Value Investing – Getting the Basics Right

May 6, 2013

in Investing

By Sean Seah (guest contributor)

Beginners (and even veterans) who are looking at investing can be easily bewildered by the large number of strategies and assets out there, and unsure about how to proceed. In this article we interview Sean Seah, a Value Investing trainer, bestselling author of Winning the Money Game and Gone Fishing with Buffett, and speaker at the National Achievers Congress 2013, on why he thinks Value Investing is the best investing strategy.

Could you share your stories of how you began your Value Investing journey and how you built your expertise in it to the point where you can now teach it?

I still remember a moment from years ago, standing in the bookshop and staring at the large number of books about the stock market. That was when I had decided that I wanted to learn how to profit from the stock market. I vividly remember telling myself that I would devote the next two years or so, to study and understand the stock market. During my university days, I had developed a mindset that most people could not make money from the stock market. It was only until a friend of mine, Suffian, shared with me that he had made more than $200,000 in the stock market over three to four years – that totally shook my belief that we cannot profit from the market.

I started by reading books, attending courses and networking with seasoned investors and up till today, I still continue to learn. But the journey wasn’t a smooth one as when I started out, I had no idea which methods actually worked, so I tried everything I could get my hands on, which included speculative methods. One thing which I did correctly was to reflect and review continuously. When I reviewed my results from the different methods, Value Investing stood out to be the most outstanding one. My Value Investing Options Strategy (VIOs) produced the best results.

Not only did it produce consistent results, it was also much more passive and required very little time to set up and to monitor.

From early 2008, I started sharing with friends and conducted free mini seminars because I was really passionate about investing. I didn’t quite see myself as an expert back then, but my friends who actually used what I shared with them kept coming back to thank me because they had profited tremendously using what I taught. So when Cayden asked me to be a partner in setting up the Value Investing Academy and to share my investment methods, I did not hesitate because I knew that I could help even more people profit and build up their wealth.

How would you define the difference between Value Investing and other styles of investing?

Value Investing methods look at stocks as businesses. When I buy businesses that make money, I make money. It is a very logical and common sense process.

There are two key points. The first is to ask the correct questions so I can determine if the business will make money. The second is to determine what price to pay so that I already buy into some “value” upon purchasing the stock.

With regard to other styles of investing or other market entries, I will think that without answering the two key points of Value Investing, one is merely guessing and speculating.

People looking to generate wealth from the markets are faced with a wide range of options that include trading and investing in stocks, options, futures and foreign exchange. Which of them do you think would be more suitable for a beginning investor and why?

Every good investor starts with the basics, sticks with the basics, and masters the basics. The basic tenet of investing is to make a good assessment of whether the value of the investment will increase. To make a judgment based on price movement alone lacks the foundation of understanding what is holding and moving the price.

So my advice will be to study the stock as a business, which is the essence of Value Investing. Options and futures are advanced derivatives that you should not touch if you do not first master the basics.

What are the biggest obstacles you’ve seen people facing that prevent them from getting better at Value Investing?

Of all my participants and friends, everyone who wanted to be a better Value Investor eventually did. I don’t see any real obstacles except the obstacles anyone places for themselves.

How difficult is it to become a good Value Investor where you reach a point when you can invest profitably on a regular basis? How much time and effort does it take to get there?

Like me, most of my friends and seminar participants start to profit immediately once they apply the methods. While that happens, some of them will still want a little guidance because of their lack of confidence. Thus, the key indicator that the person has grown to become a good value investor is when he or she can start to make decisions on their own with confidence. For most, it may take a couple of months.

Other than stocks, you also invest in properties and gold. How do those assets fit into your Value Investing framework?

I evaluate every single investment opportunity using the Value Investing Framework. My dad and I set up a company in Texas that bought 33 units of US properties producing rental cashflow. We use the same criteria: we assess the property and ask questions to determine if it can continue to bring in rental income. Then we ask ourselves what is the correct price to pay and that is determined by the yield that we want.

What are the most important lessons you’ve learnt about living a happy, successful and meaningful life?

I will like to ask anyone reading this: “Can money bring us happiness?”

My son was recently diagnosed with leukemia and not a single cent made us any happier. We know parents who have lost their child and I believe that if you give them the choice of a billion dollars or the life of their child, the answer will be obvious.

But at the same time, because of how I had crafted my finances, I do not need to worry about the bills and on top of that, I have time freedom to be with my son and my family whenever they need me. So managing money well has its benefits – it can give you time and give you the ability to finance things you need.

Money is just a tool. Ultimately, my answer to living a happy, successful and meaningful life is to put our trust in God and be grateful for what we have.

 

Sean Seah will be going in depth on the Value Investing strategies he has used to build his wealth at the National Achievers Congress 2013. 

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