Increasing the odds

In the world of finance, we have many strategies, many different financial instruments, and thousands of advisors who will be telling you to have a unique way of making a fortune. Some of them might happen to be the right people. Some will present just the right tools. Other times, either the tools or the people handling those tools turn out to be wrong.

Especially when it comes to the people, some might be even known to be flawed in one way or another, presenting methods and strategies that turn out to be a pure gamble when it comes down to the test. Some are honest. Some are not.

Some investors have the opportunity to try out all these different ideas, tools, and strategies. Those with sufficient funds to play around and who are willing to take on all kinds of risk can experiment to find the tool and the strategy that will produce the best possible results for them. But most of us are not in this category. Those who earn a regular wage and have only the option to save and invest 10-20% of their income don’t have the resources to play around. For those I have a simple advice on how to become an investor. A successful one. It’s surprisingly simple, and it’s something that most investors know by heart, as they heard it over and over again from no one else but the worlds most famous value investor, Warren Buffett:

“It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”

While the context of this quote was referring to the topic of value investing, it includes a simple message: When you invest, you should focus on buying great companies at a fair price.

This simple formula established the foundation for Buffett’s success. There are of course no guarantees that this will make you a billionaire. It doesn’t guarantee that you will become another super-rich person. But by following this simple rule you will significantly improve your odds to do financially better.

So when I advise friends or colleagues on investing, I am not promising anyone that he or she will become rich. Instead, I am promising to increase their odds. By a large margin.

What are the odds

Increasing your financial well-being without investments puts you below the odds of a lottery ticket. That’s 1 in 13,983,816 (according to Google). Maybe you will find the perfect job, that will not burn you out, that you will love to wake-up for every single day, and that will pay you so well that you can comfortably retire without a single worry on the back of your mind. Maybe you will inherit some surprise fortune from your parents. Maybe you will happen to be at the right place, at the right time, to receive an opportunity of a life-time that will set you up financially for the rest of your life.

I got a suggestion. Let’s remove the word “maybe”, and replace it with a plan. Because the odds for “maybe” are not even 50:50. They are somewhere around the odds of that lottery ticket that I wrote about.

Now it’s hard to put a number on the odds of becoming rich through investments, but history and statistics put them significantly higher than the 50:50 figure. Every single investment you make stacks the odds a little bit more in your favor to have a better financial future, while at the same time it also reduces the risk of a financial failure. I recommend here a short read to put it a little better into perspective. It’s definitely better than what I could write here right now on a lazy Sunday afternoon 😉

Not all of your investments will be a success. In fact, the Pareto principle also applies to investments: 80 percent of your success will be attributed to only 20 percent of your investment. So if you invest in 10 stocks, only 2 of them will truly outperform (on average) and be responsible for 80% of your final result. Some will succeed, but on a smaller scale. Others might disappoint and underperform. But the point is that investors are actively contributing to setting up themselves for success. Because with every investments their odds increase.

So the message of this post is: When you invest, don’t do it for the promise of becoming rich. The true initial purpose is to increase your odds to improve your financial well-being. Whether it will make you rich, just financially stable or simply more comfortable, that’s another story.

Keeping things simple

For humans, the world is full of problems and all of these problems require some kind of a solution. The good news is that we as a species already accumulated a vast range of knowledge about most of our every-day problems, and how to solve them.

The bad news is that humans are not only slow learners with inconsistent memory functions. We are also easy to be influenced by others, and unfortunately, these “others” don’t always have our best interests at heart.

Let’s take a look at the concept of investing. As I wrote in my to date most popular article “Nobody wants to get rich slowly“, investing in the stock market is a fairly easy and straightforward process. The modern tools that we have at our disposal, namely easy access to information via the internet, access to the stock market, and to the right products (like ETFs), can help everybody becoming a successful investor.

But of course, everything simple can also be made more complicated. The world of investors today is not only about buying and selling stocks and ETFs, but the financial industry has added countless additional products to the mix. From FOREX trading to CFDs, short-selling, and BitCoins. Things can get pretty complicated.

Keeping things simple

I invest in single stocks and in ETFs only. I don’t trade with foreign currencies, I don’t put bets on the futures market, I don’t purchase digital coins, and I don’t engage in short-selling. Am I losing some opportunities along the way? Possibly. Does it bother me? Not a bit.

I like to keep things simple, and investing per se is a simple process. I do my research and then I purchase shares of a company that I believe has a bright future ahead. If I can’t find enough information about a specific company or can’t focus on one, I will look for an ETF that might cover that specific market group, and I invest in that ETF. That’s it.

It’s pretty rare that I sell any stock unless it made me a significant profit. Even then, I won’t sell the whole position, but probably only some part to free up cash and to buy the next stock or ETF.

My target is to grow my portfolio and to build up my stream of passive income via dividends. Ultimately I want to retire with sufficient passive income to not care about any government money or support from others. I want to be financially free and independent, and I still have plenty of years ahead of me to get there. History taught us that investing in stocks is the single easiest, most reliable process to reach this target.

Impatience and greed

But of course, there are some obstacles along the way, and the biggest ones are our own emotions, namely the feelings of impatience and greed.

Most companies don’t grow overnight, and the perspective of waiting for 2, 3, 5, or even 10 years for a breakthrough and the ultimate success is not easy for everyone. It can feel tempting to try to speed up the process with some CFDs and bets on the future, to hedge against losses with some short-selling options, or to divert some funds into bitcoins with the hope for a quick boost to your net-value.

And yes, there definitely are opportunities that I might be missing out on. But for me, it’s just not worth the headache, mainly because the trading frame is too short and the risk-reward ratio is not appealing enough for me.

I don’t want to trade stocks daily or even weekly. I don’t want to be forced to follow every single news-flash to be able to quickly react in a fast-paced environment. And I don’t believe in every single new trend is being said to become the next Trillion-$ market. So why would I give myself all these troubles, especially while knowing well that the simple investor approach that I am following now is historically also the most reliable one?

There is also the fact that while most of all these other opportunities in the financial industry offer viable options to make profits, they often also offer the possibility to lose your hard-earned money even beyond the originally invested amount.

Last but not least I am also perfectly aware that the main reason for the financial industry to push and empower a fast-paced environment is because they earn more in commissions and trade fees if their customers are more active.

Do your thing, but keep it simple and keep your emotions in check

I am not saying that people shouldn’t try other investments or explore other potential opportunities in the financial market on their own. Everyone can find a different path to success, and some products and concepts will work better for some than for others.

But no matter what you plan to do, learn from others who walked that path successfully, try to keep things as simple as it gets, and keep your emotions in check.

Investing in Thailand – TISCO.BK

Who would have thought? It’s already February. January didn’t really give us a fresh start into a post-covid era, which some overly optimistic people might have expected, and February doesn’t look any better. Neither does March, but let me write about that next month.

Having said that, the world is adapting to the new conditions. Stock markets are back at all-time highs as investor’s sentiment and perspectives for the future seem to be getting more predictable. So today, let me share with you my opinion on a bright star of the investment world of Thailand. A conservative pick from the world of finance: TISCO.BK

A modern specialist for finance in Thailand

The TISCO Financial Group PCL is a giant in the financial industry of Thailand. The company profile on Reuters says the following:

“TISCO Financial Group Public Company Limited is a Thailand-based holding company engaged in the financial and banking businesses. The Company primarily operates two main activities: commercial banking business and securities business. The Company and its subsidiaries provide banking services, personal loan services, corporate lending services, as well as life and non-life insurance brokerage services. They also offer securities brokerage services, asset management services, cash management services, underwriting services and others.”Source: Reuters

So there you go, nicely summarised their entire activities. The first time I stumbled upon Tisco in Thailand when I bought my first car, financed with a Tisco loan, and insured with Tisco insurance. I didn’t think much about it at that time as an investment, but I was amazed about the modern and easy way the loan was handled.

I would pay my monthly installments via online banking, at any 7/11 shop, or I could instruct them to withdraw the payments directly from my bank account. I could also make additional payments at any time I wanted, which was great as it helped me to pay off the loan much faster than the 6 years that I originally put in the contract. I paid the car back in half of that time and saved interest on top of it.

Stable growth and solid dividend

When purchasing shares, I prefer buying companies that I trust and that I have a positive experience with. So when I started investing in Thailand some 3 years ago, I naturally took a look at Tisco, and I liked what I saw.

The company has not only solid growth and an excellent share performance to show for, but it also pays annual dividends which are almost constantly growing year on year. In 2019 my yield on cost after tax was 5,84%, in 2020 it grew to 7,65%, and I am now very curious about 2021. The dividend is usually being paid out in May each year.

When COVID hit the markets and the stock dropped to levels below 70 THB, I have added to my position, which pushed my average purchasing cost to a mere 75,96 THB per share. So while I do expect the dividend to be reduced in 2021, I might still reach an excellent yield on cost.

Learning from other markets

Tisco is right now my largest holding in the Thai portfolio I manage, and I am confident that I will add more shares whenever I see the market dipping again or even if it would be just stabilizing further. One of the main reasons why I feel so confident about this company is my experience with another German financial giant: The Allianz AG.

While I never invested in Allianz (yet), it was always one of those stocks for me that I regretted not having had put money in (I still do). As boring as the business sounds in comparison with Apple or Starbucks, it’s one of the most profitable and reliable business models on the planet. It benefits from amazing profit margins and enjoys customer loyalty beyond what most other businesses can present. Not because of having such great products or services, but simply due to necessity.

If you’re investing in Thailand, Tisco should be at least on your watchlist. Do the due diligence, check the numbers, visit their investor relations website and analyze the chart. Read more articles from professional investors and get your facts straight. But I bet you will like what you see and that the stock will find its way into your portfolio.

DISCLOSURE: I have TISCO.BK in a portfolio that is managed by me.

PS: You might notice minor changes to the blogs layout. I have decided not to purchase the WordPress Premium plan this year to reduce my expenses slightly as my dividends dropped by 11% year on year. Therefore, I swapped to a free layout AND you might have to endure some WordPress commercials every now and then. Sorry for that, I will put things back into place next year.