I remembered this crystal clear.
It was 9:00 am, Monday morning. I made my way down from my office desk down to the lobby, to the cafe just round the corner.
I was still working in the financial industry.
This incident would change my investment belief about the industry forever.
I entered the empty cafe. In front of me, I saw two senior bankers – decked in full black and cream blouse – from the same firm I was working for.
This can’t be good.
Bankers don’t find you on a Monday morning for coffee unless they have something to sell you. Or something bad has happened.
See… I published a research report telling clients to stay away from a new, highly risky investment deal.
Clearly, both senior bankers who were in charge of that deal weren’t happy. And even wanted me to retract and rewrite my entire report.
Because of my personality as a quiet worker – I felt uncomfortable with what they said. I never felt so invisible in my life.
That I couldn’t share the same set of beliefs working in the finance industry. I knew the big banking world wasn’t a place for me – it was rigid and filled with politics.
I decided to walk away.
Over the years, I’ve developed these beliefs when it comes to investing.
The way I looked at investing was different from mainstream finance.
And this is what I don’t agree (sorry, if I’ve offended anyone)…
1. The finance industry has your best interest in money
The problem with the financial industry is they grow their business by garnering assets.
The more money they gather, the more fees they keep. And more products to sell you.
It’s not about helping you maximize the returns on your assets.
This creates a huge conflict between clients and bankers. It’s a problem Warren Buffett has called out many times too.
Ultimately, I learnt no one takes care of your money better other than yourself.
2. Analysts eat their own cooking
They just don’t have skin in the game. Many are simply doing their jobs. They are more concerned with forecasts and fancy financial models – that try to predict whether EBITDA can “grow another 5% next year” – than figuring out business models.
I mean, when was the last time you’ve closely scrutinized a dreaded financial model filled with nothing but complex numbers?
3. I need to have high IQ to invest
In the 1990s, a fast growing hedge fund, called Long Term Capital Management, lost billions of dollars in the hedge fund industry betting on heavily — with leverage — on bonds. These hedge funds were formed by top professors and academics who won Nobel prizes.
Yet this $130 billion hedge fund collapsed, and had to be bailed out by other big banks.
It’s not high IQ that will compound your portfolio safely. Investing is having a disciplined approach to the stock market, a curious mind and being patient.
I always liked this – the market is a pendulum that swings between unsustainable optimism, where stocks are too expensive, and unjustified pessimism that makes them too cheap.
And my take is the stock market serves as a “relocation centre” where money is moved from the active to the patient.
4. I need to have an opinion on Elon Musk/Tesla
I admire Elon Musk for the wonderful technology and innovation he brought to the world. But I don’t need to have a full opinion about him, or Tesla.
I mean, my focus is picking businesses that have predictable earnings in an industry that doesn’t see major changes.
Tesla is in a highly competitive industry. While it dominates the EV market today, it’s total global market share is still less than 2%.
5. Stocks are digits that wiggles along a chart
Mr. Market is my business partner. Everyday, Mr. Market knocks on my door and offers me a list of stocks at different prices.
I can either choose to buy or sell my inventory or ignore Mr. Market. And that’s the beauty of investing.
I treat it as a business operation buying into other businesses that can give me an adequate rate of return.
6. I cannot make money in stock market
In the short-term, the stock market is a casino.
But in the long term, it is growing profits that drive share price performance.
Over the last 90 years, the earnings per share of the S&P 500 Index has grown from $1.89 per share to $189.
7. Your fund managers outperform the market
According to research, more than 80% of funds — or unit trusts — don’t outperform the market.
8. Stick to investing in local (Singapore) stocks
The top 30 companies in Singapore are banks, properties and REITs and conglomerates.
The last global financial crisis wrecked many REITs and banks.
Simply relying on them could potentially be a risk.
9. Company results follow analysts’ expectations
This is probably one of the things that doesn’t make sense.
Why should a business performance, or shared performance follow analysts’ expectations?
Analysts don’t come from Mount Olympus with a big stick and white beard. They are just regular people like me.
Last but not least…
I know this is a little self-serving…
10. Dividend investing is inefficient and a nonsensical strategy
It’s slow, boring and doesn’t work.
I’ve built a 5-figure dividend income for my Personal Portfolio.
Some of my Diligence members are even collecting up to six-figure dividends.
What we need is not another quick-win strategy.
But a disciplined approach to accumulating our wealth.
Sometimes, investing can be simple.
Willie Keng, CFA
Founder, Dividend Titan