The 3 Steps to Become an Investor

A short guide to starting your investing journey.

Investing… what a headache. How do you start? Where do you start? There are so many professionals out there selling you their strategies, their opinions, and their books, but how useful are they? Well, I’ll be honest with you; I can’t give you a straight answer because I didn’t read that many of them. However, what I can tell you is how I started my journey into investing. And this would usually be the part where I would break down my success story, selling you on my strategies, my opinions, and my books. Ok, I definitely can’t sell you my book! as I haven’t written one… Yet! But I can start to justify (maybe justify isn’t the right word) how and why I decided to jump down the never-ending rabbit hole that is; investment.

Now one of the myths, if it indeed is a myth, is that investing is for Harvard or Oxford or whatever big wig university genius go to or lying, backstabbing, suit-wearing, white-collar, alpha wanna be dudes. In fact, investing is and most definitely can be done by anyone who is willing to put, to quote investor jargon; due diligence or in layman’s terms do your ‘homework’. Now that’s easier said than done, there is a lot of information out there for you to go through… here’s where I came to the rescue.

With this article, I aim to give you the guiding first push towards your investing journey. I’ll break down this article into three sections; section 1, will be about the qualities you are going to need or develop or dust the cobweb off in order to reap the rewards so to speak. Section number 2, is all about the different options at your figure tips, thought ill make sure not to overload you, so ill stick with 3 mains in my humble opinion. And section number 3, I will sue-come to the eager and enlighten you on how I do things, just to show you that I practice what I preach (I know in reality you have no real way of knowing whether this is true or not, but hopefully by the end of the article I would have gained your trust). So, lets us get stuck in.

Drum roll please (imagine the sound) … Section number 1! Here… it… comes…

We hit things off by breaking down the necessary qualities an investor or dare I say a good investor would need.

№1) Discipline, now this is a biggie, you will never make those financial gain without this quality. Now I don’t want to speculate here, says the guy about to speculate, but you might be wondering as to why it’s a biggie. Well fear not here I come with an answer; there exists an infamous character that pulls the myriad of strings that rockets or plummets the world of stocks. Now that being said you might think that this character would be a stable, upstand, clean-cut, intelligent type, kind of like the ex-president of the U.S. Obama or Bill Gates. But you would be WRONG! This guy… that is in control of all your future gains… is a paranoid schizophrenia with a hint of bipolar. And he’s called Mr. Market (thank Mr. Ben Graham form the name), now I should say that Mr. Market only has these psychological issues in the short-term, however, in the long-term, he starts to act more like Obama or Bill Gates. So, what’s the link between Discipline and Mr. Market? Nothing… Just kidding! I didn’t drag you through that Narrative for; nothing. See discipline will help you fight the psychotic tendency of Mr. Market. Mr. Market in the short term likes to mess with you, you buy a stock, of what you think is the best company out there and BOOM! Mr. Market kicks the chair under you and laughs at you, as you fall on your backside. So, having discipline, you hit the gym five times a week you build your gluteus maximus and when that chair is kicked, you tense those fine muscles and define gravity.

To make all of this simple; discipline will help you to stick with your choices and weather any storm in the short-term and then enjoy the long-term gains.

№2) The thirst for knowledge. You got to seek knowledge like a man… or a woman! (don’t want to offend anyone, all-inclusive here) that’s just spent 3 days in the Sahara Desert and finally finding that oasis, with beautiful palm trees standing guard over a delicious pool filled with cold, crystal-clear, baby blue water. Could you imagine how you react? After 3 days out in the desert heat, man it would probably be the best drink of water in your whole life, Vodka be damned. And… here comes the hard truth about investing… there are no legal shortcuts in making those financial gains, there is just hard work. Hence the thirst for knowledge, you got to have that passion for acquiring information. Just like that man or woman searching for the oasis, you too got to have that will to drink up all the knowledge that you can find. So, yet again here I come swiping down with some knowledge bombs. A tailor-made just for you, cause your special (as you are reading my article), an almighty reading list and what’s more! I’ve organized it from beginner to advance just for you, your welcome!

So, without further ado… here comes the list.

· The Richest Man in Babylon, by Mr. George S. Clason; this is a great book for anyone that wants to be financially smart and learn how to save as well as invest. Now if you are a complete beginner to reading or you one those people; “I would love to, but I don’t have the time”. Don’t fret there is an audiobook version for this book on YouTube, (at the time of writing this article).

· The education of a value investor, by Mr. Guy Spier. I think he is from South Africa random fact. This is a great story of a guy becoming a value investor if you hadn’t guessed.

· The little book that still beats the market, by Mr. Joel Greenblatt. This is one of my investing bibles, is simple (he wrote it for his kids, so yeah… no investing jargon just simple words) and he gives you a bit of a helping hand too, but you have to read it to found out what that helping hand is.

We’re moving into the intermediate part of the list.

· Dhandho Investor, by the finance Guru that is Mr. Mohnish Pabrai, I-love-this-book, it fills in the gaps from the ‘Education of a value investor’, this dude (Mohnish) is the bomb, highly recommend.

· One up wall street, by Mr. Peter Lynch. Great read, its got good humor, and knowledge, what more would you want? That right no more.

And now comes the advance section of the list, this is for the big kids.

· What works on WallStreet, by the man with the most incredible Irish name Mr. James P. O’Shaughnessy, what a name… love it (one of the reasons why I read his book, yes because of that name). The book is great but starts to be a bit technical here, you’ve been warned.

· The Intelligent Investor, by the Godfather to all investors, the legend that is Mr. Benjamin Graham, the inventor of the crazy Mr. Market. This is quite literally the investor’s ‘Bible’. Though it’s a bit of dry read.

· And last but most sternly not least, the legend himself Mr. Warren Buffet. Anything that he wrote about is worth a read, he always posts his shareholder letters on the Berkshire Hathaway website. All of these are gold to investors.

And that concludes our reading list, I hope that you are still with me (I’m testing your discipline here, if you got this far, the discipline force is strong in you). Now back to the qualities.

№3) You got to be a bit of a risk-taker. Now I’m not asking you to be Evel Knievel here, but you got to be willing to take that hard-earned cash that’s sitting in that tight-fisted bank of yours and risk it. Now I say risk, you’re not really going to risk it (if you’ve done your homework and read the books form that beautiful list above). Remember Mr. Market is only crazy in the short-term in the long-term the guy is as smart as they get. In the great words of Mr. M. Pabrai, “head I win, tails I don’t lose that much”. This risk-taker business is not a big quality, but it is the one that’s going to get you out the door and down the store or in less nonsensical words; get you started. Sooo… it an essential quality to have.

Now you will be relieved to know that this concludes the qualities section of this article, phew, right?! Though a quick summary may not hurt… I hope! if it does go see a doctor cause that doesn’t sound right, anyway… the 3 qualities; 1) discipline, 2) thirst for knowledge and 3) a bit of a risk-taker.

Let’s get started on the next section, remember discipline, stay with me here… you can do it!

Your Options…

Not much of an intro is needed here, this section does what it says on the tin, (just to make sure you all are with me here; it’s going to tell what options you have when you going to start investing).

Well… like with your daily or weekly or monthly or just online shopping, you are presented with a whole heap of choices to pick from. I hate picking shows on Netflix, I swear! I spend more time looking through the options than I do actually watching the blasted show/movie. So, I’m going to do you a favor and boil all the choices into a list of three. I bet you thinking; “even that’s going to cause issues” well not to worry. I did say 3 but what I actually meant to say is 2. The third one is there to make up numbers. Without further ado, here-we-go!

Option 1

Let’s start with the safest opinion, give your cash, to the mash! or better said to an upstanding, professional, a straight and narrow investment firm (side note; they’re hard to find). Something like Berkshire Hathaway, ran by the legend himself Mr. Warren Buffet, though I should mention that a stock (yes just one stock), will send you back $300,000. Well there about, remember Mr Market screws around with the stock prices in the short-term, all-the-time! However, they do have a cheaper option in the range of 200–300 bucks ($), but your perks are limited. This is most definitely the safest route to pick. You give your hard-earned money to the Gurus and they make you, the dosh! all you do now sit back and keep pumping in the cash, thank you… compound interest!! Now you can do that with most of the investing Gurus mentioned from that impressive book list, up above. Disclaimer! You still need to have those impressive investors qualities I throw at you earlier from this option to work.

Option 2

Ok… we move onto the next option in this comprehensive load down. Now to introduce, possibly one of the most shocking things I’m going to type in this article… The do it yourself option! Now, now I know what you’re thinking, “yeah right, when do I have the time?” (if you are reading this during the infamous COVID-19 lockdown, well… I think you have your answer). Don’t fret this option is split into two part; the safe, casual walk in the park, one-day research type of option and then the F*** the market, I’m going train my ass off and beat you sorry ass — type, (if you haven’t of guessed this is the one that requires a bit of time). I guess it really depends on your personality here as to which one you going to pick (just if you are interested, I’m the F*** the market type). Ok enough of that back to reality, let's break down the safe casual walk option.

Here, what we will do is look at something called Index funds and ETFs (Exchange-Trade-Funds), both of which provide a safe haven for your dosh and tend to grow it for you (in the long-term). Now for those who are wondering, what the difference is between Index funds and EFTs. The simplest way to look at it is the way you put your cash in. An Index fund is basically mutual fund, means you give your money to (hopefully) upstanding gentlemen who effectively do the work form you (well, not your job work, though won’t that be great a dude that does everything for you and you still get paid! On second thought, I think that was abolished in the 1800s). It is a pool of a number of company stocks, that these pros pick and invest on your behalf and you get a percentage of the total gains (relative to how much you put in). Now you still need to do your homework to find the ‘right one’ for you and you going to have to pay a fee, as these pros are risking their lives for your money (err… just remember the housing bubble of 2007 -2009). And ETFs are just stock versions of the Index funds, so you get to buy and sell them like if they were individual stocks, still have to pay a fee though. The overall point here is… you might not beat the market, but you’ll ride the wave into gain-city, again just think about the long-term game.

Now here comes the boom train! The F*** the market option to investing, (disclaimer: I put the “F*** the market” slogan, but I’m going to be real with you, respect the hell out of Mr. Market cause he’ll chew up and spit you out like gum). See this option does require you to do your homework or in investor speak; “your due diligence”, whereas the previous two options you could get away with not reading any of the books, in may epic selection (though why would you do that to me?!). With this option, there’s no chance in hell. Now Arguably, this is the most riskiness option (out of the ones mentioned), the safety wheels are off and you're free to fall on your backend. In this option you do your own stock picking and basket putting. So, your risk game will go up. But if you had the discipline, the thirst and read those books (form my epic list), you’ll be like “Bah, humbug” to the risk. All you have to do is; pick a great strategy (from any of the Gurus I spoke about or any that you know), copy the hell out of it (no shame) and sit back and watch the gain accumulate in your account. Again! all of this is a long-term game. With this option, you stand more of a chance in beating the market, but you can just as easily lose a whole lot, (like all your money).

Just to make sure that I didn’t lose on the way down here or confused through my incredible writing (Cough! Cough!), here’s a quick summary.

Option1) give your dosh to an investment firm and let them do it for you (don’t have to read my book selection — sad face) and you probably earn some gains but have to pay fees.

Option2) do it yourself, (split into two paths) either you pick an index fund or ETF or both let them do the work for you similar to putting your dosh in an investment firm, but with the added benefit of having more control over it. Or you do everything yourself, more work but more potential gains (also more risk if you go in blind).

And Now!… (drum roll) What you’ve been waiting for… the breakdown, of yours truly, investment strategy. (pause for applause)

Thank you, thank you…

It’s pretty simple (I like things that are simple, less of it to go wrong), my strategy based around the company’s intrinsic value relative to its selling price. That way you can, not always avoid unexpected mood swings by our short-term psychotic friend Mr. Market. The quote that always sticks in my head, whenever I search and screen up stock choices “head I win, tails I don’t lose that much” by my man Mr. M. Pabrai. You wanna pick stocks that even if the worst comes to worst, you won’t lose too much of your hard-earned cash, maybe if you lucky and also did your homework you might even gain. Stocks that risk little and gain a lot (paraphrasing to hell here) are the winning choice.

You might be wondering how this magic screening is done. Well, start with finding companies that are valued below their “fair-value” meaning that if the company was to go bankrupt, then by the sale of its assets, (in theory) it could cover your amount of invested funds. This would mean that in the worst-case scenario you’ll lose a bit or just break-even or in the best situation, you make a little bit of a profit. Win! Win! A great site to use, though you do need to pay for it is https://simplywall.st

You keep hearing me shut short-term this short-term that and that Mr. Market tends to be psychotic in the short-term. Well to me short-term is around 12months or so, I make sure that at the least when I’ve (after doing my homework) pick the stock I like and I feel are undervalued, I will at the very minimum hold them for a year. Giving the finger to the psychotic version of Mr. Market. See holding a stock for a year allows Mr. Market to get his sh*t together and see your stock for the gem that it is. After that, you can sell it or keep. I tend to screen it again to see if it’s still worth keeping, (most of the time it is).

Here’s another thing to think about, how to judge the value and health of a company? Well, I could put my investor hat on and blow out all the ratios and math equations that can be used, like; Profit-to-earns ratio or the sales-to-book ratio. But freaky that would take way too long, so I’ll leave that for you to dig into. (ratios to look out for are Profit-to-earnings ratio, price-to-sale or price-to-book to name a few). I like to dig around a company’s financial statements, for one it makes me feel like I’m a detective and two to see how much debt a company has, if they have low debt and are showing growth, Winner! Winner! chicken dinner!

To sum up my simple investment strategy; 1) make sure that the stock price is below the fair price or the intrinsic price, 2) make sure that the company is health (low debt and show some growth) and 3) hold the stock for a minimum of a year, just so that Mr. Market can calm down and see your gem.

That’s all folks! I wish you luck on the start of your investment journey. Just as a side note the brokerage firm that I use or better-said platform is DEGIRO, a great investing platform very cheap when it comes to them taking their cut after you sell and/or buy stocks.

Man, if you made it to this point — both well done and thank you! hope this amuse you as well as educate you. Please press the follow button, clap, and share. If you have any questions about what you have read about… hit me up, be happy to answer them. Peace!!