CHAPTER 1: INTRODUCTION
Imagine yourself learning to play a new game. What are the factors that would help you win the game? Very often, we will firstly equip ourselves with the knowledge or skills to play the game. Subsequently, we will try to understand the rules of the game so that we know how to win it. After which, we will derive a strategy to help us achieve our goal. With enough practice, it is highly likely that we will achieve good results and win the game!
Let us take learning how to play basketball for example. Before we enter a match, we need to learn skills like dribbling, passing and shooting the ball. Subsequently, we need to understand the rules of a basketball game. To be able to win a match, we also need to have a good strategy to tackle our opponent. Eventually, whether we will win or not boils down to how much we practice!
Just like basketball, share investing is just another game. To win, it is necessary to follow the steps mentioned above. Share investing is a "zero sum game" whereby not everyone can be a winner, and the winners profit from the losers. As such, we should be even more prepared, to ensure that we emerge the winners in this game!
There are a few disciplines in share investing to help us win the game. "Fundamental Analysis" is one of the main disciplines widely used in the share investing game. Players adopting this discipline focus on quality of the shares, health of companies and market conditions for making investment decisions. The concepts used in this book subscribes to this discipline. If you are thinking of playing the share investing game with fundamental analysis, this is definitely the book for you!
Structure of the Book
This book consists of three sections following the steps you would adopt in winning games. This is how you can look at it with the basketball game example: In the basketball game, you must first learn the basic skills of dribbling, passing and shooting the ball. Back to our share investing game, the basic skills you need to learn are Economic Analysis, Financial Statement Analysis, Business Analysis and Pricing Analysis. Section 1 covers these basic skills.
After you know how to dribble, pass and shoot the ball, you need to know the rules of the basketball game and be familiar with the basketball court. I will do the equivalent for our share investing game in Section 2. This section will expand on the most critical rules to win the share investing game, which is to search for either undervalued shares (value shares) or shares of companies with growth potential (growth shares).
Just as you need to be familiar with the basketball court, you need to know the various components of the share market. This section will highlight the various features about the share market that you should take note of. At the same time, I will introduce some other instruments, namely Real Estate Investment Trusts (REITs) and Exchange Traded Funds (ETFs) that are available in the share market. These instruments can be very helpful in enhancing your shares portfolio.
To win a basketball game, strategizing your game plan is vital. In Section 3, we will discuss the strategy of share investing in details. We will have certain exercises to help you understand yourself, your investment objective and your risk profile. After these exercises, you would have all the ingredients spelt out in the investment process. With all these ingredients, I will illustrate how to put them together in the investment process to help you derive the watch list.
This book will conclude with a description of the portfolio maintenance activities you need to carry out. With that, you would have all the knowledge required to - Create a Secondary Income Stream through Long Term Share Investing!
Are you ready for the share investing game? Start your learning journey now!