Well, it is about what you should do to become a better investor, but it is more about what you need to know and what you should NOT to become a better investor.
1. You should not expect your will get rich overnight through investment
For any investment (Real Estate, Stock or Bond), if your investment horizon is less than 5 years, you probably should not do it.
Any speculation that can give you a 50% return in a week is likely very risky, and you can lose 50% as quickly as that.
2. What is the good return you should expect these days?
Is 6% good? Well, 30 years ago, it was very bad return. 10 years ago, it was bad. Nowadays, 6% is a good return. Bank is paying almost 0% on your deposit. US Treasury is paying you less than 2.7% for borrowing you money for 30 years. 6-8% is very good return and 10-12% is great return these days.
So be reasonable, adjust your expection.
3. Do not invest in something you don’t understand
If you do not understand an investment, chances are you don’t know how to make money and how to control your risk. You need to learn about this investment. If you still don’t understand, just don’t do it.
4. Start with baby steps, do not rush
Start with paper trade if you want to invest in stocks or bonds. If you want to investment in Real Estate, do not do million dollar deal for your first one. Start with condo. For your first deal, no matter how you are prepared, your chance of losing money is still pretty high, you have to accept that and prepare for it.
5. Do not watch too much financial news.
CNBC talking heads try to assign meanings to a tiny price movement, it is purely non sense. Peter Lynch once said, “If you spend 13 minutes watching financial news, you have already wasted 10 minutes.”
6. You must go against conventional wisdom
For example, Financial Industry always tells you “You cannot time the market and you should not time the market”. This is purely BS, excuse my language.
You have to time the market. If you bought Real Estate properties in early 90’s in Southern California when Defense industry went downturn and foreclosures shot up like crazy, you are much better off than most of us. If you did not sell your Tech stocks in 2000 or your condo in Miami in 2006, you are much worse off than most of us.
举个例子，怀梦这次就做得非常smart，当Toronto downtown 的 condo 已经 overpriced and started down trend, 当机立断，dump it。This is what a successful investor should do.
7. Don’t follow the Herd
Certainly following the crowd will make you feel comfortable, but it does not do you any good in investment. Good investment opportunities lie where people are ignoring.
It is awfully hard to make money when a trade is very crowded.
8. Keep it simple
“All the math you need in the stock market you get in the fourth grade.” - Peter Lynch.
A simple but effective investment strategy is always better than a complicated yet unproven one. The simple one will give you some margin for error.
9. Cash is King for Investors
I know everyone hates to hold cash because government of every country is debasing the currency. We still have to hold cash, enough to make you feel comfortable to sleep well in the evenings.
There are at least several advantages I can think of holding cash. In emergency situation, you are not forced to sell you investment. In a bear market, you can still survive, remember Landlord Stress Test proposed by TT? You can get quality assets in deep discounted price when there is a fire sale.
10. Where should you invest now?
That’s a million dollar question. It depends. It depends on your age, your retirement plan, your risk tolerance level, your local market.
But in general, Real Estate is still the best value you can get in decades considering the price and interest rate. Stock in general is NOT dirt cheap any more. It is about fair to very modestly overvalued level, depending on which ratio you use.
If you use Buffett’s ratio of total market cap (TMC) to GNP, the reading is 97.5% as of today.
Bond has risen up so much, it is heavily overvalued.
It is very interesting to see investors have pulled $750billion from stock fund and poured $1.25trillion into bond.
There are more technical details in investment. I see people ask questions like what’s the difference in investing in Real Estate and investing in REIT, I can invest in REITs.
Do you understand the difference between Equity REITs and Mortgage REITs? How to value an Equity REITs?
Do you understand these valuation techniques? Such as Funds from Operations Yield or Multiple, Adjusted Funds from Operations yield or Multiple, NAV Discount or Premium, Dividend Discount or Discounted Cash Flow models.
All in All, it takes education, discipline and patience to become a better investor.
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