More often that not, we find it hard to admit our mistakes, much less documenting them. But I do agree (with both hands and legs raised) when BursaMethod’s Peter Lim said this:-
I always believe we learn more from failure than from successes.
This is when I asked him to share his first profitable investment story, and he replied:-
“Hello Lieu, I was wondering instead of sharing profitable story, can I share my failure story instead?”
Here is his first investment story, which ends up in total loss. However, sometimes after we fall, we get up, ego bruised but that hardens our resolve to fight for another day . After all, what does not kill you makes you stronger.
My first stock investment was with AIG, the parent company of AIA. Being an agent of AIA, we have the “privilege” to buy shares of AIG without brokerage fees if our production is above a certain amount every year. Then they will deduct from our commission at zero interest spread over 6 months.
I “invested” around RM 1.7k back in 2005, buying 6 units at around USD 75 per share.
Then during the 2008 financial crisis, AIG shares took a huge beating that they’ve done a reverse split of 20 to 1 share. Thus, my ownership was converted to 0.33 share.
Since its less than 1 share, they refund me the market value of my shares, with a cheque around USD 5.
The bank informed me that if I banked in an overseas cheque, the minimum charge is RM 32. Thus, my AIG cheque of USD 5 is worthless, which means 100% loss on my first stock investment.
Today, my income from my stock investments (both capital gains and dividends) exceed my working income or my expenses.
There are many lessons I learned from my “investment” in AIG, namely:
- I realised that doesn’t qualify as an “investment”. Benjamin Graham said, “An investment operation is one which upon thorough analysis, promises safety of principal and an adequate return. Operations not meeting that requirements is speculation.” I have no idea what I’m buying. Just simply follow all other AIA agents who say “Buy”.
- Highly leveraged company like banks and insurance company should be screened with huge caution. A small mistake by the management on the Assets of the company could potentially wipe out the entire Equity of the company.
- Screening them with huge caution doesn’t mean avoiding / fearing them. I’ve made over 100k in profits from LPI (an extremely well managed local general insurance company with superb profitability) when I bought it in early 2009.
- It’s not that Stocks are risky. It’s the way most people “invest” is. When you invest on good business run by management who thinks and behave like the owners and buying at a price which give you a considerable margin of safely, then to me, that’s pretty safe.
- Never stop learning, never fear after the 1st fall.
- Learn from the best. I simply read all I can about Buffett, Graham, Lynch, and understand how they do analysis and their reasoning.
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