A peek into the real life story of a Malaysian investor as he experiences ups and downs while learning about stocks. 

As an individual stocks investor, I have been investing in Malaysian stocks for almost 2 years. If you asked me if I gained a lot in the market, yes I did!

Nah, I’m not rich yet. What I meant is that I have gained experience and knowledge.

In this article, I would like to share my experience of being an individual stocks investor in Malaysia.

My Motivation to Start my Stock Investing Journey

Why Invest?

In 2018, both of my parents retired from government service. Luckily for them, their pension would provide lifetime recurring monthly incomes. Seeing them enjoying their retirement made me think, “What would my retirement life look like?”.

Since I worked in a private company, I can only rely on my EPF.

This makes me concerned about my retirement fund. Is EPF really enough for me to retire comfortably?

Why Stocks?

While I checked Google for answers about sustainable retirement, I stumbled across a few blogs mentioning financial independence. It is a life stage where we can fully cover our living expenses with passive income. I was captivated by the concept of passive income.

My exploration of passive income options led me to stock investing. No surprise, dividends from stocks are the best passive income for retirement. All we need is capital that generates enough dividends to pay our living expenses.

Start with Beginner’s Luck

My First Stock – AirAsia

I started my investing journey by investing in AirAsia. I’m not sure why I invested in it, but I guess it was simply because almost every new investor understands what this company does.

I got stuck when I bought the stock right after AirAsia announced a bad financial result in February 2019. My entry price is RM2.85, and the share price just kept dropping.

With a friend’s advice, I bought more shares at RM2.64. That was my first time learning how to average down. It’s a strategy to lower our average price of a stock.

The Blessings of Special Dividend

Eventually, I learnt how to (briefly) read a financial report and I realized AirAsia had a massive amount of debt. So, I decided that AirAsia is too risky for me and looked to sell off all of the AirAsia shares I held.

Coincidentally, AirAsia announced a special dividend of 90 cents in July 2019. With hope, I placed my sell order of all my AirAsia shares at RM2.85.

I get blessed by beginner’s luck when my order matched at RM3.02 instead. I gained an unexpected RM1,600 profit from the transaction. This immediately boosted my confidence in stock investing.

Following Other People’s Stock Picks

I simply love using certain apps for stock monitoring. Apps provide tons of info about individual stocks. Not just financial figures, announcements, and news, but also comments by other users.

However, because of reading too many comments, I made my first big mistake in my first year of investing.

The Effortless Profit

You see, there are users who look credible in their comments and are followed by thousands of people. So, I did follow one of these “gurus” in the comments section. For the purpose of this article, let us call him Mr. W.

Mr. W did not self-declare himself as a guru, but I observed that he has a massive number followers and most of his stock picks have been consistently profitable.

The greed in my head took over and I started to follow his every comment.

Well, guess what. I earned a quick gain of RM1,800 by following what Mr. W invested in! I did do my homework though by reading financial reports of the company he invested in.

While it sounds sensible, but my dependent mindset is wrong.

Overconfidence with a Heavy Bet

There was a stock Mr. W invested in named ARBB. It is a company that had just converted from a Timber business to an IT business. From losses to profits, it seems like a good turnover company to invest in.

However, the price was already 20% to 30% higher than his entry price when I noticed it. I thought the price could still go higher, so I invested heavily in this stock.

Many news covered MOUs signed by this company with potential customers. But as time goes, no agreements were made and those were just paper talks. Eventually, their share price slowly declined as investors lost their trust.

In One Strike, Lost It All

While I still held on to my unrealized losses, Mr. W sold all his holdings as he lost his trust as well. At that time, I still have no idea why he sold all his shares while the company is making more profits. So, I kept holding this stock.

As my losses grew bigger, the emotional torture became too big and I decided to sell off with RM7,000 plus losses. All my previous stock profits vanished because of it.

Desperation Made Me Lose Even More

Did I learn my lesson from the big loss? Nope.

I followed him again to buy another stock. Why? Because I desperately needed to earn back the money I had lost.

I then promptly lost another RM2,000. Ugh, what an idiot I was!

Great Returns From Investing Independently

After I learnt my lesson the hard way, I reconstructed my stock portfolio, avoided reading comments and rumors from Facebook investing groups.

With this adjustment, I have more time for myself and more clarity when making every investing decision. Instead of spending time reading other people’s opinions, I have more time to focus on stock analysis.

By doing my own homework, I obtained a total return of 25% within 3 months. For me, that’s a really lucrative (unrealized) profit to have. I began to enjoy the progress of stock picking.

With confidence (again), I set a goal of achieving a 20% return from my stock portfolio every year. My portfolio was built with just a few growth stocks.

My thought is, 20% return in a year should be easy, right? Since I already achieved a 25% return in just 3 months, what can go wrong?

A Big Lesson I Learnt in March 2020

Fast forward to 2020, there was a market crash in March. The roller coaster deep dive was just brutal for a new investor like me. My whole portfolio turned from green to red in a matter of weeks.

Although I call myself a long-term investor, I was super uncomfortable with my unrealized losses. At that moment, I realized that I cannot tolerate such amount of risks from growth stocks!

Afraid of more losses, I sold most of my stocks with panic. And, I did it at the lowest point of the stock market. You can imagine how much I lost. It swept away all my profits plus some of my invested money.

It took me like two months to recover from the aftershock. I only dared to buy some stocks in May 2020. Fortunately, I was able to breakeven with a little profit from my investments at the end of 2020.

Initially, I thought that I was unlucky to face such an event. But now, I’m grateful that I have experienced a market crash early in my investing journey. In fact, market crashes are unavoidable when you decide to invest in the stock market.

 

Summary of My Investing Story

Well, I’m not sure if my story is interesting enough for you. But, I hope it will give you some ideas on what you will experience when you decide to invest in individual stocks.

There’s a saying that goes, “A smart man learns from his mistakes. A wise man learns from the mistakes of others”.

I want you to become the wise man/woman who learns from my mistakes.

Here are the takeaways from my story:

  • Always be humble and adopt a mindset of continuous learning. Overconfidence causes us to make emotional and irrational decisions.
  • Do not blindly follow other people’s investments and do avoid noises such as news and rumors from social media.
  • Understand your risk appetite and adjust your asset allocation accordingly, so you won’t panic during a market crash.

Investing in individual stocks is proven to be riskier than passive investing. However, if you have the time and passion to analyze businesses, individual stock investing can be a fun thing to do and can bring you lucrative returns.

On the flip side, you should not invest in individual stocks if you are not keen to analyze businesses behind stocks. Else, you will end up on the lazy path such as following stock tips or speculating.

I hope my story gave you some value and hope you won’t make the same mistakes as mine.

 

Do you have other experiences in stocks to share with us?

MyPF Story is a series focusing on personal stories by licensed financial planners and Malaysians. If you have a story you would like to share, get in touch with us so we can document it. 

 

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