Saturday, February 02, 2008

Investment Journey - Continuous Learning

This is a short post to highlight the importance of continuous learning as we embark on our journey to be a better investor, and towards financial freedom. Throughout out investment life, we will encounter all sorts of different companies, different challenges and new obstacles. It is the job of the intelligent and conscientious investor to read up more on the companies he is interested in, and to do objective research and analysis on aspects of industries which he does not understand. Knowledge is infinite, and learning is a lifelong experience (as MM Lee puts it), so we must continually upgrade our skills set and knowledge base in order to remain relevant.

Warren Buffett himself is an avid reader and readily digests WSJ, Economist and other major publications on a daily basis. For him, reading is part of understanding what goes on around him, while it also highlights opportunities for him to invest BRK's money. As a retail investor, we too must have the appetite for knowledge and to find out more. The recent sub-prime problems, inflation in China and Singapore, credit crunches and Federal Reserves Interest Rate Policy: these are all topics which we should have a firm understanding of in order to get a grasp of how it relates back to our investments. Remember that Mr. Buffett does not advocate predicting the economy or wha the Fed will do, but he does not say we should not understand and absorb how these actions will impact the economy and the environment around us. For one thing, an example would be banks tightening credit to each other, thus making the provision of loans rarer. Companies who rely heavily on debt may find it harder to borrow to expand.

Recently too, I had a crash course and an in-depth discussion on shipping trusts, as I had recently conducted some research and reading on the structure of shipping trusts and of FSL Trust. Suffice to say that without this continuous learning mentality, I would not have bothered to delve deeper into the pros and cons and to understand the financing structure of such trusts. A lot of credit has to go to forumers on Wallstrait who have enlightened me on how to value FSL Trust (using DCF or IRR) and hence to ascribe a value to it; in order to determine margin of safety. Thus, the process of continuous learning means that I have to continue to delve deeper into what I do not know, in order to gain more clarity and confidence in my investment. Perhaps one can argue that I should have done more due dilligence before I invested, but the available public information was limited as this is a new type of trust. Hence, I had to leverage on the experience and vast knowledge of forumers (expert value investors) in order to learn more. This post is also to show my appreciation to them for helping me along in my investment journey.

So why not start now by reading up on investing ? Pick up good books from the bookstore or surf some websites on value investing in order to enhance your knowledge. Knowledge is power, so they say; and when used correctly it can be a powerful tool for wealth building.


PanzerGrenadier said...

Hi Musicwhiz

I share your views on continuous learning. The only slight difference is that I think in Singapore formal education is over-rated over informal education.

Conventional wisdom is upgrade to stay employable. My own take is upgrade when you have a strong interest and that certification / qualification is well regarded in your targetted industry. If not, may not want to blow money on adding paper to one's CV.

The googlisation of the world wide web has meant that much more information is now available at our finger tips, but the public library is still one of the best value-for-money places to gain knowledge.

Buying people lunch and learning from them is also helpful especially for domain experts who are very good in what they do.

Be well and prosper!

musicwhiz said...

Hello Panzer,

Yep, I do agree that formal education can only bring us to a certain level, while those with informal education and vast experience may actually do better in the real world when confronted with real-life problems.

True, it is good to upgrade only if it is value-added. I think my MBA has helped me in my career choice and I do not regret taking one. On the other hand, if I were to pursue a CFA it would be a waste of time as I do not intend to enter the banking industry anytime soon.

We are always learning from those who are more knowledgeable, and learning itself should be an enjoyable process which is both fun and enriching !