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3 Simple Things A New Investor Needs To Know Before Investing

Hey there, new investor. The world of investing can look like an intimidating place with the mountains of information, and opinions being shared. With all this information, it can feel overwhelming. It may even feel like you trying to take a drink from a fireman’s hose.

It doesn’t have to be this hard.

To make your life a little easier, I would like to share three simple things to keep in mind before you set off in your journey of investing.

Buy businesses, not tickers

When you buy a share of a company, you becoming a joint owner in the business. This means that you have a share of the whatever revenue and profits that the company makes. For instance, if you buy shares in CapitalMall Trust (SGX: C38U), you are getting a piece of the rental paid by tenants in popular malls such as Raffles City, Bugis Junction and Plaza Singapura. Similarly, if you buy shares of Old Chang Kee Ltd (SGX: 5ML), you benefit every time someone purchases a tasty Curry’O from its stores.

As an owner of a business, it follows that you should get interested with how the business is being run, and what its plans are for the future.

Price is what you pay, value is what you get

Do you have a favorite bottle of wine? You may have noticed that different places may sell your favorite wine at different prices. During festive seasons, it may even go on sale. The astute reader would have noticed that the value of the bottle of wine had not changed, but the price for a bottle could differ from place to place.

To a certain extent, the share market works in the same way. The share market is a place that will throw out random prices for companies every day, often with little regard for the value of the companies. Good companies can sometimes go for a bargain price one day, and be expensively priced in another day. The key here is to focus on the value of the company behind the shares, and try to get a bargain price for it.

There is no right way to invest

There are many books and articles written on how to invest, but it is important to know that every investor has their own take on how investing should be done. Even the best investors in the world do not invest in the same way. By all means, go ahead and read up on the investing approaches of as many successful investors as you can. But, pick the way which resonates the most with you, and continue refining your approach from there.

Foolish summary

The three simple thoughts above are one of the few things that I have learned while I was starting out in investing. It might provide you, the new investor, with a simple framework to learn more as you go along.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.