October 29

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This Is It! The 8 Key Principles for Investing Like a Pro

I remember having anxiety over starting my first “serious” investment many years ago. I also remember how hard it was to understand the world of investments at first.

Not all of us have the time or patience to do layers of research each time we come across a new investment or yet another jargon.

I regularly conduct Financial Health Checks at KPMG.

So, here it is - if you are nervous about making your first investment like my 25-year-old self was (I was a late bloomer!), but you want to do it; OR you’ve started with an easy one like PRS (Private Retirement Scheme), but would like to do more (and profit more!) - make sure you keep to these 8 very simple but important principles to become a successful investor.

Excited to learn? Let’s get started.

1. Invest with Clear Financial Goals in Mind

Investing without a goal is like driving without knowing where you are heading to.

It’s important to know where your destination is and which route it is that you’re taking before you even head out the door.

Because different goals (e.g. short vs long term goals) require vastly different investment strategies, and you don’t want to realise much later on that you’ve taken the wrong path for your type of goals.

At the end of the day, we want to arrive exactly at where we set out for, not 10km away, or RM5,000 short for a Europe trip, or an even bigger nightmare - RM500,000 short for the dream retirement lifestyle cruising the Caribbean.

"What have I just done with my RM8k" or "Sriracha in my eyes"?

When you don’t know WHY you’re investing, you'll freak out a lot over situations like these:

  • A negative news headline appears on your feed, you worry about your investment losing money... 
  • When a friend acts surprised you're not investing in a trendy investment he/she has, you worry whether you’ve put your money in the right place...
  • Any slight movement makes you fear the market is dragging you down...

If these negative emotions already bother you now, the chances are you will be quite a panicky investor, one who’s more prone to buying or selling whenever, and for whatever reason.

Go on a goal-based investment journey

Without clear goals, you are more prone to just buy and sell an investment for the wrong reasons.

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A useful tip is to adopt an investment strategy based on all your financial goals. And how do you do that?

First, list down all your goals and categorise them into short, medium and long term.

Short being less than 5 years, medium being 5 to 10, and lastly, long being 10 years and above. This way it’s easier to then map out a suitable overall investment plan that addresses each goal.

Then, refer to this table below for suitable investment types for your different term goals. In the personal finance world, you may also hear investment types being referred to as ‘investment vehicles’.

Short Term

Medium Term

Long Term

You intend to reach the Goal in

Less than 5 years

5 - 10 years

10 years and above

Examples of Goals

Downpayment for a house, a car, having a child, a vacation

A child’s education fund, business expansion, early retirement

Retirement, pay off housing loan, a child's education fund

Types of Investment (aka ‘Investment Vehicles’)

Unit Trusts, P2P Lending, Equity Crowdfunding, Gold, Fixed Deposit

Unit Trusts, Stocks, REITs

Unit Trusts, Blue Chip Stocks, REITs, Property, ETF

Short Term

You intend to reach the Goal in

Less than 5 years

Examples of Goals

Downpayment for a house, a car, having a child, a vacation

Types of Investment (aka ‘Investment Vehicles’)

Unit Trusts, P2P Lending, Equity Crowdfunding, Gold, Fixed Deposit

Medium Term

You intend to reach the Goal in

5 - 10 years

Examples of Goals

A child’s education fund, business expansion, early retirement

Types of Investment (aka ‘Investment Vehicles’)

Unit Trusts, Stocks, REITs

Long Term

You intend to reach the Goal in

10 years and above

Examples of Goals

Retirement, pay off housing loan, a child's education fund

Types of Investment (aka ‘Investment Vehicles’)

Unit Trusts, Blue Chip Stocks, REITs, Property, ETF

Short, medium and long-term financial goals with their respective, widely generalised, investment strategy that I can recommend.

Now, are these investment vehicles combos the very best fit suitable for everyone? The answer is NO!

Because chances are they will differ for different individuals with varying risk appetites, which I will discuss next.

To sum it up:
Successful investors know clearly why they are investing.

2. Determine your Risk Appetite

Not nearly enough people take this important step, but risk appetite is something everybody must find out for themselves before they make their first investment.


"How much risk are you willing to take to invest in something?" 
"What type of risks can you and your pocket handle and for how long?"


Your answers to the two questions above will change throughout your life, as you move through new life stages, new life goals, and as the market goes through movements for a myriad of reasons.

Not knowing your appetite before getting into investments is a big no-no; the same way lack of self-awareness in other areas of your life does not help you achieve your goals.

A very practical example: you know you can’t tolerate even the thought of losing 20% of your money but you enter into a stock investment. (Stocks are volatile in nature). You’re doomed to suffer a few sleepless nights in this case, don’t you think?

Create a Risk Profile

To learn about a person’s risk appetite, financial advisers use a risk assessment quiz to create a ‘risk profile’, which is essentially a report of your characteristics as an investor. It will include your risk score as well as recommendations on how to allocate your investment money.

Are you going to be an investor who’s Aggressive, Conservative, or somewhere in between? For a better understanding of your risk appetite, take this 3-Minute Risk Assessment Quiz that I've created for you!

Invest confidently, and correct all your previous, bad investment decisions!

Take my risk assessment quiz and get a custom report based on your risk profile.

What can you do with your very own risk profile? You can use it to:

  • Make informed decisions that align with your investment goals
  • Decide which investment to go into if you’re currently considering between a few options.
  • Identify investments that are definitely NOT for you, avoid making major mistakes that might cost you
  • Compare your investments with other investors who share a similar risk appetite, either online or among your friends and family

Re-assess as You Age!


Redo your risk assessment every few years. As we progress through life, our goals and circumstances change, and so do our risk appetite and profile.

Other things to understand about risks

In general, the higher the potential return of an investment, the higher the risks. If you come across any “investment opportunity” that promises a high return with low risk - I’m not saying you should pass on it right away - just be extra cautious.

Do additional research and focus on not getting too excited too soon. Take the time to gather all the facts and data, then evaluate accordingly. This way you give yourself a chance to recognise if it’s truly an excellent investment that suits you, or a bullet you should dodge.

To sum it up:
Successful investors are aware of their risk appetites and use the self-knowledge to decide which investment opportunities to take up.

3. Invest only in what you can understand

Warren Buffett, the business mogul slash investment genius, has famously made the subject of this section a golden principle to hold on to when it comes to investing.

But how does it apply to regular, non-billionaire individuals like you and I, again?

Very simply put, if you don’t understand [insert ANY INVESTMENT’s name], then don’t invest in it yet. As simple as that.

If you don't understand an investment, then don't invest in it YET. Familiarise yourself with the subject before you make a move.

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The word “yet” is emphasised because we can learn anything, and then become better suited to invest in it. What you don’t understand right at this moment you will have at least a basic understanding within 5 minutes of Googling.

So if you never quite understood how REITs or ETFs work, or what a certain financial term mean - remember the answer is only one new tab away, and you can increase your financial literacy just like that.

Increase your financial knowledge to open up more doors

A convenient way to upgrade your personal finance game is to utilise content put out by experts and even regular people who are successful at managing their personal finances.

Simply subscribe yourself to a few online channels they put out content on, and voilà! You will “automatically” absorb new personal finance knowledge while you’re scrolling, reading, watching or listening to their content!

The idea is to get exposed to financially healthier mindsets to improve the way you think about money, budgeting, finance, investments and etc. These bits of influence and learning can accumulate in time and make you more finance-savvy.

Match Yourself to Your Financial Role Models


If you have kids, naturally your financial priorities will be different from people who don't have kids.


Start identifying people online who create money/budget/finance-related content, and match yourself to those who share your interests and circumstances, e.g. age, wage and life stage.


By finding financial role models that you genuinely look up to, you will be more likely to pick up their good money habits. And in turn, help yourself save more, invest more and make more!

Setting yourself a challenge can also work wonders! A great idea would be to:

Start learning about all the asset classes aka investment options/products that are available to you. Perhaps one a day/week. Who knows? You might just stumble upon your new favourite medium to invest!

Information is in abundance today, and they’re available in all kinds of format: online articles, free weekend classes, Youtube videos, books, etc. You’re bound to find something that fits your learning style and attention span 😉

Always, always do your own research!

It doesn't matter how much you trust the person who's willing to do the research for you. Your money to be invested, your responsibility!

It sounds like a no-brainer but it is what leads to many could-have-been-prevented investment failures for a lot of people. He says, she says, he thought I thought... doesn't matter in the end when your money is gone.

Doing your due diligence lowers the risk of you picking a bad investment or one that’s not suitable for you.

For example, if you’re looking to invest in stocks of a company, not going through the company’s balance sheet would be... unwise to say the least. If you’re looking into unit trusts, a good idea would be to utilise great online resources such as my.morningstar.com and fundsupermart.com.my. They provide organised information of almost all unit trusts that are available in Malaysia.

To sum it up:
Successful investors are always learning about the different investment opportunities that are available. They never blindly jump into an investment without prior research.

4. Keep your investment costs to a minimum

The financial industry refrains from reminding you about this: investments often come with high fees and charges! So much so that it’s one of the biggest reasons newbies fail at investing.

Let’s first use stock investing as an example. Even if you DIY online (the supposedly cheapest route) instead of using a remisier, your costs differ between one share trading account and another that’s available in the market:

Charges of different brokerage firms that you open an account and start investing in stocks with.

Another popular type of investment, that has extremely different charges depending on who or where you buy it from, is unit trusts. More specifically, a unit trust that invests in stocks (aka an “equity fund”).

When you buy an equity fund from a bank or unit trust company, or through a unit trust agent/consultant, often the costs go up to 5.5% as upfront charges of your investment amount. That’s an expensive cost to bear as an investor!

Getting charged 5.5% means that when you put down RM10,000 as investment, your actual invested amount is only RM9,450. How long before you’ll get back that RM550 that was lost in the process? About 12 months 😨, assuming a 6% annual rate of return. Even longer time if your rate of return is lower.

If you had gone the DIY route, you can buy the same fund with as low as 1.5% sales charge through eunittrust.com.my (not an affiliate link, just stating facts here). Using the same RM10,000 example, 1.5% would be RM150, your invested amount would have been RM9,850.

Lastly, if you buy it from a financial adviser such as myself, advisers typically charge 2-3% (inclusive of a management fee to monitor and rebalance your portfolio periodically for you). With the same RM10,000 example again, 2-3% would be RM200-300, your invested amount would be RM9,700-9,800.

Working with a financial adviser is suitable for you if you don’t like/don’t know how to DIY, and can’t bother to learn about the markets and do rebalancing on your own. *subtle plug cough cough*

A 4% difference in sales charge could mean taking eight more months to break even.

To conclude my point about investment costs, you need to realise that whatever you choose to invest in… be it a property, a unit trust, cryptocurrency, stocks, equity crowdfunding, etc… there is always more than one path or platform or agent available for you to start your investment.

They each charge differently, some with additional services offered and some none. So, do your research, decide if you need to pay extra for any tasks you can’t do yourself, and take those investment costs into consideration.

Need your feedback...

I’ve been thinking about running a 0% sales charge promotion for young people who are interested in getting started with unit trust investments. Not sure how many people would be interested though! - if you think I should run it, comment and let me know!

To sum it up:
Successful investors are mindful of the fees and charges that are involved with an investment. They will decide to either DIY or get help with investments after evaluating their needs, limitations and resources (e.g. time, financial knowledge, amount of self-discipline).

5. Be disciplined and invest consistently

Think of any kind of excellence, grand achievement or success you’ve witnessed in your life…

It could be your favourite athlete who has gone on to represent his/her nation and won a medal, a good friend’s successful business venture that started really small, your grandmother who’s excellent at gardening and whom you can always count on to bring your droopy plants back to life.

Did any of them happen overnight?

Of course not. Successes are a result of hard work, perseverance and lessons, mixed in and fermented over time.

The same applies to successes of the financial kind. Unless you’re so lucky to kena jackpot out of the blue, developing good habits around managing your money and investing is your way out of the rat race one day.

3 simple and effective investment habits

The goal is to have increasingly more money in investments as you grow older. Below are three worthy habits you can adopt to become disciplined with investing!

1. Take time to review all your investments regularly.

Schedule a time at least once in 6 months to sit down, review all your investments and see if you need to cash out any profits and put more money into other investments.

An example of a situation you would cash out profits: when you believe the thing you invested in has hit its peak, unlikely to rise any more, so you move your fund out to place it somewhere else that you believe will grow.

An example of a situation you would put in more money into an investment: an investment that you believe will do well in future has dropped in price, perhaps lower than you last invested in it, so you put more money into it to bring down your overall investment costs. Financial planners and investors call this technique “dollar cost averaging”.

2. Gradually increase your savings rate by a certain percentage.

In other words, save a higher percentage of your income. E.g. Save 2% more of your income next month.

"Where should this money go?"

If you have saved up a sufficient amount as your emergency fund, put these savings into investments. If the sum is not enough to be invested, accumulate it month over month until the sum is enough.

You will slowly but surely achieve your investment goals sooner this way.

3. Separate your fun money from investment money

Depriving yourself of all pleasures for a month or two may seem like a great idea to ramp up your savings effort. But often what happens with stripping your budget to the very bones is an emotional explosion waiting to happen...

Proof of what I’ve said here? Every time my fiancee goes on a shopping fast, what comes after the end of that fast is a raging, compulsive shopping spree. Often does more harm than good if you ask me.

Establishing discipline for the sake of your personal financial success may sound and feel like hard work that you’d rather skip over, but the outcome will be absolutely worth it.

To sum it up:
Successful investors feel at peace following a set of habits established to keep their investments on track and to ensure their goals in life will be met when it comes time.

6. Aim for the long haul (Have patience)

Why is long term strategy the way to go? One word - compounding interest! Okay, those are two words but they’re more important than you probably take them for.

The power of compounding interest

Check out the difference between the final amount with vs without compounding interest!

The most impressive growth in this chart above exemplifies the power of compounding interest. Every cent you earn gets rolled into your capital chunk and helps you earn the next cent and more.

If you aren’t making use of this to supercharge your investments... instead you may be cashing out your gains every time, the entire orange area in the graph is what you’re missing out on!

Compounding your interests is a no-brainer to grow your net worth. The longer you let them roll, the higher the potential returns.

Time in the Market rather than Timing the Market

If you have been afraid of starting to invest because you are terrified of losing your money, making the decision to invest for the long haul will help your case because it reduces the risks of loss.

If you had invested in this stock (this is a chart of the S&P500), you will gain close to 300% growth over 20 years.

Since every market has its cycles of ups and downs, what many people try to do is to buy low and quickly sell high to make a profit. Think multiple dozens of sprints vs a marathon. And you can't blame them, buying low and selling high is a natural thought.

However, studies have concluded that you would actually make less profit trying to time the market (aka trying to predict when it's cheaper to buy in and make a purchase based on your own prediction).

This study even found that investors lose up to 1% annually by poorly timing their buys and sells.

Even if you’re willing to study the market deeply and determined to become an expert investor, American financial theorist and author William J. Bernstein came up with an estimate of the number of capable investors as 1 in 10,000... Not easy to become that top one person among 10,000 people. Not to mention, you don’t need to! Just invest for the long term!

Holding Period and Cumulative Return in the S&P 500

The longer you hold an investment, the lower your probability of loss.  Source: Betterment

Many short-term investments are more expensive than one long-term investment!

When you invest for the long term, an obvious saving is on the transaction fees. Each new transaction for investments such as stocks, unit trusts and good ol’ properties costs you money.

If you actively go in and out of investments like you do with your weekly fast food indulgence, your transaction fees are going to rack up, fast!

To sum it up:
Successful investors understand the significance of investing for the long term and is laser-focused on their long-term goals, such as retirement, education funds for kids, or paying off a housing loan.

7. Don’t invest only in one thing, do it buffet style!

What’s a good alternative to the age old personal finance analogy that says, “Don’t put all your eggs in one basket”? Because I’d hate to throw you the big cliched line but there’s really no better way to put it!

We all hate to lose money. If you can’t invest for the long haul like I suggested earlier, this other trick will help you - diversify your investments to minimise the chances of you making a loss!

The beauty of diversification. How does it actually minimise investment risks?

Different investments shine in different times and market situations. Some of them, when they thrive, they dull their certain opposite types of investment; and vice versa when they go down, their opposites thrive!

One such example is stocks vs bonds. How come? Because whenever the market goes bad, many stock investors would sell their stocks to move their capital to safer, less volatile places such as bonds. When enough of them do it, the stock market suffers an outflow that enhances the safer investment types.

Back to you being a smart investor who’s looking to not lose money. Let’s take an extreme hypothetical situation to demonstrate a point.

Let’s say you diversify your portfolio into five investments like in this image below. Investment A keeps making 15% return every year, Investment B makes 6% yearly, Investment C doesn’t make money, Investment D loses 6% every year, and lastly, Investment E is so lousy it loses 15% yearly. What will happen after 20 years?

How much would the annual ROI be? Could it be 0%?

Tada! Magic... You'll get an average return of 7.41% yearly. Clap clap, not bad with an investment that loses you 15% every single year.

Surprise, surprise. This diversified portfolio actually gives you 7.41% of annualised returns throughout the investment journey! Why was it not 0%? Because your gains would have rolled right up with its compounded interests, and hence absorbed the damages your failed investments did.

Moral of this extreme hypothesis: If you can’t count on yourself to only pick winning investments like Investment A all the time, every time… then always diversify!

How to practically diversify in real life?

1. Diversify across different types of investments (asset classes)

By now you know, to prevent a financial catastrophe from happening, you need to minimise your risks by having a diversified portfolio of investments.

Build a balanced variety of investments that proportionately invest in multiple asset classes such as fixed deposit, unit trusts, stocks, property, gold and etc.

What’s “balanced” for you will not be ideal for your neighbour or even brother, Take the Quiz to find out how a balanced portfolio looks like to you.

To take your diversification game further (yes there’s a way to level up here!), read on to learn how to diversify within the asset class that you’re in.

2. Diversify across different sectors or industries

If you invest in stocks or unit trusts, you can spread out your money to invest in companies from different industries/sectors.

This way, if there’s a season during which a sector doesn’t do so well, you won’t suffer an entire portfolio’s worth of losses.

To hop between industries, let’s say property investment tickles your fancy, don’t just only do residentials! Get into the commercial space as well.

If buying an actual commercial lot or building requires too much capital that you don’t have, you can also invest in commercial properties in the form of stocks, through REITs (Real Estate Investment Trusts).

If you have money left over even then, perhaps get into airbnb as well. Even within the airbnb space, there are different markets such as local tourists and overseas tourists. I hope you see my point… Who said you can’t be creative with investments? 😉

To sum it up:
Successful investors love diversifying their investments to cut down risks and max out ROI!

8. Be emotionally bulletproof when it comes to investing

“I’m investing in this new cryptocurrency because I feel like everyone is talking about them. Shouldn’t be so wrong to buy a bit myself.”

Ever heard a friend justify his investments with pure feelings and emotions? Bless your friend because it’s a minefield out there for headfirst people when it comes to investments.

What can happen when emotions take control of your investments?

Speaking of cryptocurrency, I’ll use 2017’s biggest roller coaster ride - Bitcoins - to show you why you should avoid involving too much of your emotion for investments.

Bitcoin’s price peaked on 17 December 2017. The record high price was a whopping $19,783.

Exactly a month before the peak the digital coin was worth $7,700.

That’s 157% growth in a MONTH’s time, 2400% growth in a year. That is crazy!

As the price first started to surge circa May 2017 because of the exploding popularity, there were eager investors who cashed out their entire retirement savings, mortgaged their homes or started owing massive credit card debt just so that they could invest in more Bitcoins.

In the days leading up to the bubble’s burst, more new Bitcoin investors continued to buy into the cryptocurrency, regardless of the high prices of $16k, $17k, $19k...

What didn’t help - experts were predicting on TV and tech blogs that Bitcoin would surpass $20,000 and even hit $25,000… many investors were waiting to become an overnight millionaire. Until it flopped in just 5 days after the peak on Dec 17.

Timeline of news breaking out about Bitcoin hitting USD20,000 and USD25,000, against the price of Bitcoin from Sep 2017 until now. In late 2017, the speculations sent people into a frenzy to invest in Bitcoin. Price chart adapted from Bitcoin.com

Today a Bitcoin is worth around $10,000 - $11,000 (September 2020).

Which means if you had bought a tenth of a Bitcoin at its peak with RM8,183, it is now worth between RM4,130 - RM4,540 (as of September 2020).

Now, I’m not denying the fact that many investors who bought it early enough did get rich by cashing out their Bitcoins before the plunge! Read these happy Bitcoin stories for that.

But what was avoidable?

  • Those who went into it because other people were doing it.
  • Those who bought into it because they couldn’t resist the heat of the $20,000 prediction so “I’d better get it while it’s still $17,000”.
  • And lastly, those who borrowed money to invest in it.

This is, again, an out-of-the-norm example, but it’s a real-life case that you probably remember, and I didn’t need to dig out decades of data :p

Your typical scenarios of investing with your emotions instead of wits are hopefully not as stomach-turning.

So how do you keep cool?

Your run-of-the-mill investments will not typically have such dramatic turns. But the ways to stay level-headed apply to all investments.

In fact, the seven principles earlier are your answers. Here I’ll recap:

  1. Set clear goals - Why are you investing in an investment?
  2. Know your risk appetite - How much losses can you take? For how long can you wait for an investment to mature? Etc.
  3. Invest only in what you understand - Learn about different investments and markets to gradually grow your portfolio.
  4. Keep your investment costs to a minimum - Watch out for fees and charges! Research and survey.
  5. Be disciplined and invest consistently - This one self-explanatory. Set up automation if you are forgetful.
  6. Aim for the long haul - Invest for the long-term if you can.
  7. Diversify! - Gradually diversify across asset classes, sectors and industries!

To sum it up:
Successful investors maintain a "zen" head while investing in order to not lose their sanity over the ever-present market noise.

Now, go ahead and make that first investment.

Now that you know your appetite as an investor, and you have an idea of the investments that are right for you, and you have these eight principles to stick to? It’s time to put them into action!

If you have any questions or comments, let me know in the comments section below!


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