My Worst Investment Ever Podcast

Phuong Nguyen is a CFA charterholder. He is a value-oriented and fundamentally driven investor. He has 8 years of experience in the investment industry with various buy-side firms and has lived through some, a few of the tough market times. In his view, the Asian investment landscape is uneven and investors should sharpen their investing acumen beyond the face value of data or information. He manages his family investment account, which has delivered an annualized return of more than 30%, which is more than 15% over the benchmark. Meanwhile, his portfolio since its inception 4 years ago has only sustained an average 14.1% downside volatility compared to 23.9 for the benchmark. He is currently exploring a global career opportunity to apply his rigorous research process and investment acumen. His core expertise is in Asia-Pacific markets and he is a member of the CFA Society Singapore.   “I make it worse by using leverage, Charlie Munger and Warren Buffett talk about the 3 Ls to avoid, which are ladies, liquor and leverage: leverage I used it. It turned out to be bad for the investment.” – Phuong Nguyen   Lessons learned Don’t forget the 3Ls. Phuong referred to Buffett talking about him and his partner Charlie Munger’s attitude to leverage when he said: “There are only three ways that a smart person can go broke: liquor, ladies, and leverage.” Leverage in Phuong’s case meant borrowing money from a broker in the hope of having the money multiply to the extent that the loan can be repaid with interest to leave enough of a gain to profit from. Look out for all potential headwinds. Avoid emotional bias after meeting a company’s smiling faces. No matter how charming a company’s management is, how convincing and humble they are, do not act to invest in a company right away after you meet the company because at that time you will be suffering from emotional bias. Stay away from them for about a week, do more research and only then can you look at the investment again. Despite a company meeting and your feelings about investment going well, emotions should be kept in check.   “Our aversion to leverage has dampened our returns over the years. But Charlie and I sleep well. Both of us believe it is insane to risk what you have and need in order to obtain what you don’t need.” – Warren Buffet   Andrew’s takeaways Be mindful of the effect of confirmation bias. It’s human behavior to look for information that confirms our original views or hypothesis on a matter, and everyone in all fields suffers from that bias. Therefore, investors especially have to work extra hard to find opposing views or arguments against our thesis on an investment idea. Be wary of cyclical. When investing in cyclical type of companies, it can be extremely dangerous. A lot of people like to invest in consumer-type products because generally demand is steady and supply is steady. But when you’re investing in cyclical, there is a much greater risk, which sometimes is what attracts investors because of the old magnet: “high risk, high return”. On company visits. As an analyst for more than 20 years, taking thousands of fund managers on visits to just as many companies, Andrew says that probably 95% of the meetings he attended added no value. In some cases, it made someone either overconfident in liking the company or overconfident in disliking it. Which either way biased their decisions. Andrew agreed with Phuong but said:   “Go out and visit the company. Fine. You may like the company, you may they hate them, but don’t make your decision right way based on the visit alone.” – Andrew Stotz   You can also check out Andrew’s Books How to Start Building Your Wealth Investing in the Stock Market My Worst Investment Ever 9 Valuation Mistakes and How to Avoid Them Connect with Phuong Nguyen LinkedIn  Connect with Andrew Stotz astotz.com LinkedIn Facebook Instagram Twitter YouTube My Worst Investment Ever Podcast Further reading mentioned: Retire Before Dad (2018) Liquor, Ladies, and Leverage: How Smart People Go Broke Warren E. Buffett (Feb 2018) Letter to Shareholders of Berkshire Hathaway Inc., reporting on the company’s performance for 2017.  

Ian Beattie is currently the co-chief investment officer of NS Partners London, an investment management boutique. He holds a B.Sc. degree in economics from City University of London and started in the investing business in the early days of January 1992 as an Asian equitist. Since then he has been involved in East Asian and Asian emerging markets. Ian joined NS Partners in 1996, and just a year later, he became head of Asia and has since been focusing on the products closest to his heart, emerging markets, and Asian equity investments in the region.    “I think we’ve got to learn from our mistakes … and to learn from them, you need to know what you got wrong. And some of those are un-forecastable genuinely exogenous events. That’s why you have a diversified portfolio, right?”   - Ian Beattie     Investment journey  Ian started investing CAR Inc., a car rental company based in Beijing, despite the fact that there existed a handful of popular and booming ride-sharing companies in the continent, such as Uber and local operators that posed a threat. The balance sheet looked great and it had a good foundation for its name, with training by Hertz managers who helped to set it up.    “There’s nothing like a globally significant crisis to really test your knowledge of markets, whether it’s how our company works, how an economy works, and how those two are joined up. Pretty exciting learning experiences are not always a pleasant one.”  – Ian Beattie    But after a while, his investment started to fall. What caused it? Ian cites his initial positive assessment about the company’s management proved wrong, but on top of that, he underestimated the threat of the competition. Ian failed to see the bigger picture and the impact that the bigger companies would bring to his stock in the long run.   Emotional attachment was misplaced  As part of the peer review process, younger members of the team had been asking him early on what he was doing and why he wasn’t seeing the risk of car-rent apps such as Uber and their China equivalents and why the company was not getting more cash out of its operations (free cash flow (FCF), the cash a company produces through its operations, less the cost of expenditures on assets. FCF is the cash left over after a company pays for its operating expenses and capital expenditures, also known as CAPEX).     “I’m getting hit with this (strong feedback). And I realized I cannot defend it … If you bought a stock – or a valid investment – for a valid reason, that should still be the reason why you hold onto it. And if that story is broken, then you should sell.”  – Ian Beattie    There have been many cases such as this, wherein an investor’s reason for buying a stock suddenly changes midway through ownership. This happens mostly when the stock starts to depreciate, and when it does, it should be a clear red flag that it is no longer profitable and actions should be taken to prevent further damage. Ian, however, failed to see this flag sufficiently early on in the game.    Reassessing the situation  Ian is reminded of the OODA Loop, a discipline he has used to reset his mindset and that of his team to what is really happening. Created by US fighter pilot John Boyd during the Korean War, the OODA loop is a strategic tool used for analyzing situations for re-orientating in the heat of the moment. Part of it came from a theory to achieve success in air-to-air combat developed out of Boyd’s observations of dog fights between MiG-15s and North American F-86 Sabres in Korea. It is a disciplinary method that helps people remain calm and properly gauge what is being faced and because it’s a loop, it allows for constant re-assessment amid changing conditions.   OODA loop as applied to investing   Observe – the situation, what’s going on with the stock. In the business of investing, it’s more like to observe and identify.  Orient – yourself, if you’re a fighter pilot, but for people in investing, “analyze” the situation.  Decide – Plan what action should be taken according to the situation.   Act – Take the necessary action.     Then go straight back into the loop as conditions change  Ian suggests to observe what’s happening now to see if you have made the right change. For fund managers, that would involve risk control and re-forecasting, which is very important. Look at the new data, because usually if the share price has gone wrong, there’s some new information upon which an investor needs to redo their forecast, and he suggests being honest to the point of being brutal.     Peer review helps with that honesty   The great advantage of institutional investors is information on costs and the presence of a team, which Ian’s firm uses to employ a peer review mechanism. He says it does not matter whether investors have been in the business a few years or 30, it is wise for all team members to subject their decisions to assessment by the team, members of which might have power to veto a decision. This process is applied not just when deciding about buying a stock, but when reviewing its progress. Ian says the veto is used to empower and encourage dialogue rather than to score points. He says this process keeps everyone grounded when stocks are going up and the team presenting their idea sees their stock going up, and by doing so, also catches problems before the investment goes “horribly wrong”.   “I know the theme for your series here is how the emotion gets involved. This is an emotional business. So the peer review, as well as obviously … more information,  its most powerful tool is as an emotional check.” – Ian Beattie      Teams always contain people with varying talents   As Ian finished the main part of his interview with the story of the hedgehog and the fox and relates it to today’s market analysts. Hedgehogs make the best out of what nature has given them and use it to their advantage. They were given spikes and they use them for self-defense. They excel at one thing – their specialization. Foxes, however, do not have spikes but are eclectic and use whatever skills they can find to be able to fend for themselves. They take risks and adapt their skills to the kind of environment they are in.  In terms of approach, fund managers must liken themselves to a fox in need of hedgehogs, “because nobody knows that subject better than a hedgehog”. A good team must consist of a diverse group of people with different specializations, and led by someone who can become a good listener and has the ability to make decisions not based on what is for his own betterment, but for the good of all involved.    “I think that’s the thing about our business and about the markets in general, people who are good at it, people who last a long time … have to have an unusual balance of arrogance, because you have to believe you can beat the market, when a lot of academics out there will tell you that you can’t. But at the same time, you need to be need to have a huge  amount of humility.”  – Ian Beattie      Ian

This podcast is dedicated to John Bogle   Michael and Andrew would like to dedicate this podcast episode to the icon who passed away just before this recording was made, John Bogle, founder of the Vanguard Group, and author of such classics on investing as The Little Book of Common Sense Investing was a real Vanguard and revolutionary. Bogle started the world’s first index fund so they tip their hats in tribute.     Guest profile     Michael Falk is a CFA charter holder and a certified retirement counselor. He is a partner at the Focus Consulting Group and specializes in helping investment teams improve their investment decision making, investment firms with their strategic planning, and mediating firms’ successions. Previously, he was a chief strategist at a global macro fund and a chief investment officer in charge of manager due diligence and asset allocation for a multibillion-dollar advisory practice. Michael is an author, co-author and frequent speaker. in 2016.  He wrote the CFA Institute Research Foundation monograph Let’s All Learn How to Fish…to Sustain Long-Term Economic Growth. He is on the CFA Institute’s approved speaker list. In the past, he has taught on behalf of the CFA Society Chicago in their Investment Foundation Certificate program. He has been a contributing member of the Financial Management Association’s practitioners’ demand-driven academic research initiative group and taught at DePaul University in their Certified Financial Planner Certificate Program. He’s frequently quoted in the financial press and presents in industry events.    Moneyball man  Michael was an athlete who played competitive baseball until he was 31 years old. But in his early 20’s, he realized that he couldn’t make a career of this, so he decided to get an education, and graduated from the University of Illinois with a B.S. in Finance, adding to his interest in growing wealth. It caught his attention, but it wasn’t about getting large amounts. It was about how money drove behavior. But still, he played ball and was working on the side until his body’s aches and pains started to surface.      Summary  In this episode, Michael recounts his experiences as a private wealth manager advising a client on what to do about holdings in two big companies. The story revolves around what is seemingly his not-so-lucky share-price level, US$8/share. He shares his take on the fortunes of these huge companies and the reasons why he didn’t take the risk of investing in them, even though he was an educated investor and had advised his client to hang on to the stocks. Andrew will tell add why execution is a vital part of building an investment plan through his six-step process. Inherent in that is how crucial it is to avoid taking huge positions aggressively so you don’t end up in the same sad state as do most investors.      “Lose profitably. Use your takeaways and your learnings from those losses to not repeat the same mistakes. They say there’s no such thing as failure if you’re learning. So, my parting comment is, if you’ve got to lose, at least lose profitably.”  – Michael Falk     W$8/share investments and the odd stories behind them  Apple Inc. (AAPL:US) is now trading at US$199.23/share  Apple was starting to drop, before Steve Jobs returned and saved the company. It was trading at around $8/share. Michael was a fan of Apple computers and so his friend who was curious about the drastic consequences if the company should fall. He was confident that it wouldn’t. Buying the stock was an absolute steal, given these two probable scenarios: 1) The company would rebound, or 2) Microsoft would buy them because of the value of the technology. Surprisingly, he didn’t follow the instructions that he gave to his friend. He didn’t follow the instruction he gave to his friend.     Philip Morris  Philip Morris International Inc. (PM:US, $86.19); Altria Group Inc. (MO:US, $56.94)  Michael started his career in private wealth management. He had a client named Jack, who inherited a stock portfolio from his father. As he was doing an audit on the low-cost basis portfolio, they were unable to decide whether or not to hedge out the risks. One of the companies they were looking at was Philip Morris, which was also trading at $8/share too. Philip Morris had started to take a BD (broker-dealer) at that time because that was when the US government was going after the tobacco companies in terms of the healthcare lawsuits.    Michael’s analysis:  1.The dividend payment at that time was 8%, and he believed it wouldn

Roxana Nasoi is an advocate for community and technology with 10 years’ experience in online business data analytics and marketing. She was an Elance (then Upwork) ambassador between 2012 and 2018. She joined Aimedis as their chief communications officer (CCO) in November 2017 and is co-host at the The CryptoLaw Podcast and the Nothing at Stake podcast.    “Be true to yourself and do not be afraid to start over again.”  – Roxana Nasoi      One lesson learned    Everything you do generates a reaction that has either direct or indirect impact. It’s difficult to predict what can happen in a business or with an investment. If one doesn’t assess every single potential risk thoroughly it will return to haunt them.       “What you did today will come back to you in five years, or even sooner.” – Roxana Nasoi       Andrew’s takeaways    Breaking up is hard to do in business too, but make sure it’s a clean break. It’s important to do the work to truly separate yourself from a partnership or business partner, you want to make sure that it’s a true, clean separation. It’s even hard sometimes to identify where the connections are. But just as a lot of preparation is required to get into business or an investment, so too is it important to have an exit plan, that is well executed.     “When you separate and decide to go different ways, make sure that you invest the time and effort that’s necessary to truly separate yourself from that other business or … business partner.” – Andrew Stotz      You can also check out Andrew’s Books    How to Start Building Your Wealth Investing in the Stock Market  My Worst Investment Ever  9 Valuation Mistakes and How to Avoid Them    Connect with Roxana Nasoi  LinkedIn  Medium  Twitter    Connect with Andrew Stotz  astotz.com  LinkedIn  Facebook  Instagram  Twitter  YouTube  My Worst Investment Ever Podcast 

Tron Jordheim is a business guy, podcast writer, and speaker who spends a lot of time operating RHW Capital. Tron is one of those entrepreneurs who is always making something out of nothing. He started his first business in the sixth grade with a roll of paper towels and a can of window cleaner. He has been at it ever since. He took his boyhood interest in protection-dog training and created a whole new business model that put him through college. Tron was one of the people who helped the New York City Police Department start its K-9 Unit. He ran man-dog contract security patrols for Pan Am airlines at JFK airport and was the captain of the United States team that competed at the European championship for German shepherd dog clubs in 1982 (now called the WUSV world championship).     “What I didn’t do though is a cash flow analysis and a forward-looking pro forma … I didn’t do any of that.”  - Tron Jordheim    One lesson learned It’s very advisable to do some real risk analysis before you invest in a business so that you know that, when risk factors arise, you can recognize them. Along with that, of course, is to have a plan for dealing with the risk or avoiding it.       Andrew’s takeaway    Beware of The Entrepreneurial Seizure, which can manifest itself in the budding entrepreneur doing insufficient research on returns and risks. This happens when they have a great idea, they get so focused on it that they often lose sight of even the basic research, on revenue, on risks and they definitely ignore negative feedback. The result can be that they want to grow fast and don’t bother to test the market.   Someone in the grip of such a seizure doesn’t ask the questions:     No. 1: Do I have a product and service that’s really valuable?   No. 2: Can I execute the idea to create that product or service?     "Sometimes the best ideas are not executable. And what I’ve learned over time is that it doesn’t matter how good the idea is [it’s] how much of it can you do …and that much of it is a good idea.”– Tron Jordheim   You can also check out Andrew’s Books:  How to Start Building Your Wealth Investing in the Stock Market  My Worst Investment Ever  9 Valuation Mistakes and How to Avoid Them    Connect with Tron Jordheim:  LinkedIn  Tron Jordheim    Connect with Andrew Stotz:  astotz.

Dann Bibas is a co-founder at Fountain financial services in the United Kingdom, a digital wealth manager combining new technology was certified advisors to make personalized investing more accessible. He was formerly an equity derivatives associate at Citigroup, working closely with some of the world’s largest financial institutions on equity, cross-asset and volatility products. He is also a member of the Founders of the Future community in London, the Tech Nation Founders’ Network and is a regular speaker at start-up and fintech events.    “Stock picking, for myself at least, is really difficult”  - Dann Bibas    Die-hard passive investing fan adds key points   Dan truly believes that investment in the market for the long term is the maker of winners  He has felt this way most of his adult life since the following story of loss  Started to invest in stocks when he was a student majoring in finance at McGill University (Bachelor of Commerce)     Watching a stock closely becomes a nightmare of ups and downs   As he learned micro and macroeconomic and other financial concepts, he and his friends became interested in investing as they were learning a lot about markets and how to evaluate balance sheets.   Early forays involved using small amounts of money earned during summer jobs through a friend in his group’s TD Ameritrade account.  They bought a few hundred dollars of shares in Citigroup (a fact Dann used later on during his interview for Citigroup’s graduate program.   This was the first ever investment he actually took seriously. Perhaps too seriously, because his strong memory was that it was very anxiety driven, because he was focused on this one company, watching everything that was happening to it.  He had a clean thesis and thought he would become rich quickly. Then the stock was hit by an earnings report that was negligible below expectations.   Then some macroeconomic event happened and it fell further.   Then there was positive news and it bounced up.   But the stock can also be affected by other banks’ earnings reports, impacting the sector.   So he went from thinking he had an effective thesis but his stock was getting “hit on all sides” both up and down.   How’s the sector doing?   How’s the broader market doing?   How are its peers doing?   Is there a specific event that was not factored into the share price that is now happening?   There were too many variables.   Also stressing him out was a Forex issue. The money he was earning was in Canadian dollars, and his band of brothers was investing in US dollars.   So on top of all the above, he was having to look at how the USD/CAD was trading.     “I think it’s safe to say I was very, very overwhelmed. I think we just about sold out of our positions to break even … my first one or two gray hairs came from those couple of weeks or months of investing.”  - Dann Bibas    Definitely after this experience, he follows what Warren Buffett preaches, he converted his investor style from active to passive investments  And, he’s very happy with it.     Lessons learned  1. Stock picking is really difficult: Because:   a. Accounting for all the many variables is a lot of hard work   b. Coping emotionally with the ups and downs of a stock and all the elements that have an impact on a single stock is also very difficult   2. Full conversion and commitment “to the faith of passive investing”    a. Because of the long-term benefits   b. Investors do actually end up outperforming stock pickers  c. He much prefers reading about wider economic growth than looking into the balance sheets of individual companies  3. Such lessons drive the advice he now gives clients at Fountain    Andrew’s takeaways  Work and investing habits must suit your personality. Some people in the market just like to watch the price changes rather than beat the market “What makes you happy?”  It’s amazing how many people put money down (investing) without knowledge of the market. It’s a little bit like jumping in the car not knowing what a seat belt is or figuring out what the gas pedal is, just treading on the gas pedal.     “The end result of that is that you’re taking on risk that you don’t necessarily  know about for that person. And the world doesn’t care.” 

Guest profile     Hansi Mehrotra runs the financial literacy and investor education blog, The Money Hans. She was named in LinkedIn’s inaugural global 10 TopVoices for Money & Finance. More recently, she was included in the LinkedIn TopVoice and PowerProfile for India in 2018 and the year before, the same site’s PowerProfile for Finance in India. Her profile on that site has more than 289,000 followers. Hansi has over 20 years of financial services industry experience, mostly in online delivery of investment research and consulting for the wealth management industry across the Asia-Pacific region. She set up and led the same region’s wealth management business for Mercer’s investment consulting division in Australia and Singapore. And, Hansi has led a number of projects in India, including the design of investment options for the National Pension System. She holds a BA from the University of Delhi, a graduate diploma in applied finance and investments from the Securities Institute of Australia (now FINSIA), and is a Chartered Financial Analyst (CFA).    “Just because we didn’t have data doesn’t mean it never happened.” - Hansi Mehrotra   Prelude to tale of woe and Hansi’s motivations   She finished her degree at the University of Delhi  by correspondence because she come from a very small town.   Her desire to learn finance was due to a “lack of money”. Also, her father had lost a lot of money and she wanted to know why.   While earning her graduate diploma in Australia, she worked as a waitress part time.   Hansi’s drive and skill for self-study came partly from her father, who urged her to help her less academically inclined brother with his work     Asset allocation and sizing of position – went to Zero  Hansi and her husband started a joint-venture company to research tax-effective agriculture schemes.   They became well-known for writing the best research reports on how to receive tax benefits from planting trees, such as in orchards, vineyards, and for pulp and paper.   She joined Mercer and convinced them to employ her husband as a consulting to research agribusiness as an asset class globally.   With the knowledge they gained after reading Rich Dad Poor Dad, by Robert Kiyosaki and became interested in passive investments and income streams.  Thinking about starting a family, they discussed Hansi leaving work and needing support while raising children and managing the home.    They invested their combined life savings into the top rated agribusiness schemes that they had recommended to their clients.  Investments included pulp mills in Tasmania (specifically Gunns), orchards, grapes, stone fruit, and a big outlay in a unit trust in red-wine vineyards in the Barossa Valley, South Australia (premium wine-growing country).   The vineyard investment doubled its value in 12 months and other agribusiness stocks were doing well and achieving high returns, “so we were riding high”.  Hansi and her partner were then re-investing profits back into these schemes they were earning a return of up to 15%.   “All of it got wiped out.”   All three investment areas were hit with either environment factors (hail storms) other bad weather, foreign exchange losses and environmental impact issues and regulatory problems, bring them all to zero.   Because have were unlisted company, they could not recoup their investment in any way.   That was the end of their plans to have children.   Impact of investing and failure     “Learn from mistakes and just because we didn’t have data doesn’t mean it never happened.” - Hansi Mehrotra   Andrew asks about emotional strain on marriage  “Tell us about the emotion between you and your husband as you were going through this – how did you manage to keep the relationship strong, because a lot of times going through financial crisis can tear people apart?”      Hansi’s response   They were both trained analysts.   They forgot that what they had preached to others about investing applied to themselves.  Feels great regret for letting someone else convince her to forget all she had learned, especially about diversification and other safety factors in investing.  Such situations put a lot of stress on a couple and her marriage was no exception because they never got the finances ready to have children. “Now it’s too late.”     Lessons Hansi learned  Diversification should never be forgotten

  Thao Quynh has 15 years of experience in the financial service and investment industry. She was the investment portfolio manager for two European funds with US$280 million of assets under management. Prior to that, she worked as a financial analyst and research manager for leading brokerage houses in Vietnam. She started out with a university tuition loan to create the asset of knowledge and it is this knowledge that has given her financial security. She believes in diversifying across various asset classes and allocates about half of her wealth to investing in the stock market investments. Thao holds a Master’s Degree in International Business from SKEMA Business School in France and an MBA from the European Management Education Center in Vietnam. Today she is serving her country as an investment manager and portfolio strategy manager at Vietnam Holding Asset Management.    Vietnamese stock market booms in youthful exuberance   The year 2007 was a boom time for the relatively young Vietnamese stock market and everyone was excited about the kind of profitability in which returns of double or triple were quite normal.  The VN index chart had soared from around the 680 mark in late 2006 to its peak of around 1179 in March 2007. Several companies were trading at 70 times PE and 100 times PE and what is considered a bubble at that point of time.     [caption id="attachment_2621" align="aligncenter" width="403"] The VN index chart had soared from around the 680 mark in late 2006 to its peak of around 1179 in March 2007. The latter year was when naïve investor Thao started to invest and got caught up in the excitement and greed.[/caption]   Source: Investing.com   In the same year, Thao invested in a Vietnamese start-up brokerage house. It looked a good prospect for the following reasons:  The founders were successful entrepreneurs with rich experience in leading other big financial institutions in Vietnam, one was former director at Merrill Lynch.  The information was transparent and its financial statement was audited by a Big Four accounting firm.  So all up, it had good financing potential, network advantage, and management capability. This investment was at first a big success. Two months after investing, the stock price went up around 18%. But Thao didn’t sell because, by her own admission, she got greedy and expected it go higher. She even rejected an offer to buy her shares on the over-the-counter (OTC) market at 2.5 times her cost price.    Stock market bubble bursts  Thao doubted that the bubble would burst at that time because everyone was expecting robust growth in the economy since the country had just entered World Trade Organization and that this would be a good catalyst for corporate performance and stock prices. However, the unexpected happened when that same year the Vietnam stock market showed for the first time some correlation with the US market. The global financial crisis was showing early red flags with the collapse of Lehman Brothers. Her investment went from a profit of 2.5 times to a loss of 50% in just a year and liquidity was a big factor as nobody wanted to buy after the bubble had burst.    Opportunity loss  Regret hit Thao over this investment but she decided to ignore it. She consoled herself that the stock price would recover one day. But that only happened nine years later. Thao sold her investment in 2016 at the break-even price on her initial price. But she admits that while she in pure numbers didn’t suffer a great loss, the real damage was in opportunity loss for not selling at the right time and holding on too long despite some awareness that a bubble was happening.    “It did recover but nine years later. I sold my investment in 2016 at its break-even price so, although I sufferedonly a nominal loss, I had a big opportunity loss for not selling at the right time and for keeping it for too long with that awareness of the bubble.” – Thao Quynh   Thao’s lessons learned      1.Be aware of a bubble – Typically during such times, market sentiment is overly optimistic and people go a little crazy. We should be careful about that kind of positivity. “We may get crazy with them too”    2.Liquidity is extremely important – Especially when you want to sell your shares.     Andrew’s takeaways  The big picture matters – A lot of times investors get caught up in the small picture about a company they are investing in but even great companies can crash if there’s a shift in the industry or if there’s a bubble. This is critical to know.  Over-the-Counter (OTC) markets – If a company has issued shares but it is not listed them on the stock market, there tends to be an over the counter market where you could.    Vietnam is unique as a frontier market – There’s not much liquidity in most frontier markets. There are a small number of companies at the top of the market that have liquidity. But there are a large number of companies at the other end of the market that do not have liquidity. Liquidity really matters when you want to sell.  

Jerremy Alexander Newsome is the CEO and co-founder of www.reallifetrading.com. The trader and newly published author has one of the fastest growing audiences and websites on the Internet and attacks the markets with energy, exuberance, and humor that is truly refreshing. He has been professionally trading the stock market since he was 21 years old. Jerremy specializes in candlesticks, gaps, day trading with shares and options, swing trading and credit spreads. He graduated from the University of Florida in 2009 with a bachelor’s degree in business management, with a minor in mass communication. In his spare time, he has dabbled in the comedy world, practices Brazilian jiu-jitsu and has an informed taste in music and good beverages. Forrest Gump drives desire to not ‘have to worry about money no more’ Many people were inspired by the 1994 Tom Hanks masterwork, Forrest Gump. The box office hit inspired viewers with its mash-up history and heart-wrenching life lessons. Notably, it included an undeniable and timeless investment lesson.   Our guest Jerremy’s love affair with trading in the stock market started when he watched Forrest go to the mailbox while he’s telling his new park-bench friend how he’d had a call from “Lieutenant Dan”, who had invested their money in “some kind of fruit company” (Apple computers, Apple Inc. AAPL:US, APPL.OQ) and that they “didn’t have to worry about money no more”. For young Jerremy, the main motivation for getting into the world of investing was that his family always worried about money and he wanted to find out “How could we not do that anymore?” Jerremy begged his father to invest in Apple as well, and finally he agreed too, also saying he would match his son’s stake. He gave US$1,300 to his father, a sum raised from door-to-door sales of blackberries he had picked himself in the summer of 1994. The Apple shares they bought performed very well and around six years later, his father gave his then-12-year-old self a whopping $12,000 and he has been hooked on trading and investing ever since. Apple Inc.’s share price from beginning to present [caption id="attachment_2558" align="alignnone" width="1555"] Red line in the Apple Inc. chart above represents the approximate period Jerremy and his father traded in Apple shares, which succeeded in turning Jerremy’s initial investment of US$1,300 into $12,000. He has been hooked on investing and trading ever since.[/caption] Summary: Jerremy’s journey in investing In this episode, Jerremy shares what sparked his interest in investing and paved the way for his professional trading career.  He will reminisce about the glorious yet ill-fated days of being dazzled by the hottest trend at the time – silver. Jerremy was confident after tasting success when he had a striking 36% return from his father’s retirement funds in three months. But things didn’t go as expected when after its peak at $48.35 per share, it dropped by $10 in a week, a 20% loss in value, and unbelievably plunged to zero in the following week. Jerremy will detail more of the ins and outs of the trade and how his personal investment and loss of his father’s entire of his taught him the more important lessons: opening up his fears, on following the trend, and risk mitigation. Learn more from Andrew as well as he will give you his six-step process, fundamentals take when investing, for beginners or experts.   Every investor’s going to have losses. It doesn’t matter how much money they’ve made over time they’ve had certain situations that they’ve lost a lot of money on. So being honest, being humble, being open about it is key and integral. And it’s very important through the whole process of learning. You can learn more from your losers, than you will for your winners, without question. – Jerremy Newsome Investor, 21, bedazzled by hype and sheen of silver   On Jerremy’s 21st birthday, he asked for the contents of his father’s retirement account with which to trade. Confident about a strategy he had been using, he went on to make a stunning 36% return on the entire $100,000 in just three months. His father was as excited as he was. Then, he learned about stock options, which move faster than stocks. Jerremy went into investing in silver, which was all the rage and he was as caught up in the media, social and investing hype as everyone else. He felt he could not lose. This was the “perfect investment” and that thought was very assuring. His first foray into silver had been shares in First Majestic Silver (Corp.) ticker symbol (AG:US, AG.A) and he did very well. He holds an unofficial Guinness World Book of Records for buying silver at its highest price and even bought a lot of call options. He bought 300 call options, valued at $16,000 that time. In layman’s terms, Andrew defined call options as – “… when you think something’s going up, it’s not enough just to own the underlying stock. What if you could take a leveraged bet that says I’m going to make more money when this thing goes up? An option allows you to do that.” In 2011, the share price for the silver went up from $18 an ounce to $45.57 an ounce in a few short months, which validated his thesis and gave him comfort. When silver lost its shine After its highest share price at $48.37, it dropped to $35 after a week.  It is a $10 decrease which is over 20% rate. He bought on leverage so he was not just buying gear, but also the actual underlying position which has zero value other than pure speculation.  Jerremy was speculating at its highest degree and in just one week, the price plummeted to zero. And he lost everything in his investment. Jerremy bets wrong way with his options There are two types of insurance that options provide: insurance for the downside and insurance for the upside. Many people are unaware that one factor about trading itself is you can insure your stock positions, which right now is very beneficial for many traders. It is called a put option, which is an insurance position for your shares.  When Jerremy bought a call option, he was buying an insurance position only expecting the stock to go up. The only way to win when buying a call option is if the stock continues to go higher, and he bought a $50 call option when silver was trading at $48.37 cents. It was a position that needed to go to $50 in order to make money and it never did. He lost all of the money he put in, but it didn’t stop him because he thought it was a normal correction. He thought the stock was just pulling back and that it would rebound higher. And so, he eventually ended up buying even more options a few months later in August 2011 and that’s when silver dropped another 20% and he lost all of the money. The $100,000 that his dad gave all lost. Two fears and why he didn’t get out Jerremy only thought and considered making profits without considering the downside – how much he could lose or how bad his investments could go.  A few years later, he figured why he didn’t get out and instead of losing it all, he could’ve taken a small loss. He admits he had rational fears: (1) afraid of not being loved and (2) afraid of not feeling good enough. Since he lost all of his father’s money, he had to tell him and he feared that he would lose the love of his father as a consequence. And so, he never got out, which meant he hung on and lost more. It was a very strong psychological component, because I’m trading (with) my dad’s money, I’m 21 years old and what was happening is when I refused to take the loss, I tried, you know, years later to figure out why. Why did I not just get out, take a loss of some kind and say … ‘Hey, sorry dad, we only lost 50,000’. Rather than losing it all, why don’t I just get out, take the small loss. – Jerremy Newsome iShares Silver Trust tracks the spot price of silver + Jerremy’s trades [caption id="attachment_2559" align="alignnone" width="1545"] Chart shows the iShares Silver Trust which tracks the spot price of silver and Jerremy’s trades. Source: TradingView[/caption] Jerremy’s Takeaways    1. If everyone loves something and everyone’s talking about it, don’t get involved. Don’t invest. Bitcoin was the perfect example. Buying at $20,000. No way. Don’t do it. 2.Risk mitigation.  There are strategies you can use where you can either win big or, if you don’t know what you’re doing, you can lose everything. Risk mitigation is key in this environment because if you don’t have the money, you definitely can’t trade and you certainly can’t get it back. But if you have the money, you must protect it. Since you know that you have to protect yourself regardless of how much money you have in this world, you can lose every dime on a position that you don’t fully understand. Andrew’s Takeaways Not feeling good enough: Many of the people Andrew has interviewed are esteemed and experienced financial professionals who hid their losses in fear that they would be unworthy of their titles. He notes Your Money and Your Brain by Jason Zweig, the book he read that helped him realize that investing is a physical thing. We have emotional reactions and we mental reactions to investing. Such reactions can be measured to such an extent and that they are so tangibly physical that he calls investing a contact sport. Most people who succumb to their emotions fail to realize how easily their brains and their emotions are being manipulated. 2.Confirmation bias or The White Toyota Syndrome: When you buy a white Toyota, all of a sudden you notice there’s a lot of white Toyotas on the road. And this is the concept of confirmation bias. That bias is what we’re doing when we’re looking for things that confirm our beliefs. Serious long-term investors welcome ideas that go against their beliefs and they see the value in them. 3. Do not invest when everybody’s talking about it. 4. What should be a good process of investing for the average beginner?   Andrew outlines his six-step process: Step 1: Find an idea. Step 2: Research the return. Step 3: Asses the risks. Step 4: Create a plan. Step 5: Execute the plan. Step 6: Monitor the progress. The most important out of these six steps to which Andrew regularly refers is that you want to separate the research that you do about the return from the research you do about the risk. To arrive at this he was strongly influenced by Michael Gerber’s book The E-Myth, which discusses this extensively. The book identifies a state it calls “an entrepreneurial seizure”.   “What is important is that we separate the work that we do on researching the return, which brings all of the positive emotion and the assessment of risk and the researching of risk and risk management.” - Andrew Stotz Final words: Every trader is going to have losses. Jerremy has discovered that being honest, humble and open are the fundamental keys. Importance of risk mitigation. Measures to avoid the same fate Jerremy advises listeners to do the following: Get some charting software, such as tradingview.com, think or swim, freestockcharts.com, Yahoo finance or the like. For every guest on this show, each one of your listeners should pull up the chart concerned if it is available and look at the course of the investment on the chart. Discern why it was a bad trade (as we have done in the charts above). If you can also visually identify why something is not a good idea, it can also help when you see it. In a few weeks or months, Jerremy suggests that Andrew is going to have a guest talk about how they bought Bitcoin (COINXBT:SS) at 20,000 or Ethereum at 2,000, and if you can visually identify what a bubble looks like or “a hyperextension of price action”, you have a much greater chance to not buy at that bubble point. Go back and research with day-by-day analysis events such as the Great Depression, the crash of 1987, the tech bubble of 2000, the Bitcoin bubble, the Tulip mania of 1637, many others, actually looking visually at that information. These are things you can quantitatively do right now. Controlling your emotions and controlling your thoughts are difficult things to do. It takes time. But once you can do a quantitative act, like physically getting in front of a chart and see how these events looked, when you see another one, your brain will recognize the pattern and maybe you shouldn’t buy at that point. Andrew’s final word: If we separate the research on the return and the risk, we force ourselves to move to a separate phase of research that allows us then to say, “This is a great return. I’m going to make a ton of money. But now I have to look at how to manage the risk.” You can also check out Andrew’s Books: How to Start Building Your Wealth Investing in the Stock Market My Worst Investment Ever 9 Valuation Mistakes and How to Avoid Them Connect with Jerremy Newsome: reallifetrading.com jerremynewsome.com LinkedIn Twitter   YouTube Connect with Andrew Stotz: astotz.com LinkedIn Facebook Instagram Twitter YouTube My Worst Investment Ever Podcast Further reading as mentioned in the podcast Newsome, Jerremy (2019) Money Grows on Trees: “How to reshape your thoughts, beliefs and ideals about money and become truly wealthy.” Gerber, Michael (1986) The E-Myth: Why Most Small Businesses Don't Work and What to Do About It Zweig, Jason (2005) Your Money and Your Brain: How the New Science of Neuroeconomics Can Help Make You Rich

Philipp Kristian Diekhöner is a keynote TEDx speaker, global innovation strategist and author of The Trust Economy, published in English (2017), German (2018) and Simplified Chinese (2019).  Philipp has spoken at eminent global organizations such as Facebook, P&G, Microsoft, Turner, Munich Re, Zillow, Globe Telecom, CPA Australia, Germany’s Federal Ministry for Economics and Energy, the Economist Intelligence Unit and many others. He’s written for Forbes, Esquire, e27, Marketing Mag and InVision blog plus several industry publications and featured across Springer Professional, Men’s Folio, Money FM 89.3 and Your Story. Philipp is also a founding partner of DDX, the award-winning German innovation foundry that helps companies innovate the most trusted products and services. In his free time, he’s an avid sailor and yogi.      Trust is key to change and is highly relevant to investing  After spending almost a decade working around the world in the sphere of innovation in numerous disciplines, Philipp makes two important observations: (1) that effecting change is particularly difficult, and that (2) trust is essential whenever we are trying to do something interesting or new. In fact, the world changes when trust patterns shift. This is, he says, why when old technology lingers, it is because it has managed to remain trusted. He added that by the same token, new tech that is actually not very good can still succeed also because we have somehow given it our trust. This change, whether good or bad, is very relevant to investing.    “When it comes to financial markets, our trust in the way the world works determines which things change and which things stay the same.”  – Philipp Kristian Diekhöner    Summary: Technology influence the way we trust businesses   This episode dives deep into a story about the placing (and misplacing) of trust in today’s technology. Our guest Philipp looks back at his investment in a robo-advisor fintech start-up in Singapore. He was attracted to its sophisticated digital interface and trusted them to actively manage his portfolio. At closer inspection, he discovered by himself his investment took a big hit due to a currency correction of which he had not been informed.     Phillip commands a unique perspective on trust, but was led astray based on misplaced trust in the gadgetry and slick delivery of the robo-advisor and its promoters. Despite this disappointment, he nevertheless learned a profound lesson that has paved the way to his development of new methods of research. He warns investors to beware of putting money into a company that provides no absolute “proof points” or evidence to back up their claims. And ultimately, do their own homework on what they place their trust in, an essential point to remember when assessing risk.    “With investments, there is always a difference between trustworthy players and trusted players. Some people just choose to be only trusted but not trustworthy. And at the end of the day, from losing a couple of grand worth of money, I actually realized that I gained a lot of insight   into my topic.”  – Philipp Kristian Diekhöner     Early win with a ‘trustworthy’ robo-advisor lifts that tech’s appeal   Philipp had worked a number of start-ups also in the Singapore fintech space and one was the robo-advisor, smartly. He knew the people well as he had helped them launch in the city state as a pioneer of some of the definitely more interesting fintech products. He also invested with them and earned some rewarding returns, all the while feeling that it was all more hip, modern, and relevant to him than investing in a bank or in the markets: “Because we all know that banks’ incentives are not aligned to yours”. Add to that his inside knowledge of working in finance for years, meaning he knew also what ordinary finance was like behind the scenes.   Flush from modest wins and impressed by the tech, Philipp looked at a new robo-advisor company in Singapore with a sleek interface. He had written a lot about digital interfaces and appreciated that people were increasingly putting a lot of trust in these. As did he, injecting a sizeable chunk of money into it thinking that the robo-advisors presented well and that it appeared they would do a good job, as smartly had done.     Undisclosed currency change exposure stabs in the back   Part of the outfit’s pitch was that the size of clients’ fees is because they were a “full-service” enterprise and would actively manage his portfolio. But when Philipp actually started looking into its investment framework, it turned out to be mostly a work of fiction. While digging even deeper, there was a major currency correction, which of course can have major implications on anyone’s investment. In his case, that meant a loss of around US$7,000), which definitely hurt.     Not-so-active management fails to include vital communication   While the robo-advisor was selling itself as an “actively managed product