This article was written in partnership with IG, the world’s No.1 CFD provider (by revenue excluding FX, published half yearly financial statements, June 2019). All views expressed in the article are the independent opinion of Dollars and Sense and do not in any way reflect the views, opinions, or endorsements of IG Asia Pte Ltd (Co. Reg. No. 20051002K) (“IG”).
Starting your financial journey can be a daunting task. It not only requires us to be financially literate in knowing how to save and invest but also requires some technical knowledge. In addition, a large part of being a good investor or trader is experience. It’s like riding a bike or learning how to swim, you can never get good in it until you try and make your fair share of mistakes.
An individual who understands this is Alvin Chow, the founder and CEO of Dr Wealth, one of Singapore’s leading financial websites. Besides providing a wealth of investment-related content for people to read, Dr Wealth also offers various investment and trading courses such as their Intelligent Investors Immersive, Early Retirement Masterclass and Quantitative Investing Course.
One thing which is important for Dr Wealth is that the company advocates for people to learn from real investors, and not just from speakers. Dr Wealth trainers are practitioners first – they invest and trade their money and have achieved a certain degree of success – before they share their investing and trading journeys to others.
While he can be considered an experienced investor today, Alvin didn’t start off as an expert. A former Singapore Air Force regular, Alvin’s initial investment journey in the stock market started off poorly when he lost about $100,000. The loss didn’t deter him and he continued to learn how to invest properly. It was not until he learned Factor Investing from a friend who works in a hedge fund that he got his first taste of success in the markets. Subsequently, with a few friends, they started Dr Wealth so that they could share their knowledge with other retail investors in Singapore.
In this month’s edition of #myfirsttrade, we chat with Alvin to find out more about how it’s like running a company that teaches people on how to seek market opportunities to generate better returns on their investment capital.
DollarsAndSense (DNS): We like to start off every interview with this question. Can you still remember your very first trade, and how did it end up performing for you? #myfirsttrade
Alvin Chow (AC): It was in 2007, during the bull run leading to the Great Financial Crisis. I was studying in university at that time and had some savings to punt. Shipping and commodities were very hot, and I picked COSCO Corp warrant from the list of the top trading volume. I bought a warrant because I had little capital and it offered 5x leverage. I got lucky and doubled my money within a week!
But as a naïve beginner, I mistook luck for skill and felt confident of my investing ability. I continued to punt but eventually lost the winnings and more. This made me realize I had a lot to learn if I wanted to be successful.
DNS: Dr Wealth currently offer a wide variety of courses. You have courses that teach people about Deep Value, Growth Investing. At the same time, you also offer courses on quant investing and also day trading signal service. What were the reasons why you decided to offer such a variety of investment and trading courses and services to individuals?
Alvin Chow (AC): I always akin investing strategy to religion. There are numerous religions, and each has a different belief and view of the world. It’s a personal choice to decide what beliefs a person wants to adopt.
Similarly, there are many strategies to approach the markets. Van Tharp, a trader with a psychology background, said that we don’t trade the markets, we trade our belief of the markets. I have witnessed people achieving success using strategies that are opposite to each other. It is hard to explain why both work, but they do.
I became more tolerant in a diverse set of strategies rather than to prescribe my strategy as the best. But I am not skilled in all the strategies, so I got the experts in each area to share what they know with investors.
DNS: You make an effort to ensure you have trainers who are not only good in teaching (and selling) but who also have a track record of being able to execute successfully what they teach. Share with us why this is important for Dr Wealth?
Alvin Chow (AC): We have three criteria when we pick our trainers.
First, they must be practitioners and have achieved success in an area of investing or trading. Paper qualifications aren’t as important as their actual results. This is because we don’t aim to teach theories but to impart practical actionable investing skills. Our courses are not meant to train professionals in the finance industry, that role belongs to the university and other professional institutions. We aim to teach the man on the street who wants to take charge of their investments, hence practicality and applicability are what we look out for in a trainer.
Second, they must be willing to teach. Not all experts are willing to spend their time to impart their knowledge. They find teaching a chore and just want to focus on their own investment or trading. Hence, we do our part to convince as many experts as possible to share what they do.
Third, those who have results and are willing to teach must have the ability to teach. Most of our customers do not have a finance background and hence the ability to translate difficult abstract concepts to laymen terms is a skill by itself. Couple all these with the ability to engage the audience and we have the elements of a good trainer.
DNS: With more than 4,000 students having graduated from your courses, what are some of the biggest misconceptions that you find among students who are new to investing or trading. How do you help them overcome some of these misconceptions?
AC: One of the biggest problems for beginners is that they have unrealistic expectations. They expect the markets to give them regular returns just like a job would give them a regular paycheck. Once they experience the swings in the value of their investments, their expectations get smashed and some of them may even panic. They need to recalibrate their expectations or else they will continue to disappoint themselves.
I always tell them that as investors we are price takers and not price setters. The markets decide whether we receive a return or not and we are in no position to project our demands on the market. You cannot say I want a 20% return this year, it just doesn’t happen like this. The market decides how much to give you.
DNS: What would you say is the difference between the education courses provided by Dr Wealth compared to others which are offered in Singapore?
AC: I believe some courses are motivational in nature while ours aren’t. We focus on the quality of content delivered during the course. Motivational courses work for some people who need to feel inspired in order to start investing or else they might do nothing.
Being an engineer by training, our investment styles tend to be more numbers-driven rather than story-driven. I’m a fan of the movie Moneyball. It was a true story of how a baseball manager used numbers to cut through the biases of scouts and build a world-class team with a low budget. There were a lot of insights we can learn about this baseball story that can be applied to investing.
AC: We noticed that some traders were not keen to take up courses as they already had some knowledge of how to trade. Their challenge was not being able to find the time to look at the markets or they have yet to discover a workable strategy. These signals allow them to follow the seasoned traders and peek over their shoulders as they identify potential trades to enter and exit the markets.
Subscribers get real-time alerts on their phones and they decide whether they want to act on them. It is simple and less time-consuming compared to doing everything by yourself.
DNS: In your view, how important is risk management – whether it’s investing or trading. How can one better manage the risk they face?
AC: Risk management is the foundation of all successful investing and trading activities. I have not seen anyone succeed without a solid risk management plan in place. The markets are uncertain, and this means that anything can happen.
Risk management is about taking a proactive effort to protect your capital in a large number of scenarios that could possibly happen. You cannot invest or trade once you lose your capital.
Luck determines a large part of investment outcomes. We might be tempted to ask how we can be luckier in investing. But we cannot do it because that is out of our control. Instead, we should strive to be less unlucky, and that by itself is risk management. You have robust plans in place to prepare for unlucky events.
To quote Charlie Munger, “all I want to know is where I’m going to die, so I’ll never go there.”
DNS: One final question. If you could go back in time to advise your younger self. What is one advice you would give him?
AC: I am tempted to tell him to avoid some of the investing mistakes I made but that’s not helpful because everyone needs to go through the rite of passage and losing money is part of the learning process to become a better investor.
I would rather tell my younger self to learn faster. To do that, drop the ego and be more open to other people’s perspectives but that doesn’t mean to accept everything which everyone says. Take the advice in context. If the person’s context is similar to yours, then it makes sense to heed it. If it isn’t, don’t be blinded by the person’s success because following in his footsteps may not be relevant at all.
Trading And Investing Are Two Different Ways Of Making Money From The Financial Markets
As mentioned by Alvin, investing and trading are two different ways of making money from the financial markets.
Investors invest with the expectations that prices of the assets they invest in will increase in value over the long-term while traders are hoping to make profits in the short-term by taking advantage of price volatility of assets. If you are looking to trade, you should look for a reputable, MAS-regulated provider such as IG Singapore, which is able to provide you with a wide range of asset classes to select from for your trades.
Risk management is an underrated component of both investing and trading that we shouldn’t ignore. While we cannot make ourselves “luckier” in order to get higher returns, we can take steps to protect ourselves from being “less unlucky”.
As a high-risk, high-return activity, every trader needs to adopt some form of risk management when executing their trades. Without adequate risk management, even the most profitable short-term traders will eventually make a mistake and bust their trading account.
If you are new to trading, start off with a demo account first. A demo account allows you to understand the mindset you need to take as a trader as well as familiarises you with the various tools that you can use to manage your risks, before putting actual money into your trades. You can even use your demo account to try trading signals which are offered real-time (for free) for IG account users.
In addition, find for yourself a group of like-minded individuals that you can share and discuss your investing or trading journey with. Dr Wealth has a Ask Dr Wealth Facebook Group that you can ask any investment-related questions. If you want to get involved in a trading community, IG also hosts a community where traders of all levels can participate in and learn from one another.
IG provides an execution-only service. The information in this article is for informational and educational purposes only and does not constitute (and should not be construed as containing) any form of financial or investment advice or an investment recommendation or an offer of or solicitation to invest or transact in any financial instrument. Nor does the information take into account the investment objective, financial situation or particular need of any person. Where in doubt, you should seek advice from an independent financial adviser regarding the suitability of your investment, under a separate arrangement, as you deem fit.
No responsibility is accepted by IG for any loss or damage arising in any way (including due to negligence) from anyone acting or refraining from acting as a result of the information. All forms of investment carry risks. Trading in leveraged products such as CFDs carry risks and may not be suitable for everyone. Losses can exceed deposits.
This article has not been reviewed by the Monetary Authority of Singapore.