My Birthday Present to You: Be Different

Social norm dictates that we receive presents on our birthday. However, as an investor, I am also a contrarian, so let this be different too. This article is my birthday present to you as I celebrate my 33rd birthday.

My Birthday Discovery

My family and I went on a vacation to the tropical island of Sentosa. We loved the place because it is close to home and kids-friendly, and this time we stayed at a newly opened hotel on the island.

When we went into the room, to my surprise, I saw a familiar looking building from my hotel window. While it may look nothing unusual, for my instinct told me that the white building with orange roof is definitely of military origin. The hotel butler shared that this building was previously a military barracks. But now it has been redesigned into a luxury hotel.

I was not convinced because my years of military experience told me that nothing about a military barracks is luxurious, furthermore this is an old military barracks from the 1900s. Military barracks are usually highly functional by very spartan in features.

The butler was very kind, and he actually brought me to take a look at their architecture plans. He showed me how the old military barracks was transformed into a luxury hotel while still retaining its military design. He said,

The old barracks were so well-designed that it could still be adapted to the new hotel plans decades later.

Bulter

Be A Well-Designed Investor

In the modern age, many investors seek out novelty in their investing journey. However, there are many immutable principles that continue to serve investors well even in this modern age. Learning old and time-tested principles is akin to learning from others’ experience because many were costly mistakes by those before us.

History is a free lesson on many costly mistakes by others.

Pete

Therefore, we must make full use of history to learn from others and not to repeat the same mistakes again. With these principles, we can be a well-designed investor that can withstand the test of time.

Below are some of my main principles as an investor.

Reject Get-Rich-Quick Scheme

This is my number one. I am also susceptible to basic human instincts. Over the years, I attended several courses to “improve myself” but the truth is I attended them because of their lure of “Do this and you will be rich quickly”. When someone dangles a carrot of “bright future” in front of you, you are naturally attracted to it.

Why? Because it gives you hope. Hope of a dream life, and you desperately want it to be true.

However, instead of helping you to be rich, it actually makes you poorer. Each time you are chasing these “shiny objects” that promise riches, you are one step further away from the truth on becoming rich – Invest properly in great businesses for the long term.

I recently had a conversation with a friend who is “trying out” forex trading. He said he enjoyed the process a lot and was making some money. He said it was working out for him and he was exploring into cannabis and crypto trading next by attending a course that cost US$5000.

He asked me about value investing and I shared how it works and what are my expected returns. His response:

Huh? Who has time 15-20% gain each year? I make 50-80% per trade on my forex trading

I smiled and wish him all the best.

Take Advantage When the Market is Irrational

The investing world will always be irrational because it is made up of thousands and thousands of human decisions, and humans will always be irrational.

Therefore, the market will throw up investing opportunities every now and then. Especially when the market is very fearful and people are dumping their investment.

For instance, a friend recently bought a condominium at a record low price. I was very curious because it looked too good to be true. He shared that the owner had a short timeline to sell their condominium and was willing to let it go cheaply.

My friend did something strange, he actually offered $20,000 more than the asking price, and the owner accepted immediately. His reason was nothing of great investing acumen.

The price was already very good, I paid 1% more to make sure I am the owner

Friend

To be a successful investor, you must take advantage of such opportunities when you see it, because they don’t happen very often. However, it is equally important that you verify that it is indeed a real opportunity and not a trap.

The Market is Never Stupid, Protect Your Capital

While the market is irrational at times, it is never stupid over the long term. I seldom make absolute statements and this is one of them.

THE MARKET IS NEVER STUPID.

So when you encounter an amazing deal, ask yourself the following questions:

• Do I know something that the market is missing?
• If it is such a good deal, why is it still available? Won’t other investors have taken it?
• What are the risk and rewards of the deal? Does it make sense for me?
• What do I stand to lose if the deal fails? Is it an acceptable loss?

If you can confidently answer these questions, then the deal might be a real opportunity. But if you are ever in doubt, skip it. The most important thing as an investor is to protect your capital.

Rule No. 1 : Never lose money. Rule No. 2: Refer to Rule No. 1

Warren Buffett

Be Careful When You Are 100% Certain

When I was a pilot trainee in the Air Force, I was always fearful when I was stepping into an aircraft. After all, it is a high risk activity. On the contrary, I was always in awe of my instructors as they were so confident and skilful. Whenever I am flying with them, I would feel safe and secure.

One day, when I returned from another successful flight with my instructor, I took the time to chat with him.

“Sir, do you still feel afraid when you fly?”

“Always.” he replied.

I was shocked because he was a seasoned pilot with more than 10,000 flying hours under his belt.

He added, “Being afraid is healthy. It keeps me focus on flying safely.” “If I am ever not afraid, I should stop flying.”

While not as dangerous as flying a military jet, investing does involve large sums of money and it will be healthy to adopt a similar attitude.

Investing is always about probability. The way to success is repeating investments with high odds of success while avoiding those with low odds of success.

However, it is almost impossible to be 100% certain about any investment, or find an investment that has 100% probability of winning.

If you are ever feeling 100% certain about any investment, you should be extra careful. Borrowing my instructors’ advise, I would say:

“If I am ever not afraid, I should stop investing”

These immutable principles will definitely serve you well in your investing journey.

Wish everyone success in building their “luxurious hotel” on top of this “old military barracks”. Happy birthday!