With the proper knowledge, wealth can be obtained and sustained. Make money work harder for you instead of let time work against you. Risks only comes from not knowing what you are investing in. You are unique, and only you know what is best for yourself. Even if you need help, defining what you need best would make it clearer for other people whom you seek help from. These are some of the common sense concepts outlined in Lai Seng Choy’s first book, Infinite Wealth.
Starting from a humble background as a know-nothing investors, Lai Seng Choy has came a long way from shunning stocks to actually learning about value investing, and formulated a way that suited him the best. Note that best for him might not be best for everyone – in fact he never claimed his method is the best. However, it is worth taking note his stock investing methodology as reference and then perhaps formulating a way that suited to you – after all, as Lai say, “You are unique, and only you know what you need or want.”
In case you are wondering Lai’s stock investment process is a way to make quick money, it is absolutely NOT. In fact, he stressed that there is no magic formula to make quick money in stock market. He further urged readers to wake up and accept the fact that the so-called hot stock tip is tip for general public, but history for big traders. So why bother? Big traders are there to grab immediate profit when the general public is buying based on “the tip”. But how many of us still cling on such “hot tip” and refuse to accept this fact?
What he has is a straightforward step-by-step, systematic, effective and proven way to get impressive investment results in long term. But extensive homework is required, using the proper tools which – some are free, some are not. The book didn’t really cover the demonstration of the exact tools used; that is Lai and I co-founded InvestBursa.com, where members could engage Lai live on the “fishing methods” instead of giving us “the fish”.
In case you are wondering why there’s no mention of value investing, there IS – at a back chapter of the book. No stock investor will defy the power of value investing – buy a company a half of its price aka at bargain. Being in the stockmarket for 10 years, survived 2 major downturns and came out unscathed to write a book on it – Lai too, is well versed in the principle of value investing (ie calculating the intrinsic value of a company). But then he realized applying this concept alone didn’t work for him. As he narrated to me, if you spotted a good counter, you know its intrinsic value well, but it might NOT drop to this bargain price until the next recession – say 4 years from now. Then the next question comes in – what will you do with the money you have allocated to invest for the next 4 years?
Conversely, if you spotted an undervalued company with intrinsic value of $ 100 but its stock price is currently trading at $ 15, would you doubt if your intrinsic value calculation is correct? Want to ask Warren Buffett to verify it? 🙂
Which is why Lai fundamental investing focuses on a few metrics that makes sense in determining business profitability. Things like, net profit margin, cash flow (cash is always king) and return of equity. Then in the second part of his method, he shared only 5 simple technical analysis to gauge entry and exit prices. Just 5 – don’t need to be overly complicated.
I don’t think Lai is overtly averse to using margin to generate higher returns – it is just that he is against borrowing money to invest because that means you are really not in a good shape yet to dabble in stock markets. What he don’t want to happen is that readers might misinterpreted his words and use borrowed money solely to invest. If things head south, one would end up in a even dire situation than what he begins with. He advocated that one should build up strong foundation of having 6 months emergency buffer fund, clearing off high interest rates debt which eats into our return (credit card’s 18% per annum) and a couple of things as well.
As for the definition of financial freedom, Lai is with the group who believes one should be debt free. Another group which contradicts with such thoughts is that you don’t have to be debt free, but have good debts instead to generate more investment returns which is higher than the cost of borrowings. Neither is wrong nor right – it depends on your preference. He shares his thought in an interview with me previously here – on his second book, Freedom.
Freedom Interview with Lai Seng Choy
Now the Chief Editor at Kanyin is kind enough to send me 2 copies of this book titled Infinite Wealth to be give away exclusive for you, my subscribers.
This giveaway is sponsored by:
All you need to do is to answer this question:
What is your stock investment style?
Post your comments below – short or long. Winners to be announced 20 Mar 2013.
Update: Winner for this round is choong and Stephanie. Thanks for the comments. Another giveaway coming in April 🙂