I've probably got the best “job” in the world. During the day, I work with a boutique investment bank – on the investments side. Looking at various private equity opportunities. During the night, I just extend that “job” – as an investor – looking at various public equity opportunities.
While many are sweating it out trying to earn some cash. I don't bother. I invest cash instead. (Do I sound arrogant?) You may think it's only possible to live such a lifestyle if you have money in the first place. And to a certain extent – it is true – that money begets money.
I currently trade globally, US Markets, Indian Markets, International (Forex). The advantage about being in this part of the world is timing. I can trade in the early morning for India, head off to office – focus on my day job, then around 4.30 pm head back home – to trade US markets. Not bad, but it is a real time killer – unless you have the passion for such trading/investing – DONT do it! Social life can be messed up…
But I don't want to leave you high and dry. I want to share with you the best way to start having enough cash to invest. And here's the secret – I did it the hard way – I saved. Unfortunately, for many that's difficult to digest. So let me break it down, and give you a shot of reality!
Are you living below your means – or do you want to keep up the “image” of being well off? Do you really need to drive around in a Mercedes, when a Toyota Corolla will do?
I live frugally as possible. But it's not always the case. I believe in enjoying the “fruits of your labor” – otherwise whats the point of all this money – if you can't enjoy it?
But what you should remember is what you get the most satisfaction from? If I buy something, I want to make sure that I'll get the most satisfaction from it – otherwise I won't buy it. What this also means, is that I might be willing to pay $5,000 dollars for a high end laptop – but I'd be dead against buying a $1,000 watch (because I don't like wearing watches!). To each his own. But whatever it is… make sure you really, really, really will enjoy using it.
Ok, so you now have a boatload of cash from all that frugal living. What next? Invest it. Sounds easy. I didn't say it was simple… just easy. You still need to dig in with some hard work (read learning).
So over the next few days, you'll also see posts about investing in stocks, (and why you shouldn't ideally invest in mutual funds). I'll also be posting recommendations on investments that I've made in the past few days. If you have any questions about investing that you'd like answered, please send me an email.
You hear a lot of people talk about being their own boss, new themes that have emerged are lifestyle design, location independent lifestyle, personal outsourcing, virtual assistants, cloud living. People are searching for some way to enjoy a passive income, to enjoy traveling around the world.
Now I totally believe in following your passion, but really not everyone can live that lifestyle. Passive income isn't for everyone… some people are in the service business.
My dad for example, is a doctor… now just imagine a situation where you had to have an operation. Do you think he'll say… just download my ebook or visit my site and you'll get all the secrets to performing your own operation? That would be ridiculous…
No… he'd do an operation, and that means he can operate on one person at a time. Not efficient, but that's life! (btw, he does have his own site)
And what do I do? Let's see… I went into investing… investing my own money. Here's my philosophy on money: I believe that we're all stewards of money, and that basically everything you have is temporary, it comes from God, and he can just take it away.
But I believe in being independent. I have from such a young age, tried to not depend on my father, despite him being a well known doctor in the region. I wanted to do it my way…
It was tough, and sooner or later… I found my path.
You see, when I was studying… I didnt like studying, I would see my cousins all taking it easy… that's because their fathers' had created businesses that they could run.
After college, I came across some interesting books like the Millionaire Next Door, and who doesn't want to become a millionaire? Well, if not a millionaire – at least have a good amount of wealth! And so it happened… that I chose investing as a business.
There are couple of reasons, which I'll elaborate here… you may or may not agree with it… but here's what I think.
Here are couple of things I wanted from my business:
- Scale – the ability to write once, run many times – just like software, books, music. It's quite interesting to think that investing (and not trading) is pretty much like that. You need to study the company you plan to invest in (aka write once) and then you just invest your money (aka run many)! Well, the ‘run many' part is mainly because the effort you put in (once) can be used for a $100 investment or a $1,000,000 investment.
- Leverage – same as above. Actually you can't scale, but you can leverage. Multiplier effect from using margin, or multiplier effect from investing $100 or $1,000,0000.
I use Investor & Trader as my tag line because I'm constantly swinging between both. But let's just have a look at the difference between the investor and trader.
Both Investor and Trader have the same objective: to make money from the markets. However, how they do this is what makes investors and traders different.
Investors are generally interested in investing money into undervalued business, with the aim of making a long term profit, and may also expect the period dividends or interest payments. They are concerned with the fundamentals and forecasts, all the while riding out the short term ups and downs in the market.
Traders are more short term, and aim to profit from the short term price movements. There are various types of traders, Position Traders, Swing Traders, Day Traders, Scalper, but I would classify them as speculators. Speculation is derived from the Latin word to specere – to see.
Traders are generally happy to part with their capital in expectation of an appreciation on that capital i.e. they are buying for resale rather than for use or income.
Whilst the companies need investors more, because the capital is required to grow and expand their business – and this takes time. The capital markets need traders more, as they create the liquidity for investors.
You may swing between both, but when you enter a trade – at least know what you are when you start!
7 Tools for Investing Success
Keep your axe sharp…. that was the best advice I ever received.
People say that you shouldn't blame your tools. I agree, having the wrong tools is your fault! (So don't blame game them!) I'm not suggesting you have the state of the art. You just need the basics to help you with investing. I'll share with you the basics.
Investment Tool #1
Invest some good money in a decent computer. I used to use Dell with Windows. However, I've switched to Mac – and won't be turning back. Macs' are costlier upfront – but they're more stable and reliable. The only thing I really miss was Excel. However, there's a way around – get yourself VMWare Fusion and you can run Windows environment on your Mac (with Microsoft Office)! Whatever… get a good and reliable computer. Period.
Investment Tool #2
High Speed Broadband Internet Connection. Don't skimp on this. I'm not suggesting you go for the 21Mb connection – a 1 Mb will do just fine for starters. But don't skimp here. You need to be connected – both from the point of view of researching, trading and investing. If you have a faster connection – you can stream information via the various news channels straight to your desktop. No need to pickup the remote for the TV and get distracted.
Investment Tool #3
Get a simple BIG calculator. Yes, I know that sounds stupid – but before I tell you about the remaining tools, you just need one. Simple calculations without the need to move a mouse is always good.
Investment Tool #4
Buy a spreadsheet program. If you're on Mac – you have Numbers, if you're on PC – you can opt between Microsoft Office (preferable) or Open Office. Whatever you chose – get familiar with the programme – the time you spend getting to know your software will save you countless hours! I use spreadsheets to keep a track of my portfolio, conduct analysis of financial statements, asset allocation, seeing the returns (and losses sometimes). This is going to be your key tool.
Investment Tool #5
Online Discount Brokerage. How else are you going to put in those trades? Oh, yes you can call your broker – but our objective is to do everything ourselves as far as possible and save money. The famous ones include TD Ameritrade and ThinkOrSwim (which is now acquired by TD Ameritrade). You should have both web-based trading screen access as well as any downloadable software. I use ThinkOrSwim – although its mainly meant for traders – I learn alot from it and find it easier and faster to use.
Investment Tool #6
Research Sites. There are plenty of sites out there. But I only need a few of them. And the ones I use are free. Google Finance is a real great site. Highly recommended. Yahoo Finance has always been a favourite for many – but I prefer Google, they also have screening tools, excellent graphs, links to news articles, blogs, portfolio, watchlists, financials – the works.
Investment Tool #7
If you don't search for your own investment ideas – you need a good option to receive regular flow of research. Subscribe to the best independent research firms out there. (I use The Oxford Club, EquityMaster, Personalfn, KirkReport and Weber Global Opportunities).
How to trade International Markets from the Middle East
It's so unfortunate that given the opportunity to make money on the international stage, people don't know how to. When some friends hear that I trade international markets, they're surprised.
I tell them it's very easy and that they can do it as well. In fact it's just the lack of knowledge, and probably a bit of laziness that causes people to lose out on great money making opportunities. With over 10,000 companies to choose from, you're really leaving a lot on the table in terms of the US stock exchanges.
Why stop there… want to reach out more? That's also possible. How can you get started… well, with a days effort and the signing of a W8BEN form, and funding of at least USD 5,000 – you can start within a day after filling up a form online. That form will take you less than an hour to fill.
Two online discount brokers that will help you set up a trading account, provide you the software and get you onboard that I recommend are:
- TD Ameritrade: They recently took over ThinkOrSwim Trading platform and have been around for as long as I can remember.
- Interactive Brokers: Great number of markets to chose from and one of the best in terms of costs per trade!
What are you waiting for? Move….