How I got into the investment world
posted by Michael Olafusi , on ,
If you look through my PC, you'll see financial statements (annual reports) of Nigerian companies, stock analysis templates, and lots of Excel documents. I have all sorts of Investment and Finance books in my library. I even have Finance college books; books written mainly to teach 3rd year Finance undergraduate students and 2nd year MBA students Corporate Finance and Valuation. I'm currently reading a big expensive college book on Financial Modelling using Excel. I'm subscribed to investment and stock analysis blogs online. And I have read more books on Finance and Investment than on any other topic. This year alone I have bought 41 books and 17 audiobooks, and more than half of them are on Finance and Investment. Oh, I also need to let you know that I didn't read all the 41 books and 17 audiobooks;, I opened everyone of them, read about half completely, and read a few more than once. I read at my own pace; I don't have any exam to write or deadline (like 2 books per month) to meet.
So back to the main focus of this post -- How I got into the investment world.
It all began in my 4th year at the university. I got into the stock market craze. I spent my Mobil scholarship pay that year on stocks. And I saw it grow and disappear. It was my second stock purchase. The first one was a 10-bagger. I saw my investment grow ten fold. And even the dividend pay was like magic money. Then I went on to do the one that did me. It took me 3 years to accept that the money was gone. Once in a while I keep thinking it would come back.
It was that misfortune that gave me the push I needed. I began reading all I could about the stock market. I opened a mutual fund with ARM, and then another with Stanbic IBTC. I read like my salary depended on it. I then went on to open my own stock brokerage account, and began buying stocks myself with my hard earned salary. And I lost money again. But I didn't give up; I kept on reading and reading. I kept fine tuning my investment strategy.
I'm still a long way off being referred to as an Investment guru, it takes years of verifiable excellent results, but I'm taking a "Nothing or Best" approach to it. It's either the stock market wreaks me or I come out super victorious. But the good thing is finance is very interesting and I don't think I can lose all again, as I don't intending betting or taking big risk. I'm going the Buffett way -- slow and steady. It's just that it requires a lot of studying and computation. One will need to do his own math. It requires a profound knowledge of Finance and Financial accounting. It requires a basic knowledge of financial modelling. It requires proficiency in using Microsoft Excel. It requires in-depth reading of financial statements. It requires an excellent knowledge of the nation's economy and consumer habits. And most importantly, it requires experience in making both the right and wrong decisions.
Don't be deceived by the talk about a monkey doing better than professional investors. Some of the brightest people in the world are in the finance world. Doctors and Engineers goto school and are almost drilled to death. But after school, life becomes very easy for them. They don't have to study half as hard as they did throughout school. But for the Finance guys, it's death at school and death after school. I mean the finance guys at the core of the investment world, the ones we regard as professional investors. They study more and for more hours throughout their career. Even a roadside mechanic will become super-good if subjected to same study+work that these guys go through.
The truth is that what they are up against is something much bigger than what an outsider can understand. It's like being stuck in a traffic at the middle of the third mainland bridge on a Monday evening, and then you're told outsmart everyone. The reality is that you won't end up much better than the learner on the other lane and if you do too much, you would only hit someone else's car and delay yourself further. And that's what the finance world is like from within. You'll only know the best driver at the Oworonsoki end of the bridge, and not at the middle of the bridge. It's the one who avoided being bashed and made the most of every clean opportunity that ends up being the smartest/best. The problem is that it requires expert driving skill (core finance) and a great deal of common sense. Common sense will keep you out of misfortunes and a great driving skill will help you enjoy an otherwise frustrating ride.
Most books teach you the common sense part, and make the professional investors look stupid. The same way a Traffic warden will make an expert driver look stupid for breaking a traffic rule. But no matter how many of those books you read, you can never become as good as the expert. You'll be only an expert at judging them. You'll need to get the same core knowledge they have and be able to make your own independent decisions without external help, using the basics of all analysis -- financial reports and economics -- before you can claim equality with the experts. And that's the stage I'm currently in. It's more of an art than a knowledge. Just like driving, it takes lots of time behind all sorts of wheels and across all sorts of roads and during all sorts of time.
And that's been both how I got into the investment world and how I'm doing.