- D
- B
- D
- D
- I guess there really isn't a one size fits all answer but I will detail my wealth building experiences over the past decade.
The first thing that occured to me was debt. When I graduated, I had a tuition loan hanging over my head, every single day was a grind to make sure I spent well within my means so that whatever I could afford to use to pay off my loan, was being channelled to that purpose. Debt stopped me from starting.
If you have debt, you will never really find that free cash flow you need to start investing. Of course, I'm not saying that all debt is bad. Your mortgage is also a debt, which you will eventually pay off, and you should always size your mortgage so that you can still have free cash flow to invest and build your wealth. I now have a mortgage as well since I have a HDB, but the mortgage has been sized nicely such that I still have free cash flow every month, which I am directing to my wealth building journey.
I think the takeaway is that one should focus on paying off bad debt as fast as you can, and even with good debt, having it paid off will lead you to a zero debt position which is always a good thing for an individual.
The second thing is cashflow. If you need to spend $2000/month, and you take home $2500/mth, you will naturally only be able to commit $500/mth to investing. So I made it a point to try to increase my income over time while keeping expenses as low as I could, preventing lifestyle creep where possible. If you can increase your income to $3000/mth and your expenses only inflate to $2100/mth, that's $900/mth now that you can channel to wealth building.
So I think the takeaway is that you should try to increase your income. There's always a minimum you have to spend every month, and while cutting your expenses to reach that level can be done, sustained spending at that level will likely lead you to feel miserable and upset about life, as I felt once when I first graduated, trying to spend <$500/mth while juggling my commitments to the family, etc.
Eventually, cash flow improved for me over time, but even today, I recognise one thing: you'll never have enough. We all have many things we want to do, and for me, cashflow is paramount to sustain my investment journey.
The third thing is knowledge. While knowledge is more widely available now, we have to acknowledge that 10+ years ago when I graduated, it was a very different matter. The concept of personal finance was still in its infancy somewhat, and resources were not as easy to come by as they are now. Consuming knowledge was one thing, applying it was another. You can read all the books you want, attend all the workshops and seminars and classes that you want, but if you never get yourself out of the chair and actually start applying what you learn by putting your money in the markets, knowledge remains that, knowledge.
Having said that, you still need to acquire some knowledge before you start to invest. At the very least, that will allow you to understand what you think you might want to invest in, what you think might not suit you, etc. But I always say this; take it with a pinch of salt, because while some things that you read about are factual (the definition of PE, for example, is fixed), some things that you read about can be opinions. So form your own opinion.
Till today, I'm still gaining experience and applying. My journey is far from over. My decisions could be better. So knowledge will always be a never ending 'obstacle'.
One more thing to add about knowledge: The analysis-paralysis is very real. When confronted with too much information, your decision making can halt. I still face this somewhat today, when it comes to choosing what to invest in, for example, have conducted my research equally on both banks, do I buy OCBC or UOB? Sometimes, the best way is to just bite the bullet and choose one and figure it out later, but at the point of making the decision, you will be filled with conflicting emotions.
The fourth thing is experience and emotions. When I started investing in the mid 2010s, my first stock did relatively well, total returns wise. (I'm still holding on to it for the dividends, as I am an income investor). But success is often fleeting, my second stock pick, bouyed by my initial confidence in my first, has turned out to be one of my worst performing stocks. But looking back, it's natural, you are going to make mistakes. And I also made the mistake of not cutting losses while I could (it's the emotion and false thinking that I couldn't possibly be wrong), and I doubled down instead. Today, that stock's total returns are still negative (almost breaking even though!), but I still keep it in my portfolio as a reminder never to under estimate how hard it is to make money; as a financial advisor by profession, I do see many clients lose money on the stock market when they buy and sell their shares.
Emotions are never easy to control. You will have emotional attachment to your purchases. Try not to. Yes, I made mistakes in the past, but I will say this: learn from them. The faster you learn from your mistakes, the better your next decision will be. And you will make plenty of mistakes, fail hard, but always remember to pick yourself up again. Not all is lost.
The fifth thing is time. This is one of my personal regrets. I spend the early half of the 2010s just socking money away in my bank after paying off my tuition loan. If I had just started even a little bit earlier, say 2 years, things might have turned out different. Still, having started is better than not starting. And having said that, time is also an issue for myself. Not about the time lost before I started, but rather about the time I have to conduct research, analysis, and monitoring of my own portfolio. This comes down to one thing, we all are working, and few of us are blessed to have that kind of free time to monitor portfolios, even after work, plenty of people have to deal with family commitments. So through that, two things became very important, diversification and selection.
Diversification allowed me to reduce the need to buy individual stocks. I don't buy meme stocks, I diversify to improve my chances, reduce my risk, and free up my time. But even when I diversify, what I diversify into matters. This is where selection becomes very important. Waiting to buy into a good asset is worth more than choosing a mediocre one on the spot just because you have money that you want to invest and you don't want it sitting in the banks.
To top this off, dollar cost averaging has allowed me to reduce my need to constantly check the markets. Yes I do check them from time to time but I always have a warchest that waits for opportunities, and a fund that just DCAs into my investments, so that I can get a part of my toes wet. This seems counter intuitive to the paragraph above, but it is really my hedging strategy. Emotions do come into play when a good asset you have been looking at falls further, and you sometimes over think about whether the price is good, or will it drop even further such that you have to wait, or even if your initial analysis about it being good was correct in the first place.
That's my story. I feel like I'm missing out on some things still, but I do have to get back to work. Maybe I'll add on more next time.
The first thing that occured to me was debt. When I graduated, I had a tuition loan hanging over my head, every single day was a grind to make sure I spent well within my means so that whatever I could afford to use to pay off my loan, was being channelled to that purpose. Debt stopped me from starting.
If you have debt, you will never really find that free cash flow you need to start investing. Of course, I'm not saying that all debt is bad. Your mortgage is also a debt, which you will eventually pay off, and you should always size your mortgage so that you can still have free cash flow to invest and build your wealth. I now have a mortgage as well since I have a HDB, but the mortgage has been sized nicely such that I still have free cash flow every month, which I am directing to my wealth building journey.
I think the takeaway is that one should focus on paying off bad debt as fast as you can, and even with good debt, having it paid off will lead you to a zero debt position which is always a good thing for an individual.
The second thing is cashflow. If you need to spend $2000/month, and you take home $2500/mth, you will naturally only be able to commit $500/mth to investing. So I made it a point to try to increase my income over time while keeping expenses as low as I could, preventing lifestyle creep where possible. If you can increase your income to $3000/mth and your expenses only inflate to $2100/mth, that's $900/mth now that you can channel to wealth building.
So I think the takeaway is that you should try to increase your income. There's always a minimum you have to spend every month, and while cutting your expenses to reach that level can be done, sustained spending at that level will likely lead you to feel miserable and upset about life, as I felt once when I first graduated, trying to spend <$500/mth while juggling my commitments to the family, etc.
Eventually, cash flow improved for me over time, but even today, I recognise one thing: you'll never have enough. We all have many things we want to do, and for me, cashflow is paramount to sustain my investment journey.
The third thing is knowledge. While knowledge is more widely available now, we have to acknowledge that 10+ years ago when I graduated, it was a very different matter. The concept of personal finance was still in its infancy somewhat, and resources were not as easy to come by as they are now. Consuming knowledge was one thing, applying it was another. You can read all the books you want, attend all the workshops and seminars and classes that you want, but if you never get yourself out of the chair and actually start applying what you learn by putting your money in the markets, knowledge remains that, knowledge.
Having said that, you still need to acquire some knowledge before you start to invest. At the very least, that will allow you to understand what you think you might want to invest in, what you think might not suit you, etc. But I always say this; take it with a pinch of salt, because while some things that you read about are factual (the definition of PE, for example, is fixed), some things that you read about can be opinions. So form your own opinion.
Till today, I'm still gaining experience and applying. My journey is far from over. My decisions could be better. So knowledge will always be a never ending 'obstacle'.
One more thing to add about knowledge: The analysis-paralysis is very real. When confronted with too much information, your decision making can halt. I still face this somewhat today, when it comes to choosing what to invest in, for example, have conducted my research equally on both banks, do I buy OCBC or UOB? Sometimes, the best way is to just bite the bullet and choose one and figure it out later, but at the point of making the decision, you will be filled with conflicting emotions.
The fourth thing is experience and emotions. When I started investing in the mid 2010s, my first stock did relatively well, total returns wise. (I'm still holding on to it for the dividends, as I am an income investor). But success is often fleeting, my second stock pick, bouyed by my initial confidence in my first, has turned out to be one of my worst performing stocks. But looking back, it's natural, you are going to make mistakes. And I also made the mistake of not cutting losses while I could (it's the emotion and false thinking that I couldn't possibly be wrong), and I doubled down instead. Today, that stock's total returns are still negative (almost breaking even though!), but I still keep it in my portfolio as a reminder never to under estimate how hard it is to make money; as a financial advisor by profession, I do see many clients lose money on the stock market when they buy and sell their shares.
Emotions are never easy to control. You will have emotional attachment to your purchases. Try not to. Yes, I made mistakes in the past, but I will say this: learn from them. The faster you learn from your mistakes, the better your next decision will be. And you will make plenty of mistakes, fail hard, but always remember to pick yourself up again. Not all is lost.
The fifth thing is time. This is one of my personal regrets. I spend the early half of the 2010s just socking money away in my bank after paying off my tuition loan. If I had just started even a little bit earlier, say 2 years, things might have turned out different. Still, having started is better than not starting. And having said that, time is also an issue for myself. Not about the time lost before I started, but rather about the time I have to conduct research, analysis, and monitoring of my own portfolio. This comes down to one thing, we all are working, and few of us are blessed to have that kind of free time to monitor portfolios, even after work, plenty of people have to deal with family commitments. So through that, two things became very important, diversification and selection.
Diversification allowed me to reduce the need to buy individual stocks. I don't buy meme stocks, I diversify to improve my chances, reduce my risk, and free up my time. But even when I diversify, what I diversify into matters. This is where selection becomes very important. Waiting to buy into a good asset is worth more than choosing a mediocre one on the spot just because you have money that you want to invest and you don't want it sitting in the banks.
To top this off, dollar cost averaging has allowed me to reduce my need to constantly check the markets. Yes I do check them from time to time but I always have a warchest that waits for opportunities, and a fund that just DCAs into my investments, so that I can get a part of my toes wet. This seems counter intuitive to the paragraph above, but it is really my hedging strategy. Emotions do come into play when a good asset you have been looking at falls further, and you sometimes over think about whether the price is good, or will it drop even further such that you have to wait, or even if your initial analysis about it being good was correct in the first place.
That's my story. I feel like I'm missing out on some things still, but I do have to get back to work. Maybe I'll add on more next time.