How Do You Teach Someone To Invest In the Stock Market?

Teaching someone investing is different from teaching someone how to invest in the stock market. The first one is a general overview of what investing is, it could be real estate, stocks or buying jewelry. While the 2nd one is more specific and will determine the character and personality of the investor.

The hardest question for me to answer is when someone asks me, how to invest in the stock market. A life insurance agent will love this opportunity to sell an insurance product that has investment and retirement plan in it, earning himself a 40% commission in the process. But I'm not a life insurance agent and I definitely won't invest my money in insurance products.

I also don't like the 1 day seminars conducted by a lot of organizations on how to invest in the stock market. I think, that is a bit misleading. It takes me weeks to find out what's the best computer laptop to buy, it takes years of accumulated knowledge to know which specification is right for my needs, yet people seem to think that attending 1 day seminars would automatically make you an expert in a field that few of us can only master... or make profitable.

I do believe that these seminars have value. And I am not entirely against them. For example, teaching someone how to navigate an online stock trading dashboard would be a good seminar for 1 day. But teaching someone how to read charts or financial statements in one day would only do more harm than good for the investor  (but more good than harm to the broker, in terms of money). Since most people would actually study that sort of stuff in university for 5 years.

And I'm also not against insurance companies selling investment products. They are actually good, given some circumstances. But the bad news about it is that when sales quota comes first, the investor's welfare is not the #1 priority. Remember that these are salesmen, and you have to think twice before investing. They have a commission, a quota and are ambitious in pursuit of money. Your returns is probably not the first thing in their mind. Its probably their own retirement.

So how do you exactly teach someone how to invest in the stock market where financial advisers are salesmen and seminars are not enough?

Hmm... that is a big question mark and I still don't know how to answer that. When someone asks me, it always leaves me speechless. Trying to think of things to say.

How did I learn to invest? Books. But given most people are afraid to read books, I don't think I have an answer for that. What if the insurance salesman wrote a book? Reading what kinds of books is another question. But its a lot easier to answer.

The Pursuit of Happiness

I remember in college when I watched the movie by Will Smith about the true story of a guy that went from rags to riches. I also remember having been disappointed with the movie while my friends thought of it as an inspiration. I'm the only one who thought that "He just got a job. What's the big deal?".

The pursuit of happiness, in our world is different for all of us. And I could only categorize them into 4 types. It's important to know which type you fall into, so that you know you're searching for your happiness. Money can either be a means to an end or the end itself. It depends on what type are you.

4 Types of People According to Their Happiness

1. The Pleasure Seekers

These type of people are happy when they are stimulated by events, substance or activity. They are the one who will pursue happiness in the terms of travel, backpacking, going to clubs and parties, meeting new people, hiking the mountains, going to exotic locations, different foods, relationships. Happiness is living in the moment and the experiences you get. Happiness for them is the now and the feeling of being in the moment, without a care for tomorrow. Like living each day as if its their last.

2. The Security Seekers

These type of people are happy being with their family, friends and work. They are happy having work. Having said that, the movie Pursuit of Happiness is based on these type. Family + Work = Happiness for them. Having a stable, work-life balance is the ultimate goal because there is no other way to live life. Being useful to family, organization and society. That is their happiness.

3. The Knowledge Seekers

These type of people are happy learning new skills, knowing about a lot of things to understand or have control of the natural world. The keyword here is understanding the world. Happiness for them is to understand nature, the universe, the world itself. Or to understand people and how they think. In a way, for this type to be happy, it is imperative to have a lot of free time dedicated to learning, reading and experimenting.

4. The Enlightenment Seekers

These type of people are happy when they inspire others to be the best they can be. They are happy when there no clutter in their life. Living on the most bear essentials of life. While security seekers would love a good house, a car in a good neighborhood, these type like the simplest cabin in the middle of the woods living off the land. They are happy when they find time to know their true self and help others know their true self too.

The important thing to remember is that, different people are of different types and most likely pursue the happiness they fit into. I, for example is of the knowledge seeker and the movie "Pursuit of Happiness", which caters the Security Seekers, does not excite nor inspire me. In a summary I think the movie is about a homeless guy who got a good job at the end of the movie. A security seeker may be brought to tears, like my friends. But I am not so moved by this. I cried seeing the launch of a space mission or a mechanical arm working on a paraplegic, but not so interested in a homeless guy having a job.

And with this in thought, remember now, that some of these types are not your average security seekers who would be happy to work until old age. Most of them are unconventional in the work-live-die way. And investing would be a good way to brought about the change to the pursuit of your own happiness.

Define Your Own Meaning of "Wealth"

Who is the wealthier person?

• Someone who drives a P1,500,000 peso car to work with P50,000 savings in bank OR someone uses a bicycle, has P1,500,000 pesos worth of company stocks and has P10,000 savings in bank?
• Someone who frequently buys DVD or someone who frequently buys books?
• Someone who eats fast food or someone who cooks his own food?
• Someone who buys foods in the supermarket or someone who grows it himself?
• Someone who has P2,000,000 worth of a house OR someone who owns P2,000,000 worth of rental property?
• Someone who can afford high medical expenses OR someone who can avoid medical illness?
• Someone who throws a big party every year for their birthday OR someone who invites friends over every night to hang out?
• Someone who earns a lot of money abroad and leaves their family behind OR someone who leaves their work abroad to BE WITH their family?
• In that sense, who is wealthier? Someone who spends time with work OR someone who spends time with loved ones?
• Someone who has a lot of things OR someone who has and needs nothing?
• Someone who can't leave work OR someone who doesn't want work?
• Someone who can see their money in the bank grow OR someone who can see their child grow?
• Someone who pays to fix things in the house OR someone who can fix things in the house?
• Someone who dresses fine, in suits and dresses in the latest fashion OR someone who buys quality (not necessarily in the latest trend) and never have to buy again?
• Someone with a big family OR someone with a small family?
• Someone who owns a gun OR someone who can avoid a fight?
• Someone who follows a religion OR someone who's mind is free from any religion?
• Someone who feel bored when there's silence OR someone who is comfortable with silence?
• Someone who feel bored alone OR someone who is comfortable being alone?
• Someone who knows the latest news OR someone who knows history?
• Someone who knows how to use the latest tech gadgets, know their specs and latest apps OR someone who can create such gadgets, specs and apps?
• Someone who follows other's opinions OR someone who follows his own intuition?
• Someone who can make roaring speeches OR someone who prefers silent deeds?
• Someone who prefers to talk about the problem OR someone who reflects on his own problems?
• Someone who has no time OR someone who has a lot of time?

The Pursuit of the Black Belt

On my list of goals, I said that I want to obtain a black belt in a martial art. Here comes, the hard part, what martial art should I pursue?

This kind of activity is much like investing, it takes careful planning because, at the course of the pursuit, there will be times of doubt, once I know that I have made the right choice, the higher the chance that I will stick to it and obtain the belt.

I have been thinking a lot about this, since obtaining a black belt in a martial art means investing my time, money and body (you may get injured).

Let's see the given variables (me and my condition).. I'm in my 30's, not getting any younger, I'm small, cerebral and doesn't want to get knocked out. I value my brain cells and would like to live a normal life in old age, without punch drunk, dementia or any brain damage. I don't want to fight.

I have a previous experience in martial arts, a knockdown full contact karate, old school style called Kyokushin. Its like muay thai with bare knuckles, no gloves, and you win only when you knock your opponent out or down. And this experience has taught me, fighting will either make you a monk or a maniac.

I became a monk. Metaphorically speaking, fortunately.

So I also want a martial art that does not harm people. But equally effective when there's no other choice. Karate is out of the picture since its a hard style. Bruises and broken bones are its cup of tea. Muay thai and boxing is out as well, even though I admire those arts. I think any form of striking is out. Its either brain damage for me or brain damage for my opponent. Both of which I don't want to have a part of.

Which leaves me with grappling arts.

What's amazing about grappling is you don't need much strength to practice the art. You don't need to be taller. Its cerebral and it doesn't hurt the other person unless you want to. Its the perfect art for me.

My first option was aikido, after reading the book "Angry White Pyjamas" and watching some demonstration from youtube of a master throwing people like paper, I almost got into it. There was one little problem with the art. Nobody would hold your wrist in a fight. Aikido's techniques needs to be performed when the opponent holds your wrist. In the times of the samurai this would have been relevant, as your enemy might try to prevent you from drawing your sword and thus hold your wrist. But today, if someone wants to hold you, it would be more than just wrists.

I always wanted to learn judo. Perhaps if I had been more attentive in my youth, I would have learned the art. But circumstances has made me miss the chance. I'm contemplating the possibility of learning judo, but the thought of it as being physically demanding, makes me a bit wary, same goes for Greco-Roman Wrestling.

Jujitsu. This I think is the perfect art for me. I did attend one class just to try it out, and I liked it. Less focus in conditioning and building strength and more time with sparring / rolling / techniques. No striking and less injuries. The art is effective, because every training session, you go against a person who will 100% defend or resist your attacks. A focus on technique rather than strength. I have seen smaller guys tapped out someone bigger than them. In striking arts, this is not possible. As proof than even 5lbs advantage from a boxer can kill.

I think I found my art now comes the pursuit of the goal.

The Case for Investing and Trading

A couple of years ago I was into trading, it was a fun ride and very educational. I learned the value of money, time, patience and discipline. Trading has thought me, that emotions get the best of us. However sound your trading strategy may be, it will always turn you to the losing end.

Both trading and investing will teach you patience and discipline. Trading on the other hand, is more stressful and instantaneous. Wrong decisions are punished immediately, right decisions rewarded just the same.

Investing will teach you slow money. You wait for years for your fruits to unfold. But in a sense, its more accurate than trading.

I felt that trading, even though having good success with trading, is much like a gamble. No matter how many times I have seen a pattern on a chart, I know what the next scenario would be, and I would trade accordingly, still I am not sure if it will come to my favor or not. For me, it felt like gambling.

I do not like the feeling of having to "guess" no matter how sound the decision is.

Trading is fast, but it comes with a price, you will need to trade your time for the fast reward. Investing is slow and comes with luxury of time.

When you trade, you spend time waiting in front of the computer. From the opening session to the closing. With investing, I feel like I'm reading a book. I'm not in a hurry to buy a share. I want to finish reading the "story" before I could decide. The story is seen in the balance sheet. Comes the time, if I like it, I'll then decide accordingly. In trading there is no such luxury. You are always pressed for time. Trying to outsmart/outspeed the other buyer or seller. I do not like the cut throat environment of it, nor do I see the need for such haste.

I think investing is better, when it comes to comparing resources used for the return on investment. Money should be ignored, assuming both a trader and an investor use the same amount of money. What we have left to consider is time.

A trader will have to spend more of his time to earn. It is the actual time trading. If the market opens at 9:30 and closes at 3:30pm, he just spent 6 hours of his life, everyday to earn a living. An investor may read a company's balance sheet at his leisure, before sleeping or at the breakfast table with his coffee, buy a stock for 5 minutes to get an order and go hiking somewhere, take his wife to a date and play with his kids, travel with his family for the rest of the week.

Its all about the quality of time spent for the amount of reward. Let's say that a trader manages to return 50% on same year (difficult but not impossible) and the investor manages to have a return of 15% (average). I feel like that the investor has a better life when you think that the trader spent his whole year looking at a computer screen 260 days and 6 hours per day (1,560 hours), and the investor spent the same amount of hours with his family, learning new things, traveling and what not. To think that a 30 year old person only has 200,000 hours (give or take) left for his life, I feel that life is too short not spending it with your loved ones.

A trader may "make money from having money" but its the investor who "makes money work for you". Because of the two, its the investor who have the free time and let money do the working.

Dividend Received! P122,010

Amazing how time flies and money grows with it. The last time I received a dividend payment for April, I remember how happy I was, to be able to see this kind of money as if coming down from the heavens, bestowed by the Gods as a reward for the virtue of frugality.

The last dividend payment I received for the same month was P89,474, while it grew on its own, now amounting to P122,010.

The actual money that I received was P109,809, taking into account, taxes that needs to be paid, an increase of 36.36% from last year.

The money will be reinvested, so this too shall grow. I have learned recently the IPO listing of Century, the company that makes the popular canned goods and sardines. I am very much interested in investing in its IPO as I have enjoyed those canned goods every time I hike into the mountains and meals while I was still a struggling youth in college. And I'm all for helping it to expand using the money acquired from its IPO listing.

Regret Comes Last

"Nasa huli ang pagsisisi.". We all know this phrase. Our mothers have been saying this since we learned to speak. When it comes to money, I have a different approach to most people. And this difference and uniqueness makes other people uneasy.

I created this blog to share what I know about investing. And even the friends I have care for deeply, I tried to convince them of the future and their relationship with money. Personal finance today in the Philippines, for me, feels like Pop music. Its like a fad. You're in, if you know what's the definition of mutual funds is. You're in, if you have life insurance. Save or invest 10% of your money. Challenge this belief and you find yourself treated as a fool or a tightwad.

Being treated or told a tightwad does not bother me. I have grown to ignore good titles so bad ones does not tick me off either. What affect me is that people decides to close their eyes unto the reality of things. And they are afraid to look at the grim reality of the life they are heading.

Besides, who wants to be told that you're going to work for the rest of your life in a cubicle if you continue leading the life you have? Now I can feel the fear. So I decided to shut my mouth and just let people live the life they choose. In the buddhist sense, giving unsolicited opinion is also an abuse. Speak only when asked. And so I did.

After years of trying to convince friends and after 3 years of shutting up. 3 close friends came to me and realized that what I've been saying is true. I was expecting them to realize this at the age of 65, but good thing they gave it a thought. Am I happy? Yes. But it wasn't the kind of happiness that I was expecting. Because now, these people are now in my responsibility. I realized that telling them about this truth is a selfish thing. Because I wanted to be recognized. Them coming to me, taught me a lesson. I wasn't happy as I was expecting to be right. I know I'm right. But when they admitted that I was, I was indifferent.

The moral lesson of the story is this. Save and Invest nothing and prepare to regret it later on. 

Follow personal finance's advise of saving 10% of your money in investments, and be prepared to work until age 65. You may or may not regret this later on given your personality. I myself would regret spending my whole life working. What other benefits this does have I do not know. Its yours to find out if you decide to lead this kind of life.

Save and invest 80% or more of your money and you'll be called weird and a tightwad. But you'll be financially independent in 5 years, plus the ability and skills to survive without money.

And there are 2 kinds of truths. Conventional truth and ultimate truth. For people who follow the crowd, culture and society, there is conventional truth. For people who realized and saw the reality of things, there's the ultimate truth. If you try to convince people who only can see conventional truth into looking at ultimate truth, you'll only have misunderstanding. The best way is to leave them be and let them search for this truth in themselves. Until they ask, you should stay quiet.