As part of Digital Senior’s expert interview series, we are proud to have value investment expert Sean Seah share his thoughts about investing for students in this post!
Sean Seah is an Investor and the Author of 3 Best Selling (Kinokuniya and Armour Publishing Best Seller) Personal Finance Books, “Gone Fishing with Buffett”, “Winning the Money Game” and “Financial Joy”.
He is a highly sought after speaker and is the 1st Singaporean to have a foreword written by Mary Buffett, an internationally renowned investment expert. He is also the youngest speaker at National Achiever Congress 2013 and 2014 which stages speakers like Robert Kiyosaki, Richard Branson, Donald Trump, Tony Blair and Antony Robbins. He speaks at several other conferences and is a frequent Securities Investor Association Singapore (SIAS) speaker. He is also the District 80 2014 International Speech Contest Champion and the 1st runner up at the Semi Finals for World Public Speaking Contest 2014. He is featured in national media such as the Sunday Times “Money & Me”, The Edge, Exquisite Magazine and frequently on 93.8 Live. He is a father of 3 and a servant of Jesus Christ.
Out of so many investment vehicles out there, why should we choose stock investment?
I will first say that I personally am open to all investment vehicles and stock is my favorite for the simple reason that I can easily diversify.
Allow me to explain. If I have an investment fund of $100,000 and I go into property investing, I can probably invest in one property or perhaps two if I buy overseas. But I think we should come to terms that there is no such thing as a guaranteed investment. So that means my $100,000 has a very high risk if it is only in one or two portions. Of course, we can do our study etc, but inherently, investment returns always come back in the future and from now until future, we can never accurately predict what may happen.
Now, for stocks, I can easily buy 10 to 20 or even more different types of stocks using $100000. And if I do my study on each of them, buying into those that has good cash flow, low debt and high potential for future growth, my risk is spread out into 10 to 20 portions. Even if one or two of them fail, my portfolio is still in decent shape.
Can we really become rich from investing?
My question to you is: Have we already seen people getting rich from investing? The answer is yes. There are many famous examples and in my circle of friends who are not “famous” people, I have seen so many of them become rich through investing.
Now, we have to understand your question better by knowing if we both have the same definition of “Rich” and the definition of “Investing”. In investing in stocks, we are buying shares of a company. What does that mean? It is actually as plain and simple as we have stated, “buy shares of a company”. But unfortunately, too many people have misinterpreted it.
If I start a company, say a restaurant, and I ask you to buy some shares of my company, what it simply means is we own the company together and when the restaurant makes money, we profit together.
But starting a restaurant may need a lot of money, so that’s why I can pull in friends to share the capital and they become my shareholders. This is called investing and this is what the stock market provides when a company decides to ask for shareholders publicly. The unfortunate thing is that because these shares are bought and sold daily, the price will go up and down depending on news and sentiment. Fundamentally, there is not much changes of a business from day to day but the share price does because now the stock market is treated by many like a legalized gambling den. But that is actually good news for investors who understand the value of the stock since we can leverage on the price dips.
This is call investing. It is not trying to make a quick buck from the market. It is building a portfolio of good businesses that will grow and make profits for us.
Now, how do we become rich from investing? It is by collecting businesses that become rich.
In my circle of friends, a couple of them now hold stock portfolio that is worth millions and collect hundred thousands in dividends per year. Personally, that is rich enough for me. So it depends on how you define being “rich”.
How to START investing in the stock market? Assuming one has a pile of cash and an account, how can one select his first few stocks among so many of them? It is the first step that seems so hard and uncertain.
The way to start is to buy shares of businesses that you believe will make money for years to come and will continue to grow. To make a better assessment, we will not only look at the business and make a qualitative assessment, but we will also look at the past financial records and make a quantitative assessment. Check the past income, check it’s efficiency based on ratios. Make sure it has conservative debt. Finally, enter with caution by buying an amount that you are comfortable losing. Treat the first stock as buying a lesson.
For students without much spare cash for investment, how can one make sure he learns the trade?
Of course, investing without learning is gambling. There are many good books, good courses and good investors. Best case scenario is to find someone who has experience to teach you. Next best alternative is to attend courses. Actually really depends on you. If you can read and learn, that will be good. But for me, I had to attend courses so I can ask questions and get real-life guide.
From a career planning perspective, are there any perks from learning stock investment while still in school?
Well…. If you are going to be a stock analyst or business owner, it will be useful. Otherwise, let’s not try and force-fit it to say it will be useful for all careers. But in some sense, if you can analyze a stock, you can see opportunities and value add to your company since you are attuned to seeing the strength and weaknesses of each company.
For those of us who are not financially knowledgeable (didn’t take finance-related course), can we still do well in stock investment? Do you have any suggestions for this group of people?
I have met so many people who are good investors and not many had finance related background. What is needed is the interest to learn and practice and the discipline to apply.
It is like asking if people with no bio background or physical education background if they can be fit. Investment, just like fitness, requires interest and discipline. And once you get better, it becomes more and more enjoyable.
Having been an undergrad before, is there anything with regards to wealth building you wish you had known then, as an advice for current undergrads?
I wish I knew it was even possible to be successful in investing. When I was an undergrad, I was convinced that successful investing was not possible because research showed that most fund managers don’t beat the market. But I realized later that it was because they had so many limitations that retail investors like ourselves didn’t have. If I had started earlier, it will be even better. But well, I think I was dealt a pretty good deal in life. So no regrets for myself.
Any good books to recommend to speed up our learning curve on investment?
One up on wall street by Peter Lynch
Gone Fishing with Buffett by (ahem) Sean Seah
Eager to begin stock investment now?
Like what Sean said, the best way to pick up the trade is to learn from someone who has already done it! Here’s the best part. To kickstart your stock investing journey the Warren Buffett way, be sure to check out Value Investing College.