traveled to train with fellow athletes at the China Table Tennis College (CTTC) in Shanghai.
To my surprise, thereās no secret recipe at all in their training.
What they did with their drills, to a big extent, are exactly the same as the ones that I see being done in the local clubs in Malaysia.
The fundamental skills like serving, looping, and footwork are still being practiced every session.
If thereās no difference in the drills, what make Chinaās athletes different and so exceptional?
The answer lies in the consistency and intensity of their training.
In China, athletes are required to train repetitively for 2 ā 3 sessions every day. Along with the guidance from the coaches, drills are done with great attention to detail and intensity.
My journey in China has reinforced my view of mastery.
The journey to mastery is boring.
It is the work that we do consistently behind the scene when no one is watching.
It is the repetitive routine that we still try to refine every day even if we have done it 100 thousand times.
It is the fundamentals that everyone thinks is monotonous, yet we still work on intensively every single day.
The journey to mastery is boring.
Thatās what makes āexceptionalā extremely valuable and rare in this world.Ā
Rogue One is a new weekly 1-min article series where I share my random thoughts and ideas.
This is What Iād Do if I Had to Start My Investing Journey All Over Again
I started to expose myself to the world of investing as a university student 5 to 6 years ago.
Well, my ultimate masterplan back then was to crush the market like peanuts and make hell lot of money with it.
(p.s. Obviously, that intention did not end up well for me.)
It took me a long, long time before I eventually discover my sweet spot and investing style (more on this in future articles).
Looking back, I always wonder if I could have been much better with investing (and with money) if I were to put every piece of the puzzle in the right place ā one by one, step by step.
Depending on how you look at it, this article can be more like hindsight, or more of a reflection.
But my goal for this article is simple:
If you are totally new and are thinking about getting started, I hope this post will be of great guidance & insight for you.
With that, this is what I would do if I were to start over my investing journey from zero:
Step 1: First, I'd learn about personal finance & build a strong habit around money
New investors be like:
Harrā¦ but I just want to find the best stocks to buy worā¦
Yes, boring, I know.
But this is exactly what I would do FIRST if I were to start over my journey, because honestly:
Who cares if you can spot the best stocks to invest in when you have no savings to invest?
Who cares if you have attended the best investing course when you still struggle to pay off your credit card debt every month?
Looking back, instead of splurging on food & entertainment in university, I would start tracking my finances and have a more consistent savings habit (regardless of how little it could be).
Iād also build a stronger foundation & understanding around money (ie. Financial independence, compounding effect, asset & liability) by reading more personal finance (not purely investing) related books.
With all these financial knowledge and habits in place, I am sure that Iād be in a better position to start learning how to invest at the age 21 years old.
Step 2: Instead of asking āWhat Stocks to Buy?ā, ask āWhat Skills Do I Need?ā
āWhich company should I invest during this crisis ah?ā
āIs now the right time to buy into the shares of XXX yaa?ā
These are without a doubt the most asked questions by investors on investing forums, telegram chat & FB groups.
Looking back, I wasted my fair share of time indulging in discussions like these.
If I were to start again, Iād definitely spend NONE of my time consuming any content like this.
Instead, after building a sound financial habit, the next thing Iād do is to learn the skills needed for me to build a solid foundation in investing ā be it from books or a mentor/coach.
Some crucial fundamental skills include, but not limited to:
- How to extract important data and information from a financial report?
- How to develop a set of investment rules on when to buy & sell?
- How to construct a decision-making framework & thought process?
- How to make independent investment decisions without succumbing to headlines and unnecessary news & content?
Can you see how these skills above, once mastered, will be able to answer your āWhat stocks to buyā question?
Nowadays, most new investors yearn for shortcuts and/or the easy way to make money from the āexcitingā stock market ā all without considering putting effort into building their foundational skills.
But hey, I get it. That was me once upon a time too.
Just telling you that, if you are new, you might really wanna consider building a solid foundation first before risking your hard-earned money.
The only short cut in sustainable and successful investing is effort and hardwork.
Step 3: Setting my initial vision with investing
If I were to start my journey from zero again, Iād want to spend some time constructing a vision for my investing journey: a sort of picture-like vision of the outcome of investing in my life.
This is the stage where I would learn more about different financial stages in life (eg. financial independence, abundance) and set a vision to motivate me to keep honing my skills.
Now, you may disagree with me, but I would not set a fixed goal at this stage (eg. Financial independence by 30 years old).
Reason being, as a university student, there is simply no way for me to know what kind of circumstances I would be upon graduation. Hence, any form of fixed estimation is really inaccurate at best.
That said, as a start, having a conceptual understanding of whatās possible (eg. vision towards financial independence) is important and should not be overlooked.
However, it should also be noted that our lives will change as we move on to different stages in life ā hence it is essential to be flexible with the vision and ultimately discovering our goal along the way.
Step 4: Hone my skills in a simulated environment
Learning the fundamental investment skills & knowledge is a thing, but it doesnāt mean that it is the end of the journey.
In fact, it is only the beginning of the journey.
So, what I would do is I will set up a simulated investing account via platforms like Bursa Marketplace so I can test what Iāve learned in a risk-free environment.
Now, this could be a very boring stage for many. I used to do it (and gave up) too back then as there is no fun at all buying stocks in a simulated environment.
But if I were to start again, I would spend at least 6 months to a year in a simulated environment so I am sure that I can follow my entry and exit rules consistently whenever needed.
No fun, I know. But Iād cut short a lot of my learning curve if I persisted with the practice 5 years ago.
Step 5: Opening a Live Account (Finally!)
Nowās the time to finally worry about which brokerage account to open!
Or better, time to make some big money! *wink* *wink*
But is it so?
In the hindsight, what I would do as a beginner (regardless of my initial capital) is to set my intention right when opening a live account.
Instead of treating my initial few hundred bucks account as my immediate runway to become a millionaire, I would work on my ability to execute my plan/rules consistently without worrying about the returns as much.
By doing so in a small live account, it would build a very solid psychology foundation for me to handle my live account as it grows in the future.
Simply put, I would take my initial years of live investing journey to make mistakes and gain experience ā not so much on making huge gains.
Step 6: Continuous Reflection & Self-Discovery + Receive feedback
Remember that I talked about setting an initial vision in Step 3?
Now, with more experience in the market (and assuming I already graduated and started my career), Iād start to find a more solid goal and focus in investing.
This is because, by this stage, I would be more familiar with my financial commitment. Hence, it is easier to calculate and come out with a proper financial goal and action plan.
It is also time for me to start reflecting and discovering my own investing style to accommodate my other commitments in life.
At this stage, joining a community of like-minded investors (not a general Facebook/Telegram group) is hugely beneficial. It serves as a great & efficient way to leverage on great investors' insights and receive feedback to accelerate learning.
No Money Lahās Verdict
As I write this article, I am fully aware of my own investing style ā income investing (article coming soon).
That said, I honestly think that if I were to follow the above steps diligently when I first started investing, Iād be discovering my preferred style much sooner.
But the journey of investing doesnāt end at Step 6.
As both life and market are dynamic, it is a must for me to keep refining my skills and goals as I continue in my investing journey.
Anyone that says that theyāve known and learned everything is just another egomaniac with little time left in the market.
Ultimately, while I may not be able to time-travel to change my journey, there is one thing that I can do:
Focus on the right mindset, strive to keep improving, and most importantly, stay humble.
We Can Still Win the 2nd Half of 2020
All the odds were against Liverpool on the 8th of May 2019.
The day was the 2nd leg of the 2019 Champions League semifinal with Liverpool hosting Barcelona.
The Reds were already down 0-3 against Barcelona in the first leg. To make things worse, the key men for the team ā Salah and Firmino were not playing that night.
It seemed nearly mission impossible for the Reds to pull off a comeback.
But they still accomplished it ā beating Barcelona on a 4-3 in aggregate to seal their place in the Champions League final (which, they eventually won).
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For many, what Liverpool has experienced during the 1st leg is a direct reflection of their 1st half of 2020 ā a huge 0-3 punch to the face.
Heck, even the start of the 2nd half of 2020 is eerily similar:
Some may have lost their job while many would have experienced a huge cut in income.
Simply put, many of us are likely not in the best condition as we head into the 2nd half of 2020.
But does that matter?
Can we change the fact that we step into the 2nd half of 2020 being handicapped in one way or another?
Can we change the fact that we are forced to start 2nd half of the year unfavorably?
Did Liverpool whine, complain, and give up?
Liverpool players persisted and they won.
Now, I am not guaranteeing that all of us will stage a huge memorable comeback as Liverpool did.
But one thing I do know, for sure, is that complaining, looking for excuses and expecting that it is the responsibility of the government/parents/[insert person here] to help you is definitely not going to bring you anywhere near to a comeback.
You are 100% in charge of your life.
You can give yourself a fighting chance.Ā
You owe it to yourself to try.
Looking forward to seeing your comeback, wherever you are and whatever you are facing right now!
Rogue One is a new weekly 1-min article series where I share my random thoughts and ideas.
How to Know If You Are Improving?
Conceptually, many people know that making mistakes is part of the learning journey.
In practice, most people try to avoid it in any way possible:
You may be avoiding a leadership role because you do not want to be blamed when shit happens.
You may be looking for a high win-rate strategy in the market because you are sick of being wrong.
You may be staying away from a lifetime opportunity because you fear that it may be a wrong move.
Theoretically, we thought that improving means making fewer mistakes.
In reality, how would you know if you are actually improving?
First, you make bad mistakes.
Then, you make better mistakes.
Itās not the number of mistakes that determine the progress of our improvement. Itās the quality of mistakes that we make that decide the magnitude of our leap.
Rogue One is a new weekly 1-min article series where I share my random thoughts and ideas.
Being Right in The Market
I used to have a bad tendency of wanting to be right in life. Sometimes, I still do.
In a debate, I want to prove my point right ā and someone elseās opinion wrong.
In the stock market, I want to be right in the market direction so badly ā that being right made me happier than making returns.
But hereās the thing:
This can work both ways.
Whenever I'm proved wrong in a debate, I felt ashamed.
Whenever the market doesnāt go in my favor, I felt frustrated.
The emotional baggage that I carried from trying to prove myself right is suffocating.
Hereās a lesson that I learned the hard way:
We live in a world that makes up of different personalities & agendas.
We invest in a market that makes up of different perspectives & emotions.
In the market, your opinion doesnāt matter. The market moves however it wants. The market is always right.
The key here is not trying to be right all the time. Rather, itās having the humility to accept the lessons from different outcomes thatāll ultimately benefit you in the long run.
Be open with being right, AND be equally open on being wrong. There is more money to be made when you embrace both sides of the coin.
Rogue One is a new weekly 1-min article series where I share my random thoughts and ideas.
How to Build Your Emergency Fund?
An emergency fund is one of the least discussed topics in personal finance. Yet, it is the most crucial aspect of our financial life that will save us in times of unexpected crisis, if prepared well.
In spite of Covid-19, if you are still earning an income, you should really consider to start building the foundation of your financials via an emergency fund.
Typically, most people would opt for Fixed Deposit (FD) to build their emergency fund. That said, if there is a better alternative in town, would you be interested to learn more?
What is an Emergency Fund?
An emergency fund is essentially the money that you allocate on the side in case of unexpected financial emergencies like unemployment or a loss of income.
As a minimum, one should aim to build a 3 to 6 monthsā worth of emergency fund (ie. 3 - 6x Your Monthly Expenses).
Now, it is crucial for us to understand the mechanism around an emergency fund:
It is not about growing the fund like what we do with investing. Rather, with an emergency fund, we are trying to preserve the value of your emergency fund so it doesn't lose its value with time.
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Where to Place Your Emergency Fund: Money Market Fund
Money Market Funds are funds that invest in low-risk assets such as government securities, treasury bills, commercial bonds, and other highly liquid securities.
This means that unlike stock market investments that are generally volatile, the low-risk assets in a Money Market Fund is relatively stable & consistent.
Reason being, most assets under a Money Market Fund have a maturity date where it almost always ensures a return.Ā
Normally, most assets under a Money Market Fund matures in 1 year or less. This ensures the liquidity of funds that allow you to buy and sell relatively easily.
Money Market Fund vs Fixed Deposit (FD)
(1) Competitive Return
Money Market Funds generally pays a return of 3.0 ā 3.5% annually. On the other hand, FD rates have been hovering in an average of 2%.
(2) Better Liquidity
Money Market Fund is generally more liquid than FD. This means that there is no lock-in period and you can deposit and withdraw whenever you want.
(3) Lower Barrier of Entry
Not only that, a Money Market Fund also has a relatively low barrier of entry compared to FD. This means that you can start investing in Money Market Funds from as low as RM10 and still enjoy the returns.
In comparison, there is a relatively high cap for FD deposits that ranges from RM10,000 to RM100,000.
What are the Risks of Investing in Money Market Funds?
Investing in a Money Market Fund is not without its risks, although it is quite minimal relative to the stock market.
(a) Interest Rate RiskĀ
Interest rate risk refers to the impact of interest rate changes on the valuation of fixed income securities.
Essentially, when interest rates rise, fixed income asset prices generally decline. This may lower the market value of the Fundās investment in fixed income securities, which will affect the net asset value (NAV) of the Fund.
The opposite may apply when interest rates fall.
(b) Credit/Default RiskĀ
Credit/Default risk refers to the ability of issuers of fixed income assets (eg. a companyās bond) to make timely payment of interest or profit.
This means that if the issuer faces any challenges to make payment, it may impact the value as well as the liquidity of the fixed income assets of a Fund.
To manage the risks involved, a Money Market Fund will normally opt for high graded bonds and securities. This means that the chance of default will be relatively low and hence ensure peace of mind.
All in all, Money Market Fundās investment in low-risk assets ensured itās stability, making it a great FD alternative to build your emergency fund.Ā
That said, please be reminded that it is NOT a capital and return guaranteed vehicle as there are still some risks involved in it.
3 Money Market Funds Options
There are many money market options out there, varying in fees and deposit amount. For the options below, I am going to share with you 3 options out there which is suitable for most people.
The first money market fund that I think is a great option for most people is the BIMB Dana Al-Fakhim (Money Market Fund) via BEST Investment App.
Its low barrier of entry of just RM10 is the reason why I would recommend this to most people that are looking to build their emergency fund via money market.
To start, just go ahead and install the BEST Investment app on your phone (select Do It Yourself --> BIMB Dana Al-Fakhim), and start contributing to your emergency fund.
Install BEST Investment app HERE.
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The reason why I feature Opus Money Plus Fund is due to its overall fee structure that is lower than other money market options out there.
Typically, most money market funds have a management fee of up to 0.5%/annum. In contrast, Opus Money Plus Fund features a maximum management fee of 0.35%/annum.
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The final option that I am featuring here is Phillip Capital Money Market Fund.
The reason for this feature is because I am personally having my emergency fund parked with them.
That said, when it comes to ease of access, Phillip Capital is the least friendly one as it requires applicants to still fill up physical forms to open an account.
4. StashAway Simple (Updated 15/6/2020)
Newly launched in June 2020, StashAway Simple comes into the scene as a reliable alternative to Fixed Deposit (FD).
For an in-depth review of StashAway Simple, click HERE.
Money Market Funds Comparison
No Money Lah's Verdict
Hopefully this article gave you a good idea on how to get started to build your emergency fund!
Do you have any other suggestions on where to place your money for an emergency? Share with me below! :)