Subscribe to Our Youtube Channel
Follow us on Spotify
What Should You Know Before Investing?
Sean: What are factors I should consider before investing in anything?
Toni: Okay, let’s go back to the basics. We’ve said this first, determine your investment objectives. The second factor would be your timeframe. Are you going short term, medium term, long term? Third would be your risk appetite. Are you a conservative, moderate or aggressive investor?
And then I would say the fourth would also be, another factor is the size of your fund because the strategy for someone investing 10,000 is different from someone who’s going to invest a million. So you also have to take the size of your fund into consideration. And then the last one would be your knowledge in that investment. So how much do you know? Again, we’re going back to the golden rule, never invest in something you don’t understand. So those are factors to consider. Is there anything that you can add to that?
Sean: I’d say, you should have something for emergencies first. Because if you invest and it hasn’t made money yet, and usually investments take time. Right? So usually you’ll have losses. First couple of years, maybe the first three years, usually you will have losses. And then an emergency happened, you had to pull it out, you’re going to pull out with a loss, which is, you should have not invested it and you should have just kept an emergency fund first.
So make sure you follow the five steps to personal finance management. I would say that’s very important because a lot of people make that mistake. They have no emergency fund, not yet insured, and they went straight to investing. So I feel like that is a common problem because you get penalized when you pull out that investment to pay for an emergency.
Toni: Right. So establish your foundation first. Like what you mentioned, emergency fund and get yourself insured. In other words, you protect your wealth before you start accumulating it through investments. Because it’s also a waste, if you’re going long term, you need to pull it up because of an emergency and you’ll be back to zero. So it’s a waste, it’s just going to pull you back. It’s going to pull you back further from reaching your long-term financial goals.
Sean: Yeah, true that. Alright, from Niño. There are a lot of investment vehicles, but sophisticated investors always preach that it isn’t an investment vehicle you should focus on, it’s the strategy that you should work on. What’s your say about this?
Toni: Well, I would say the investment vehicle is just as important as your investment strategy. I think you have to figure out your strategy first before you choose your investment vehicle. If let’s say you want to enter the stock market, then of course your strategy will be different if you’re an investor versus a trader.
And the reason why a lot of sophisticated investors like Sean or Marvin preach that is because it’s your investment strategy that you have to stick to or follow regardless of the different market conditions. So it’s what’s going to help you not lose a lot of money. Right? Because investing in the stock market, let’s say it’s a psychological game. People tend to take action based on their emotions. There are a lot who do revenge trading, they don’t stick to their strategy, and that’s exactly how they lose money.
So it goes hand in hand, but you have to figure out your investment strategy before you enter the market. It’s also possible to adjust your strategy as you go into the market, because you’ll figure it out, “Okay, so this works for me and this doesn’t.” So that’s my take on that. How about you, Sean?
Sean: I completely agree. Strategy trumps the vehicle. There’s a lot of investment vehicles that you could get on. And the strategy is not just about hoping to get 20% per annum. That’s not a strategy. That’s a goal, but that’s not a strategy. And the strategy is more of here are my convictions, this is the market that I want to study, that I’m going to invest in, and these are the expected returns per annum or per, I don’t know, like half a year, per five years, depending on how long you want to put your money in there, and then this is what I’m going to do no matter what. That’s a strategy.
The 20% per annum, that’s not a strategy, that’s a goal. And usually that’s a goal that’s not going to be met because we have no control over the market. Stick with the strategy, not the vehicle. So I’m sure Toni you’re invested in lots of investment vehicles. You mentioned crypto, you mentioned stocks, life insurance. Same with me, I have a lot of investment vehicles that I put tiny bits of money on to see which ones work and how they work. And mostly they learn them. Right?
It’s like a tuition fee for me. I just put little bits of money to see how. And the ones that fit my strategy of SWAN, the SWAN strategy, Sleep Well At Night, S-W-A-N. And then I’m going to put the money there with returns of greater than 12% per annum. Actually 12%, I’m happy, but if it’s greater than 12%, I’m even happier. So anything 12% or more, long-term, three to five years, and the risk is relatively low, and then I’m able to sleep well at night, that’s my strategy.
So I just shared with you my investment strategy right there.
Toni: Free knowledge. But you know what trumps both investment strategy and the investment vehicle?
Toni: Your investment thesis.
Sean: What’s that?
Toni: So your investment thesis is basically your reasons for buying or selling, let’s say a certain stock or investing in a certain business. So your investment strategy will stem from your investment thesis. Actually earlier a client asked me, I bought Apple stock a few years ago and it doubled in price now, should I sell it? And I always respond, what are your reasons for buying that stock in the first place? What’s your investment thesis? And does it still apply today?
So your investment thesis will determine whether or not you’re going to sell a stock, whether or not you’re going to do this type of trading strategy or not. So it’s the investment thesis first. Then from there, you get to determine your investment strategy, then you choose an investment vehicle. That’s it. So in other words, this is your why, your big why.
Sean: Got it. That’s great. Investment thesis, got it.
Toni: And Marvin says this in other words, like, “what’s your reason for selling that stock? If you bought it because someone told you to buy it…” He goes along those lines.
Sean: That’s Marvin Germo like. The way you said it is in Marvin Germo’s style.
Toni: Right. I got to memorize even his mannerisms. But that’s it.
Sean: That’s great. Good stuff. I only learned it now, an investment thesis.
Toni: Wow. Okay.
Sean: I first heard it from Toni. There you go. Kiyosaki stated that you should build a business first, so your business can buy investments. What’s your stand in this?
Well, I only have two words for you. Marvin Germo. He skipped everything.
Toni: He just went against the cashflow quadrant. Like what is that?
Sean: Yeah. From E, he went straight to becoming an investor. That’s it. If you need proof, go check his YouTube channel, ask him questions. I think he still does lives? I think he does lives.
Toni: He does. He even goes on TikTok.
Sean: So you’ll learn how he did it. I mean, honestly, if I can go from employee and then straight to investor like Marvin, I would do it that way, but I can’t. There are some people who are blessed. I think there are some people like him who are very blessed in making money in paper assets, such as the stock market. It’s like, for me, I’m not that blessed with it. I can’t say that I’ve made a lot with those investments. I’ve made more in other private investments than in my own paper assets. So yeah.
Toni: Yeah. As for me, I really followed the cashflow quadrant. So I started out as an employee. I became self-employed. And then when you put a portion of your money to investments then those investments would pay for your expenses and all. So I guess it depends, we have to ask ourselves, are we Marvin Germo? I’m not.
Sean: Yeah. For me, I’m the same as you, I followed it all.
Toni: That’s our stand. I hope that answers your question.
Sean: I guess Niño, it might be safe, or it might be the usual progression. I would say it’s the usual progression from employee to investor. It’s very, very, very that people would go straight to investments. Very rare, but it works. There are those people.