An Insider's Guide to Smart Investing
()
About this ebook
While most people know that investing for the future is something they should do, you’d be hard-pressed to find people chatting about the types of mutual funds, comparing their advisers, or discussing the cost structure of various investment products. Learning how to make money through investing sounds appealing, but the process itself oft
Sun-Jung Choi
Chartered Financial Analyst (CFA) charterholder, Chartered Alternative Investment Analyst (CAIA) charterholder, Master of Business Administration (MBA) with Finance concentration; Previously Portfolio Analyst at wealth management firms & Compliance Audit Investigator at State Securities Division; Currently Investment Analyst
Related to An Insider's Guide to Smart Investing
Related ebooks
It's All About The Money Rating: 0 out of 5 stars0 ratingsTake Back Your Profits Rating: 0 out of 5 stars0 ratingsThe 4 biggest Mistakes in Trading: How to become a professional Trader Rating: 5 out of 5 stars5/5Your Money Mentality: How You Feel About Risk, Losses, and Gains Rating: 3 out of 5 stars3/5Achieving Financial Fulfillment Rating: 0 out of 5 stars0 ratingsThe Young Adult's Guide to Investing: A Practical Guide to Finance that Helps Young People Plan, Save, and Get Ahead Rating: 0 out of 5 stars0 ratingsBasic Understanding of Financial Investment: Book 6 For Teens and Young Adults Rating: 0 out of 5 stars0 ratingsThe Investor's Manifesto (Review and Analysis of Bernstein's Book) Rating: 0 out of 5 stars0 ratingsThe Battle for Investment Survival Rating: 0 out of 5 stars0 ratingsBeginners Guide to Investing: How to Invest Like A Pro Rating: 5 out of 5 stars5/5Turn Your Dime into Dollars Rating: 0 out of 5 stars0 ratingsInvest Wisely Rating: 0 out of 5 stars0 ratingsSimple Money 4 You: An Introduction to Money Matters for All Ages Rating: 0 out of 5 stars0 ratingsThe Battle for Investment Survival (Rediscovered Books): Complete and Unabridged Rating: 5 out of 5 stars5/5The Battle for Investment Survival: Complete and Unabridged Rating: 3 out of 5 stars3/5Property Profits: A Lazy Investor's Guide to Making Money in Real Estate Even if You Don't Have Time or Patience for All the B.S. Rating: 0 out of 5 stars0 ratingsAvoid Your Personal Fiscal Cliff Rating: 0 out of 5 stars0 ratingsThe Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel Rating: 0 out of 5 stars0 ratingsDollarlogic: A Six-Day Plan to Achieving Higher Investment Returns by Conquering Risk Rating: 0 out of 5 stars0 ratingsWealth Strategies: Investing for Your Retirement Rating: 0 out of 5 stars0 ratingsStock Market For Beginners Book: Stock Market Basics Explained for Beginners Investing in the Stock Market Rating: 4 out of 5 stars4/5Stock Market for Beginners Book: Step By Step Basics Explained For Beginners Rating: 0 out of 5 stars0 ratingsInvesting for Beginners: How To Be An Intelligent Investor And Make Money On Any Market Rating: 5 out of 5 stars5/5In the Trader's Mind: Learn to Think Like a Real Trader and Manage Money Profitably to Generate Wealth and Live in Abundance Rating: 0 out of 5 stars0 ratingsWarren Buffett Investing Strategies: Learn How Value Investing in Stocks Help You Achieve Your Financial Freedom in your Future Rating: 0 out of 5 stars0 ratingsInvesting for Beginners: For Beginners Rating: 0 out of 5 stars0 ratingsAn Investment Primer for New Investors: A Step-By-Step Guide to Investment Success Rating: 0 out of 5 stars0 ratings
Personal Finance For You
The Intelligent Investor, Rev. Ed: The Definitive Book on Value Investing Rating: 4 out of 5 stars4/5Buy, Rehab, Rent, Refinance, Repeat: The BRRRR Rental Property Investment Strategy Made Simple Rating: 5 out of 5 stars5/5The Psychology of Money: Timeless lessons on wealth, greed, and happiness Rating: 5 out of 5 stars5/5Rich Dad Poor Dad Rating: 5 out of 5 stars5/5The Millionaire Next Door Rating: 4 out of 5 stars4/5Die With Zero: Getting All You Can from Your Money and Your Life Rating: 4 out of 5 stars4/5Financial Feminist: Overcome the Patriarchy's Bullsh*t to Master Your Money and Build a Life You Love Rating: 5 out of 5 stars5/5The Millionaire Fastlane: Crack the Code to Wealth and Live Rich for a Lifetime Rating: 5 out of 5 stars5/5The Total Money Makeover by Dave Ramsey: Summary and Analysis Rating: 4 out of 5 stars4/5Money. Wealth. Life Insurance. Rating: 5 out of 5 stars5/5Same as Ever: Timeless Lessons on Risk, Opportunity and Living a Good Life Rating: 5 out of 5 stars5/5Principles: Life and Work Rating: 4 out of 5 stars4/5Personal Finance For Dummies Rating: 4 out of 5 stars4/5The Black Girl's Guide to Financial Freedom: Build Wealth, Retire Early, and Live the Life of Your Dreams Rating: 5 out of 5 stars5/5Summary of R. Nelson Nash's Becoming Your Own Banker Rating: 0 out of 5 stars0 ratingsRich Dad's Cashflow Quadrant Rating: 4 out of 5 stars4/5Get the Hell Out of Debt: The Proven 3-Phase Method That Will Radically Shift Your Relationship to Money Rating: 5 out of 5 stars5/5Good to Great: Why Some Companies Make the Leap...And Others Don't Rating: 4 out of 5 stars4/5Get What's Yours: The Secrets to Maxing Out Your Social Security Rating: 4 out of 5 stars4/5Set for Life: An All-Out Approach to Early Financial Freedom Rating: 4 out of 5 stars4/5Legal Loopholes: Credit Repair Tactics Exposed Rating: 4 out of 5 stars4/5We Should All Be Millionaires: A Woman’s Guide to Earning More, Building Wealth, and Gaining Economic Power Rating: 4 out of 5 stars4/5Summary of I Will Teach You To Be Rich: by Ramit Sethi | Includes Analysis Rating: 3 out of 5 stars3/5Money Hacks: 275+ Ways to Decrease Spending, Increase Savings, and Make Your Money Work for You! Rating: 4 out of 5 stars4/5
Reviews for An Insider's Guide to Smart Investing
0 ratings0 reviews
Book preview
An Insider's Guide to Smart Investing - Sun-Jung Choi
Copyright © 2017 by Sun-Jung Choi.
All Rights Reserved.
ISBN-10:0-9984964-1-3
ISBN-13:978-0-9984964-1-2
First Edition
Dedication
I dedicate this book to you.
I thank you for your curiosity, interest, and aspirations.
Acknowledgments
My deepest love and appreciation to my family and friends.
I am truly grateful to every single one of you who encouraged me through this journey and shared your thoughts with me.
Table of Contents
Connecting the Dots Between Investing and Familiar Concepts (for that a-ha
moment of enlightenment)
Things that Drive Investors Out of the Market
Education Eases Tension
Closing the Knowledge Gap
Learning through Analogies
Introduction—Understanding How to Invest
Current Status—What Do You Know about Investing?
Self-Diagnosis—What Is Your Investing Level?
Game Plan—What Comes Next?
Time Is Valuable—Why Invest Now?
(Essential) Knowledge + (Customized) Plan = (Long-term) Success
Chapter One: Goal Setting—Why Are You Taking the Trip?
What If All Mission Statements Were the Same?
Making the Right Plan
Need a Tour Guide?
Learn to Recognize Your Limitations
Making the Choice to Go It Alone or Ask for Help
Parting Thoughts
Chapter Two: Risk Tolerance—How Spicy Do You Want Your Food?
Ability Does Not Equal Willingness
Control the Heat
The Downside of Being More Willing Than Able
What’s Your Portfolio Called?
You Are the Money Manager
Trade-Off Between Risk and Return
There’s No Harm in Reevaluating Your Preferences
Fear (Emotion with Risk) and Greed (Emotion with Return)
Parting Thoughts
Chapter Three: Investing Capability—How Much Weight Can You Lift?
Investing, Not Gambling
Uncontrollable Factors
Recognition of Your Loss Aversion
The Truth Hurts Less in the Long Run
Parting Thoughts
Chapter Four: Investment Evaluation—What Do You Think of this Yellow Chair?
Investment Opinion vs. Investment Decision
There Is Always Another Next Big Thing
Understanding the Proper Investment Decision-Making Process
Buy
for Him Could Mean Sell
for Her
Parting Thoughts
Chapter Five: Investments with Emotional Ties—Do You Like It Because You Are Familiar with It or Because It Is Really Good?
Unconditional Rationalization
Difference Between Familiarity and True Knowledge
Understanding What Soft Value Means
Parting Thoughts
Chapter Six: Portfolio Construction—Do You Want Boiling Water or Ice Water?
Avoiding the Bipolar Portfolio
Balancing Defensive Growth and Aggressive Income
Parting Thoughts
Chapter Seven: Portfolio Review—Does That Ugly Tree Still Look Bad When You Stand on the Top of the Mountain?
Obsessing Is Shortsighted
Playing Favorites Can Hurt You
Your Reaction Can Reveal Your Suitability
Parting Thoughts
Chapter Eight: Strategy and Implementation—Is It Really Good for You If You Consume That Much?
Conviction or Obsession?
Lost Opportunities Can Cost You
Break Your Investment Habits
Parting Thoughts
Chapter Nine: Research—Are You Sure It’s a Fact?
Learn to Interpret the Intention Behind an Opinion
Don’t Confuse Presentation with Proficiency
Opinions with Facts Are Still Just Opinions
Avoiding Cherry Picking (aka Taking Things out of Context)
Parting Thoughts
Chapter Ten: Valuation—How Many Items Did You Buy Just Because They Were on Sale?
When a Good Deal Isn’t Good for You
Learn and Apply the Principles of Cost-Benefit Analysis
No Such Thing as a Free Lunch
Parting Thoughts
Chapter Eleven: Investment Decision—Did You Think He Was Female Because of His Name?
Know Your Investments
A Name Is a Sales Tool
What the Name Doesn’t Tell You
Parting Thoughts
Chapter Twelve: Diversification—Can You Make a Delicious Soup with Only Chicken and Noodles?
Diversification Equals Balance
Invest in Needs Not Wants
Strategize Your Target Diversification
Where Can I Get It?
Parting Thoughts
Chapter Thirteen: Selection and Expectation—Would You Expect to Get the Best Chinese Dish at an Italian Restaurant?
Know Who You Work With
Don’t Assume Your Financial Professional Knows Everything
Parting Thoughts
Chapter Fourteen: Investment Options—What Are the Odds of One Company Making the Best Product for Everything?
Beware of Limiting Your Options Voluntarily
Beware of Having Your Options Limited Intentionally
Parting Thoughts
Chapter Fifteen: Due Diligence—How Did You Get a Referral?
Learn Why You’re Receiving a Referral
True Talent or Marketing Skill?
Dealing with People’s Wealth
Parting Thoughts
Chapter Sixteen: Communication—What Kind of Shoes Would You Like to Buy?
Speak Before You Buy
Monitor After You Hire
Communication Is a Two-Way Street
Parting Thoughts
Chapter Seventeen: Review and Assessment—When Was the Last Time You Got New Quotes for Your Insurance?
Intuitive Read vs. Thorough Inspection
Assessment Is a Must, Not an Option
Importance of Review and Rebalance
Parting Thoughts
Chapter Eighteen: Closing Thoughts—The Smart Investor
Importance of Overcoming Emotions
Prioritize to Strategize
Appendix A—Summary
Appendix B—Review
Review as Formulas
Review as Comparisons
Review as Q&A
Appendix C—Glossary
Appendix D—Resources
Smart Investors Can Change the Game
Connecting the Dots Between Investing and Familiar Concepts
(for that a-ha
moment of enlightenment)
The main purpose of investing is to achieve increased prosperity. You choose to invest because you desire a higher level of financial security and a general sense of well-being. But what is the point of investing if it creates more fear about your money? Are you tired of worrying about your investments? Has your fear of losing or being wrong or not knowing caused you to behave in a reactionary or emotional way? If so, I’m sure you have some regrets and skepticism because of it —and you’re not alone.
Things that Drive Investors Out of the Market
Market uncertainty scares investors away, but uncertainty about investing itself is even scarier. Lack of confidence in the economic structure and lack of trust in an investment industry make people cling to the safety of cash. Being bombarded by the thought of negative outcomes forces investors to prepare for the worst-case scenario, which often pushes them toward inactivity. They hoard cash (or whatever is considered a safe asset) because they perceive investing as unsafe.
And when investors are repeatedly disappointed by unethical practices, they stop investing. Consequently, these practices cripple the true potential and prosperity of both individual wealth and the economic progress of our society.
While investment products have become more sophisticated and regulations have been tightened, the problems associated with investing still exist. Do these phrases sound familiar?
The economy will turn around soon.
The stock market is expected to outperform in the near future.
Investors need to stay in for the long haul.
No one can predict the future of investing. Furthermore, the stock market is a leading indicator of the economy. Thus, it is likely to recover before the economy does. When those positive sentiments from above fail to alleviate investors’ frustration, investors remain uncertain and fearful, and their easiest option (unfortunately) is inaction. Not knowing the future market direction is frightening, but not having enough knowledge about investing causes higher levels of fear. Think of it this way: you can bake a delicious cake (sophisticated investment) in a well-equipped kitchen (well-established environment), but what’s the point of baking if nobody wants to eat a slice (low participation in investing)?
The prevailing issues in the investment industry are the consequences of actions taken by people who invested before and how they utilized investing—either for themselves or on behalf of other investors. You’ve heard the colloquialism, Guns don’t kill people; people do.
This emphasizes the importance of the user’s responsibility and the direct impact of an action. Money enhances our lives when used properly—and so does investing.
Education Eases Tension
In any relationship, including the one between investors and investing, genuine understanding is the key. Misunderstandings can break down communication, and people tend to ignore issues and distance themselves when things don’t work out as expected. If you’ve been unhappy with previous investment experiences, you need to evaluate how you’ve invested and if you misunderstood some aspect of it. If an investment didn’t work out, blaming your adviser might seem to help heal ill feelings, but it does not provide a solution and adds more emotional discomfort in the end.
Education eases the tension that may be inhibiting your investing practices. First, it’s important to understand what caused the friction and distrust in order to reconcile what happened in the past. More specifically, you need to understand your own behavior and any problems that arose. What mistakes did you make as an investor? Did you know your risk tolerance when you invested? How did you choose your financial professional? Were you aware of the cost structure in the investment? Were you misled? If so, how can you prevent it from happening again?
Perhaps you’re new to investing or have never done it before. The best way to begin is to try to learn more about the process—just like you do at the beginning of a relationship—before making any commitments. It won’t work if you jump in unprepared, especially when you feel you should invest but lack the knowledge to do so properly.
Once you understand how investing works, you can become a disciplined long-term investor. The key is to identify your investing priorities in regards to your individual goals and investing method that suits your needs. And in order to know what’s right for you, you need to understand the basis of investing. One size fits all
never works when it comes to investing.
Closing the Knowledge Gap
We often hear things without thoroughly understanding the content. That doesn’t mean we