Saturday, March 27, 2021

A Structured And Holistic Guideline To Learn Investing

From time to time, I have had encountered people who were asking on how to start and learn about investing on online forums, chatgroups and amongst my circle of friends and acquaintances. Over time, the two most common answers emerged are to either learn oneself through online and offline resources such as YouTube and books, or to sign up for a course (or a few). 

While I understand the good intentions and advantages behind these answers, both also had their own minus points, too. For the self-learn path, there is a risk of the learner being overwhelmed with information, especially when he/she is new to investing. In addition, the contents may not be curated to the learner’s level of knowledge, so there is this feeling of being “lost” with all the concepts and jargons abound. On the other hand, courses do help in making sense of the topics in a more organized way, but the caveat is that not all courses out there are really that suitable for all individuals. Even worse, some of the courses out there might be fleecing you instead of really helping.


Furthermore, unlike hard sciences where item A and item B will give you item C (e.g., hydrogen + oxygen = water), the realm of investing is not so clear cut. Every factor and variable are inexplicably linked to one another, and there is no way we can get a certain outcome even from combining just two factors/variables together.


As part of my day job involves training, I understand the need to have a structured training program in learning new stuff. However, since investing is not hard science, learning about it does not give you the desired outcome you will get. Therefore, the key approach in learning about investing is to provide the necessary knowledge and techniques to better prepare oneself in the world of investment.


I have cobbled up a structured learning guideline on how to go about investing. Since this is a guideline, it is not a set-in-stone process to follow, but to me this is how I feel it should go and it is also a holistic approach. I would like to emphasize three main points: first, there is no short-cuts in learning, and it is better to be patient in taking time to know more stuff than to just jump into the deep end of the pool. Second, learning does not mean guaranteed results, but at least you are better armed with the knowledge and techniques than others who had no clue on what is going on. Third, learning, like investing, is a lifelong journey, so stay learned and stay invested.


The structured learning is consisted of three main stages. Bear in mind that these stages are not one-way and you are encouraged to go back and re-learn and re-read the topics as a form of refresher and/or provide you with a new outlook at things. If the topics are a bit too complex for you, you can start off with the Dummies Guide series and/or look them up online (Investopedia,, is a good starting point).


Stage One: Economics, Asset Classes, Accounting and Finance


Economics is the basic understanding of why and how the financial markets work and behave. It is the underlying premise and reason on the whole scheme of investing.


Asset classes are the various components that make up the markets, and why their characteristics and behaviour will affect one another. Along with asset classes, you can read up on the various sub-asset classes, too, like sectors, types of bonds and commodities, etc.


Accounting and finance are knowing and understanding not just the numbers behind the corporate entities that make up the markets, but also your own situation in terms financial planning.


Stage Two: Securities, Portfolio Management, Fundamental Analysis


Securities, in particular the plain vanilla ones like shares, bonds and exchange traded funds, are the various financial instruments that you can invest in and they are a reflection of the asset classes learnt in the previous stage. 


Portfolio management is about planning and arranging the securities from the various asset classes in order to balance between returns and risk. 


Fundamental analysis is key as you need to delve into the accounts of the listed corporates, perform ratio analysis (this is where accounting and finance comes in useful) and understand how the economy will impact them (economics).


It is at this stage that investing styles and methodology will start to deviate, due to the learner able to understand more of the whole works and also his/her own preferences and risk appetite. Some may like to have only two asset classes, while others may want more. Some may want to go passive investing, some active, and others a hybrid of both. This is the part where you need to find your place and stick to it.


Stage Three: Derivatives, Advanced Reading


Derivatives are another set of financial instruments and I view them as an advanced form of the plain vanilla securities learnt in Stage Two. Things like options, futures, contracts-for-difference, etc. are considered derivatives and a clear understanding is important on how to use them. It is not necessary to use them if you are not comfortable, but at least basically know how they work.


Advanced reading is the step of knowing more and beyond your current level of knowledge obtained from the past two stages, and I have to admit this part will be a bit dry for some as it involves academic and statistical material, and the real nitty-gritty on how certain things work (by things, I meant sectors, industries, geopolitics, etc.). A bit of history is included here, too, as reading up on past happenings in the economy and markets may provide some form of clue of what had happened in the past and what may happen in the future.


There are some side-learning that you can do, too, like how to use the brokerage apps and tools, back-testing your own investing methodologies/styles, or even technical analysis. These can come in at Stages Two and Three, where you can apply these on the topics covered there.


As I had mentioned before, this is just a learning guideline which I hope you will find it useful. Feel free to modify it or do not follow if it is not suitable for you. There is no hard and fast rule in learning, but constant learning and re-learning is important.


Stay learned and stay invested.

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