I wrote an article about “The ten “Don’ts” in stock investment” ten days ago in the link below:

http://klse.i3investor.com/blogs/kcchongnz/90999.jsp

I truly appreciate a number of kind comments as below:

Posted by Probability > Feb 9, 2016 02:10 PM | Report Abuse

This is another simple guide to made into a portrait and placed beside PC.
Thanks KC... despite learning quite a bit from you...I still got influenced. Affected by no.4. Somehow still surviving...

Posted by Alphabeta > Feb 9, 2016 09:06 PM | Report Abuse

Good medicine taste bitter. Once you know it works, your endless appetite to learn more to search for the source of lasting wealth is unimaginable.
Your writings and advices are invaluable to those who wish to create wealth by investing in businesses that can produce sustainable earning growth, positive free cash flow and EVA. Keep up the good work.

Posted by moneySIFU > Feb 11, 2016 02:09 AM | Report Abuse

An article with true wisdom & honest words, I salute you from my heart, Mr Chong.

Posted by Ntpboon > Feb 11, 2016 02:56 PM | Report Abuse

KC, 新年快乐！
谢谢分享！
这十“不”将成为我的座右铭。
这也是游览 i3 股市新手的新年礼物。
若能领悟，必有所获。

There are many more other kind comments which I appreciate always but have not listed down here. Thank you very much.

However, I did have my share of criticisms such as below:

Posted by Koon Bee > Feb 9, 2016 11:01 PM | Report Abuse

13th: Dont follow kcchong

And below is my ‘favorite” regular critic who never seem to understand what message I am trying to transpire in any of my articles:

Posted by donfollowblindly > Feb 10, 2016 03:37 AM | Report Abuse

BIMB-WA recommended by KC Chong at 66 sen saying it is undervalued as in attached blog. Now 28.5 sen losing 56.82% in less than 2 years.
 

Anyway, someone has jumped the gun and responded on my behalf. Thanks Frank.

Posted by Frank Soweto > Feb 13, 2016 05:53 AM | Report Abuse

another new year another great article from Kc :)
Maybe missing no 11 - donfollowblindly especially if you're extremely suwey (bad luck) LOL but can also do with No 5 as a close replacement LOL
Anyway thanks KC n gong Xi Fa Cai to u :)

I am happy when I received this request here:

Posted by engeng > Feb 14, 2016 03:23 PM | Report Abuse

KC, heard tat u gv online FA training, can gv some info about that?

And my response

Posted by kcchongnz > Feb 14, 2016 04:40 PM | Report Abuse X
Please contact me at

ckc14training2@gmail.com

I actually received quite a number of enquiries about the course after that, and almost all signed up. Sorry for this advertising which I truly believe is good. One very good thing about it is most of them are youngsters. This prompted me in writing this article for those youngsters who wish to invest in the stock market.

Before I start, I would like you youngsters to read the above article again on the “Don’ts” in stock investment, in particular, my favorite no. 1 “Don’t”; Never use margin financing in stock speculation, or investing, whatever you call it. It is a wild jungle out there; many people peddling hot stocks, continuously encouraging you to use increasing margin financing.

It is hilarious to read that margin calls are good! You are probably attracted to how seemingly immense wealth was created, but have not heard the full story that a lot more wealth, family and life were destroyed with margin financing. A young and innocent mind of yours may not be able to evaluate and fathom what is right or wrong. Do read about my various articles on the perils of margin financing listed in the article above for a different view point.

“Margin financing in stock investment is the weapon of mass destruction” kcchongnz

Instil that into your head, no kidding young man. With that I would like to start on what a youngster like you should do the five things in investing in the stock market.

1. The Magic of Compound Interest

“Start saving now”. Those are the three most powerful words in personal finance. Learn to pay yourself first by socking some saving each month before expenses, not save what is left after all expenses. If you start saving $5000 a year starting at age 24 now, or less than 20% of the salary of a young graduate, and increase your saving every year by 4% when your salary increases, and earning 10% compound annual returns, by the time you retire at 60, you would have saved $2.2 million. Figure 1 below shows how your saving grows from year to year in an exponential way.

However, if you just put your money in bank deposit earning about 4% interest, the money will grow to only about RM730000, a third of what you would expect from equity investment.

But wait until age 45 to start saving for that $2.2m and you'd need to sock away $60,000 a year in equity investment. Hence start early in investing and make sure that you put money into your investments on a regular, disciplined basis. This is what Albert Einstein said:

“Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it.”

With the growing Employee Provident Fund, plus your saving and investment in a safe manner, your total retirement sum can to a handsome $4-5 million when you retire.

How to compound your saving at 10% a year? It is definitely not from putting your money in the bank.

“How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case.”                - Robert G. Allen

2. Invest in business, good business, and selling cheap

The long-term compounded annual return of the stock market has been around 10% a year compared to about 4% for fixed deposit in banks. Hence if you wish to earn a higher return, you have to consider investing in the equity market as proven by its long-term return.

In investing in the equity market, the only reliable way to earn that kind of return consistently is through fundamental value investing by looking at the business as buying a stock is akin to investing in part of a business. You must know the business and understand its economics and performance. I know of no other investing strategies which are as plausible and can provide that kind of good and consistent return in the long term. In this article appended below, I have given all the reasons why fundamental value investing work, together with statistical significant evidences that it has worked in US and other major markets around the world, and it continues to work.

http://klse.i3investor.com/blogs/kcchongnz/50988.jsp

I have also provided my own personal experience that fundamental value investing also works in Bursa. We know it works in the long-term, it also works in the medium term as appended below.

http://klse.i3investor.com/blogs/kcchongnz/89516.jsp

3. Invest in the stock market with reasonable expectations

There is no free lunch in investing. Risk and return are intertwined with each other; the higher the return expectation, the higher the risk.  A nominal return of 10% would provide me with a real return of 6% which is pretty good, assuming an inflation rate of 4%.  

“Return expectations must be reasonable. Anything else will get you into trouble, usually through the acceptance of greater risk than is perceived.”   Howard Marks

Investing is about building long-term wealth slowly but surely. It isn’t (or shouldn’t be) speculating or gambling. It is taking calculated, prudent risk to achieve a decent return over time. Overnight or short-term windfalls are nice, but they aren’t dependent goal. 

“Take care of the downside first, and let the upside takes care of itself.” Mark Seller

“Look down, not up, when making your initial investment decision. If you don’t lose money, most of the remaining alternatives are good ones.”       Joel Greenblatt

Investing in the stock market with reasonable expectation doesn’t mean you cannot get outsized return.  In fact, my established records in i3investor have shown that this principle also can provide outsized return way above the broad market as shown in the link below:

http://klse.i3investor.com/blogs/kcchongnz/89516.jsp

4. Diversify your investment

Make sure you take advantage of the only free lunch in investing, diversification, but not over-diversification as explain in the eighth “Don’t” in stock investing in my previous article here:

http://klse.i3investor.com/blogs/kcchongnz/90999.jsp

I have also discussed about the purpose and advantage of diversification in here:

http://klse.i3investor.com/blogs/kcchongnz/86153.jsp

Yeah, I have been repeating many things in value investing. So I don’t repeat this here anymore.

5. Invest in yourself in investing knowledge

In the article appended below, we have seen that investing on their own for retail investors is not easy.

http://klse.i3investor.com/blogs/kcchongnz/75376.jsp

Most retail investors unfortunately lost money, often lost big money investing at their own in the stock market as it is not a level playing field, and most of all, very few retail investors have the necessary fundamental knowledge in investing which is essential for the success of investing. Hence if you wish to invest in your own and hope to have good investing outcome, you have to equip yourself with the proven successful fundamental knowledge and experience in investing.

With the necessary knowledge, you would be able to read and understand analysts’ reports, and sharing from internet and have your independent thinking and make your own independent decisions. You would be able to avoid the lemons, and overpriced stocks peddled all over the internet:

http://klse.i3investor.com/blogs/kcchongnz/89007.jsp

You would also be able to understand and capitalized on some of the good recommendations by analysts and bloggers such as some of them in i3investor. There are a few very good investment bloggers in i3investors. You can also analyze yourself and select good investments on your own.

For those who wish to learn the basics of fundamental value investing in a structured manner to build long-term wealth for a small fee can contact me at

Ckc14training2@gmail.com

The Bottom Line

Young men, Time is at your side. Start investing in the equity market early to build up your wealth for retirement with the extra money you have saved up. Invest in a diversified portfolio of good businesses at reasonable or cheap prices with safety in mind and let the potential extra-ordinary profits take cares of itself.  

In order to achieve the above goals, you have to depend on the most reliable person, that is yourself and no one else. Make sure that person is well equipped with the necessary knowledge, and experience guided by the good principles of investing.

Don’t just pay money to join my course. Be committed and spend some time and effort for this very important thing in your personal finance.

Tis goeth down to a fundamental aspect that “An investment in knowledge pays the best interest” Benjamin Franklin

K C Chong

Still on Chinese New Year 2016