The Origin of Investing (投资的起源)
The writer believes that since the bear market from March 2020, a lot more people know the importance of investing, where they can generate passive income even when their primary job is not operating. That being said, is earning money in the market means that you are investing? No, you may be trading or speculating but still able to earn some money. From that, why do we need to focus on investing where there are other methods that can earn money in a shorter time?
We need to first relate back why people would like to invest. The reason people started to invest is to create a secondary income through dividend payment, and that is why a lot of old-school investors quite emphasize on a company’s dividend yield. However, so called “investors” these days will only want their stocks to shoot up the sky once they bought the shares. The writer talked a lot about mind-set previously, and that’s exactly the wrong mind-set that people nowadays possess.
The newer traders and speculators will always put all their money in their stock market, sell it, cash out and spend the money. However, a wiser investor will first manage their money and income, trying to save as much as possible on daily basis so that they will have extra money to invest into the market. Then, they will allow the money to roll bigger and bigger over time, while still receiving some dividends. That way, they can enjoy both dividend income and capital gain income when they eventually sell their shares. Hence, the newcomer should first determine how much money they are willing to invest, then only they manage that amount of money in the market.
Let say you planned to invest RM10k, but because you invest all in one stock and that share dropped 20%, then you put in another RM10k to average down your cost. That’s the wrong way. A wiser way would be to invest RM10k in stock market, but only spend RM4k on a stock, and if they dropped to a new low, spend another RM4k to average down the cost. The remaining RM2k will be left to further average down the price, or finding other opportunities from other stocks.
In short, investing is not about immediate profit, but is to build your overall wealth overtime, while receiving some income from dividend payment. Trying to invest with a trading mind-set will affect your decision as you are unable to stand firm. Hence, you shall always remember to first adjust your mind-set, manage your income or money, and then manage your investment portfolio.
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