Smart Investor Magazine - Special Focus On Wealth Management - Wealth Generation From Stock Market - Is It Really Possible?

A Game Of MICE Wealth Management
SPECIAL FOCUS
Wealth Generation From Stock Markets Is It Really Possible?

There are two types of wealth management either we manage it ourselves or allow someone else to manage it.
By Kathlyn Toh
1. They follow a strategy that is repeatable

I have come across many people who invest based on tips from friends or people who are deemed to be experts, and even become dependent on them. It is OK to listen to those opinions, but we have to always keep in mind thats all they are - opinions. Why should we risk our hard-earned money based on what someone else says, rather than taking the time to study, plan, execute and make sure we know what we are doing? Having a repeatable strategy means that our success is sustainable, and can even be passed on to our family and people we care about. And thats the essence of wealth management, isnt it? The best strategy to follow is one that suits our character and our affordability in terms of capital, time and effort. Because we are all unique individuals - we tend to invest or trade differently in the market, even though we might be using the same principles or learn from the same source - and thats OK! Key lesson here is that there is no holy grail when it comes to investment and trading strategies. Ultimately you will need to develop something that suits you. If you are new to this subject, the best way to get started is to nd a person or institution that can offer you a complete and holistic education, so that you understand what options are available and have the knowledge to adapt the knowledge to your personality.
prefer to manage the majority of my wealth myself - because I can do better in getting the returns I am looking for, with the amount of risk I can manage. In this article I would like to share about wealth generation through investing or trading in the stock market, and the goal will be to provide a holistic perspective for anyone who is deciding whether this vehicle is suitable, or not.
Success Rate Myths And Truths

We often hear about people who made a lot of money from the stock market
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| SmartInvestor | 11 . 2013
because they bought the right stock at the right time. But do we know how many of them can actually succeed consistently? The truth is that 90 to 95 percent of people who get into the stock market have failed to make it a sustainable income source. Thats a sad but well documented statistic. But having trained and coached more than one thousand students, plus having researched on the most successful investors and traders of our times - I have narrowed-down the two common traits of people who have created a successful career out of investing and trading in the stock market.
2. They follow strict risk management discipline

When we invest in the stock market (any many other asset classes) we must understand that there is absolutely no guarantee that we will make money. A professional investor or trader understands that investing is a probability game. Even Warren Buffett has made a few mistakes that cost him billions in US Dollars. The truth is that you can make money with a strategy that is right 50% of the time, and you can also lose money with a strategy that has a 90% success rate (if there is actually one). So the key to success is really about managing the risks.
and apply what I have mentioned above, you are more likely to achieve your investment goals faster. Making money consistently is all about risk management being your rst priority, prots secondary. If a trader thinks about how not to lose money rst, he will then focus on managing risk of his trades. While you dont have to follow the exact rule I mentioned above - you must have your own risk management rule.
Final Suggestion
Once you have developed your strategy, it is also important to have a plan to execute your strategy. A good investment or trading plan must have the following elements: (a) It is designed to meet ones nancial objectives, and hence the objectives must be clearly dened. For example - if one desires a 30% return per annum based on a $10,000 capital - then the plan has to be based on the 30% returns per annum objective. (b) It must be a reection of a persons personality and time availability. I have met traders who tried to use short term strategies or even day trading strategies, without realising that their personality or time availability are better suited for medium and long
Never risk more than 2% of your capital in any single trade

When I rst started out trading more than 10 years ago - my results were inconsistent. I could gain a lot and then lose it all back within a few trades, until I learned of this Golden Rule in investing, and this is one rule that I cannot stress enough in my teachings. Many people, when told of this rule, would say, My capital is not that big - 2% will not allow me to trade any stocks! While that may be true back in the 80s, the development of nancial markets and technology have changed that. Today, either having an automated stop-loss, or using hedging strategies can apply this rule. The availability of leverage instruments like CFDs, Options and Futures can also help in managing risks if used properly. So if you are willing to spend some time and effort to learn
term strategies. From my observations it is very difcult for a trader who is trading against his personality nature to have any consistent success. (c) It has to include clear entry and exit criteria that govern every trade you make. In other words, every trade must be opened and closed according to what has been pre-dened in the plan and not based on intuition! (d) Lastly, the plan must include journaling of all your investments. A good journal will help you in: Reviewing your actions regularly to ensure you are following your strategy, not your emotions. Making sure that you learn, especially from your losses. I see every loss as a tuition fee I pay to the market. As a professional investor and trader, what I do on a daily basis is plan, execute and manage risks; and its actually no different from managing a business. If you can also have the discipline to do that on a regular basis stock market investing and trading can be a very rewarding venture for you.
Kathlyn Toh is a Professional Investor and Trader specializing in the U.S. and global equities market. She is also the Director and Chief Coach of Beyond Insights Sdn. Bhd., an institution that offers the most complete curriculum in our region on the subject of stock market investing. Go to www.beyondinsights. net, or follow Kathlyn on Facebook at www. fb.com/beyondinsights.
SmartInvestor | 11 . 2013 |
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A Game Of MICE Wealth Management

Wealth Generation From Stock Markets Is It Really Possible?

1. They follow a strategy that is repeatable

Success Rate Myths And Truths

2. They follow strict risk management discipline

Never risk more than 2% of your capital in any single trade

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