June 1, 2020

Most people spend their time finding the next stock pick, reading about the new investing strategies… but most of them don’t pause and think about how to learn investing quickly.

This is a difficult topic because it’s hard to know how to learn a topic quickly before you learn the topic, right?

This is why I made this video for you.

If you want to learn investing quickly, you need to have a good model (like the one I attached right ;))

In this video, you will learn:

  • What’s the key model when it comes to learning about investing?
  • What are the 3 mistakes new investors make when it comes to investing?
  • How can you avoid these mistakes?
  • How can you fast track and get results if you decide to learn through trial and error?
  • What are the next step once you learn how to learn quickly?

90% correct transcript:

Welcome back to my channel. And today I want to cover and interesting topic that will help you accelerate your progress by tenfold. And the topic is how to learn investing by herself quickly and three mistakes to avoid. I think a lot of people focus on finding, you know, a good strategy, finding good ideas, finding stocks to invest in, but they never really focus on how to learn investing quickly. And what are some of the mistakes to avoid? So this will be a particularly interesting video if you have figured out that the key barrier between you and successful investing is simply knowledge. If you have the right knowledge, then you will get there relatively quickly. If you lack knowledge, lack strategy, then it will take you a little bit more time. So with that being said, let's get started. So the first thing is that I want to celebrate that another success within investing accelerator, Mike from Indiana has sold his ABT holdings and his total return is 69.2% in two months.

So congratulations to Mike. Mike is one of the students that actually made over a hundred percent from a single investment and you can actually watch his review on my website. So congratulations to Mike for making 69.2% from ABT in two months. That is definitely an amazing result. So let's get started. Now. In order for you to learn investing quickly, you need models. Now I'm not talking about this model, you know, gal, God's obviously ideally if that is the model we need that would be amazing. Not talking about this hot guy here, Chris Hemsworth. The models I'm really talking about are mathematical conceptual models. And here is just an image of a Blackboard, you know, back in university of a mathematics class and at this hurts your head, don't worry because today we're going to talk about this one single model, which involves two circles and two triangles.

So we'll go through this model in detail. And after you understand this model, it'll help you learn investing a lot faster. So the world is really made off models. You know, whether you're talking about investing, accounting, gaming, or even learning, there are models to think about these topics. And if you have the right model, then you essentially can hack the system because you can understand the cause and effect. You can see shortcuts and you can basically skip a lot of unnecessary information and detours and get to the answer you want quickly. And that's why knowledge is. So. That's why there's so much emphasis on models. Now I do have a video earlier that talks about model thinker, which is a book I recommend. And it talks about many models relating to data science. So if that's something you're interested in, you can go check that video out.

But if you have the right model, if you have the right mindset, the correct way to think about a certain topic, you can hack the system. Now, if you are a professional, you know, 30, 40, 50 years old, you probably have mastered one area of your life and that is probably your occupation. Whether you're a doctor or you're a nurse, you're an engineer, you're a computer scientist you probably mastered that area. And you have a specific way of thinking, which makes you an expert, which makes you better than the average Joe. So that's why Latinos are so important. And when you have the right model, you will be five times 10 times better than the average investor. Now let's talk about this model. You know, on learning about investing, and I actually think about this a lot and this actually applies to a lot of other areas of your life.

Now in this case, you'll see you are on the left. If you are just starting out on learning investing, you are on the left side of this chart. And right now you don't have any knowledge. You don't have a strategy, you don't know what you're doing. Maybe you just tried out investing yourself and you starting to lose money. Or maybe you're paying a lot of management fees when you're investing with neutral funds. So you're on the left, you're in the beginning of your journey. And there's nothing wrong with that. It's just where you are today. Now you start on this journey to learn investing. And then you mainly learn from a couple of sources. Books, right? Forums, very common. And Google. Those are the three most common methods I see people learn investing. Whether it's reading a book like intelligent investor by Benjamin Graham or you're reading a book from Warren Buffett's and how he invests maybe has been an RFE and so on.

And you might go visit a forum, like a stock investing forum, a Facebook group and so on to see what other people are doing. Maybe you can follow them as well. You might also learn through a newsletter. Maybe you pay for a signal service. And if you are looking at the universe of investing, there is a lot of information. And if you go to Amazon and you search the word investing, there's over 200,000 books. So as you can see right now, as you start on your journey to master investing, you are really trying to boil down the ocean. You're trying to boil down the ocean. So then you find the treasure you're looking for. And that's really the second the idea phase. And this is the blue triangle you see here where you start off with no idea and as you learn and you learn and you learn, you accumulate a lot of ideas.

Okay, and that's why this triangle is expanding as you look from left to right. Now the third part is really testing. You figure out what works and doesn't work. You need to test, compare different ideas, compare different strategies in order to figure out what works and what doesn't work. Now when it comes to investing, I can guarantee you whatever strategy you found on the internet, if you try to search the opposite of that, you will find someone posting, blogging or talking about the opposite strategy. Now, for example, let's say you focus on trend trading. You know trend trading means you follow the trend, you follow the markets and you generally think that it goes up. If you search the opposite of that strategy, you're going to find a doomsday strategy where someone is always trying to sell at a high. Someone is always trying to sell stocks that are, that have too much hype, that are unrealistic.

For example, Tesla going up to a thousand dollars for the first time is a great example where people are trying to short it and they thought it was ridiculous that Tesla is at a thousand dollars. Now. And another opposite when you're looking at trend trading is range trading. So some people, instead of longterm investing, do you like to focus on day trading and just trying to capture a very small game consistently in order to make a living? Some people will try to capture a really large gain, like 400% 500% a thousand percent return from a single investment. So when you're looking at the investing world, there's a lot of information. There's a lot of strategies. And if you look at the, if you can look at the world like it is a map, you'll see that there's almost a strategy for every single combination. You know, if you want to be very risky, there's a strategy for that.

If you want to be very conservative, there's a strategy for that. If you want to trade penny stocks, there's a strategy for data. So as you are embarking on this journey, you will be information overload. And that's really one of the problem of the first part. As you accumulate more ideas over time, you also accumulate a lot of useless idea and that's why you have information overload. And when I first started out on investing, I actually had the same problem I was looking at day trading, swing trading, short term trading, trend trading, range trading all at the same time. So there are a lot of conflicting ideas and philosophy and I feel like I'm just like a blind man, you know, trying to touch an elephant, trying to understand parts of the elephant at a time, not really getting the full picture that that's why you need testing.

And once you figure out what works, you'll eventually find a truth. And that is really the goal of your investing journey is to find what really works, which is essentially the truth. And once you found the truth, then you naturally start making money. And this is really the destination you want to be at. Because once you figure out how to invest, once you're making a consistent return, there's no need to go further. Now from time to time you might want to revise your strategy slightly, but from my experience for the last four and a half years, once I finalize my strategy, I didn't really change it that much because once something works it will work for years and years to come.

So how does this apply to learning? Investing? I already try to give you a couple of example is trying to make it as easy to understand as possible, but how does it apply to learning, investing. Now let's talk about the three mistakes that you need to avoid when it comes to learning about investing. The first one is that you expect to have results before reaching the truth. I talked to a lot of people on the internet, you know, on how they want to learn investing. I talked to a lot of my subscribers and one of the recurring themes is really Eric, I want to get some small results first before learning the whole approach. Now that is actually quite interesting because the first question is, Ashley, can you even get some results before you mastered entire investing strategy?

And I would say it's actually pretty difficult because if you are not at the truth stage, which is the final stage, which is a complete investing strategy, you are still at the idea and testing phase. That means you still have some basically crappy ideas that don't work that is in your mind and you're still testing something else because you're not sure what are all the ideas you got works. So you should only expect results once you have a complete investing approach. Now, for example, when I look at my own investing approach, I have various components. I have a component where I find a discount at stock. I have a component where I become very, very confident in my investing strategy. I have a component where I use options to multiply my profits. So these are the three main components. There's obviously a lot more details and dots, but if I only have part of this strategy, imagine if I just have two out of three components so I can get really confident and I can use options to multiply by return, but I cannot find a stock at a discount.

Then you can envision how much does strategy's worst off because I'll be buying stocks that are not on a discount, but imagine I can buy a stock on a discount but I can't get confidence on it. Again, my return will suffer because it's missing a component and over the last eight to 10 years I realized that whenever I remove a critical component within my strategy, the strategy wouldn't work as well. Is a lot less effective if you just have a part of the strategy instead of the whole thing. Now this brings, you know, a giant problem because you don't know of your rights and unless you do a ton of research, you don't know how all the components are supposed to work together. And that is really one of the problems when you're learning through a forum post or just a Google search, when you're reading a blog posts, whoever that person is is probably giving you half of that strategy, a portion of dash strategy or maybe that person just didn't consider all the components and you don't know what you don't know and which is why the strategy have, if you are not making a profit, it is probably incomplete.

So you're probably missing some component that is critical to your success. So for example, you might be able to find stocks that are on a discount. You might be able to do some research over it. So then you get reasonably comfortable, but you don't know how to multiply your profits. And from my experience, if you just missed a third part alone, you basically cut your profits in half. So here is the first mindset change. You should only expect to results once you have a complete investing approach. And based on my experience, there's really no way around that. And it comes down to a very important lesson, which is you need to invest in your education before you see results. And if you're not willing to invest in your education, then you just wouldn't see results at all. Now mistake number two is that you skip the testing phase completely.

Now, why would this happen? And this really happens because when you get more ideas, when you read a book, when you go to a blog post, it gives you a lot of hope. It gives you a lot of ideas, it gives you a lot of new things to try. And when people learn, they get excited and that is a totally normal phenomenon. But the problem is when you learn something that is not necessarily true, when you learn something that is partially complete, which goes back to the 0.1 here, you encountered a problem of not getting the results you want because you never tested the idea. You didn't test whether the idea works with the other ideas you have and you didn't know where you, whether you have a full investing approach or not. So that's why you can not skip the testing phase. And I got to say out of all the phases where when you start learning investing, that's probably very exciting.

You read books, you learn about investing, you probably get a lot of information. So a lot of ideas. So that's very exciting. The testing phase, it's the most boring, most routine, most grunt work aspect of this journey. So that's why a lot of people will skip it. That's why a lot of people will just overlook it and just go straight to using their real money on investing. And a lot of people will just get an idea, maybe they read a blog post about it and it was start using real money on that right away. And I know because I was one of these people. So it totally makes sense because I was really excited whenever I get a new investing strategy and I would just use real money right away and I will lose it because obviously I didn't really test it.

And the only time I'd test it was with real money. So I lost a lot of money that way back when I was a day trader. So don't skip this phase. Now the solution is really you need to test and at least air minimum find evidence on these random ideas you come across on the internet. Because whenever someone posts an investing strategy, which is very common on a forum, there's really no results. Like they don't tell you what is the return you should expect. They don't tell you when does the strategy break. They don't tell you when, what you should do when there's a market crash. So when you come across these random ideas, even if you find them on a book you need to test them. And it's very simple because if you just take a step back and you think about it, let's say you read two books, one book from Warren Buffett's, which you know, he's a longterm investor, he focuses on buying undervalued stocks.

Okay? So he's going to look at a set of indicators that is different than a day trader. Now imagine you pick up a second book called 50 strategies for a day trader. So what are the ideas you learn here will not necessarily work with the lessons you learn in Warren Buffett's. Now is there a truth to both strategy? The answer is yes, but you need to figure out what works and what doesn't. And that's what's really important. And I would say testing phase is probably the part where most people fail. And I'll talk a little bit more about my testing phase and give you another tip on that in a bit. But essentially this is the phase that most people skip and which is why a lot of people fail when it comes to investing because to never get to test.

Now the third mistake is really about testing. You are testing using real money, which is the mistake I made earlier and real time. Now what does that really mean? Real time is when you're testing in the stock market, you are paper trading, which means do you buy a stock today and then you continue to attract a stock for two, three months and then you exit on paper. So imagine you're trying out an idea. You know, let's say I'm using a NACD, a crossover as an idea. Today I would pay portrayed on buying Disney NACD crossover at $50. Now I need to watch the markets maybe for two or three months and then I will say I'll exit at this price and that is one trade. In order for you to test successfully, you need at least 30 to get a good enough sample size. So then you can have some sort of statistical confidence to say that you are profitable or not.

If you are testing your strategy with just one stock that's not really testing dust, that's just a lack of a draw. Now you will notice if you are in real time, if you are serious about longterm investing, testing real time is not realistic. And there's no way you can just do that for a long period of time because by the time you finished testing it would be 10 years later for your strategy to be very effective. So that is very inefficient. So don't do that. And that's why when it comes to testing, I do not recommend using paper trading at all or using real money because you're using real time. And let's say you're just kind of swinging. Trading where you trade for three months at any exits, wishes a lot shorter timeframe than most people. And you are really waiting for three months for one trade to play out.

And during this three month period, you might get a new idea, you might read a new book, you might come across a new forum post, and that will derail you from your original strategy. So by the time you finish your three month testing for your first stock, you have got a new ideas. You're back to the blue area. You're, you're, you're testing new ideas, you're changing your investing strategy without knowing your previous strategy works or not. So as you can see, that is pretty problematic and that is one of the traps that most people fall into. So the solution, you need to use some sort of stimulation software. It's actually an incorrect word is actually simulation and back-testing to this approve ideas. Now you'll notice that I use the word disapprove and a reason is because when you are back testing, right, there's a lot of back testing out there.

A lot of people claiming that. So you can have a hundred percent success rate or whatnot or you can make millions of dollars and so on. You need to back test that idea and but that test doesn't, it works when you are actually trading. So if you back test an idea at a fails you can pretty much be sure that is not going to work in a real life scenario. So that's why you're using back testing to disapprove idea. Now when you're using simulation, what you're really looking for is to use at least 10 years of data across multiple industries when it is testing. Because if you're just using three months, six months, a year to back test, it's not really a long enough period for you to really know what are your strategy works or not. For example, right now we're in the middle of the Corona virus market crash and, and it happens once every 12 years. Last time there was a financial market crash, it was in 2008 so you can imagine there are certain offense in the markets that happens once every 10 years or so. So if you're not back testing a long enough period, then you're not really covering enough basis. So it might mean your strategy's not effective over the long term.


So the key question, I guess this is a bonus tip is how many investing strategies should you test and disprove before you can reach the truth? Now this is purely based on my personal experience and I know that's, it can be different for people. Like, if you reach a mentor, then if this can shorten your curve by quite a bit, and the more you test, the more you learn the higher success rate. I think that is very simple lesson. And from my experience, I tested around 300 strategies. So that means I went online and S out 300 strategies from books, from forums, from Google search to test to figure out what works and what does it. And when you test so many strategies, you will reach the right side, which is true. And when you reach the truth you will be in a lot more comfortable position, you will be much more confident when it comes to investing and your profits will be way higher.

So that's why you need to test your strategies because at the end of the day and idea is nothing unless you actually test it. So 300 is really the number you're looking for. If you test it 300 strategies and it still didn't work for you I would be a little bit surprised to be honest. So given that you notice number, you can probably do it within 150. If you watch some of the videos I have on YouTube, you can probably do it within a hundred or less, hopefully a hundred or less because that will save you some time. So imagine if you are using one day to test one strategy, which usually it takes less than that. Then within 100 days I think you should be able to master investing or at least get reasonably comfortable using historical data. Now when it comes to testing, using simulation I learned how to program to test strategies because in order to go over 10 years of data consistently using the same approach at first I was manually testing, but then later on I just learned programming. So they actually just test using code. So for me to test the strategy, I would say it takes me around an hour once I have all the software and code set up an hour to test one strategy. So a hundred strategies, I would say around a hundred hours. For myself, I tested of, of obviously all way over a hundred strategies. I tested 300 plus. So you can imagine a time I've put in to a master investing.

So in total it took me around eight years. And a reason is really because when I started to learn about investing, I wasn't testing at all. I actually just went from the idea to use it real buddy to invest stage. So I made that mistake. So that's why I know and it costs me a lot of money. I think I spent around 10 to 40,000, I don't remember the exact amounts on testing ideas using real money. And then later on I invested in a software where, where it helped me test faster and a longer period of time. And that's really when I experienced the most growth in my investing career. So eight years is how long it took me. And now you notice information. Now, you know, the three key mistakes, I think you can definitely cut this town tied down by lots if you are learning, investing by yourself.

So I would say if you are just, you know, an average person without a financial background, then give yourself four years, I think that is pretty reasonable to master investing, especially when it comes to longterm investing. And if you, if you are more eager, if you're more passionate, chances are you can do it between one to two years and obviously that requires a lot of hours. After you get off work, after you take care of your family to test strategies because obviously you're going down the path of trial and error, you're going down a path of learning, investing by herself. And it is an honorable, honest path because I went down that path by myself. So I totally understand and there is a special sense of accomplishment when it comes to finally figuring it out. So I guess if the question is, is there lights at the end of the tunnel, you know, if you haven't figured out investing yet, I will say there's definitely light at the end of the tunnel because right now I'm on the right side.

So I can tell you there is a way to get there. Now the question is, is it easy to get there? No, it's not. So that's pretty straightforward, fairly simple answer. It's not easy. And that's why so many people struggle with investing. That's why so many people lose money when it comes to investing because you're dealing with a lot of forces. When you are investing in the market, obviously you don't control the market. And there are a lot of players, a lot of smart people when it comes to investing in a market. So you do need to spend some time. So then you figured this out, but once you figure it out, you will reap benefits from your portfolio for years to come and that will really change your life. Yeah, so you can trust me on that one. So as we are wrapping up this video, I just want to give you some food for thought.

You know, some pointers for you to go ahead and make a change for yourself and how you can speed up your learning as well. So the first question is really do you have a software which will help you test a strategy using 10 years of data? Now if you say yes, that is fantastic. If you say no, then you should probably find this software that allows you to do that. Now for myself, when I was testing, I used a software called F X tester. So you can get that as well as around two, $300 depending on which package you got. It's a onetime fee and there is a little bit of coding involved, but it's not too complicated. So if you are an engineer or you're comfortable with coding, then it should be relatively simple. The second question is, when you are testing, does your strategy work in different industries?

I came across strategies where it worked extremely well within a specific industry, but the moment I switched it to another industry, it would fail completely so that I had to disregard that strategy. How much time can you dedicate to testing investing strategy? Now, when I was testing, I tested obviously for multiple years. I was spending a couple of hours every single night doing it for at least two, three years and I was getting pretty frustrated because obviously I went through a lot of strategies and a lot of them don't work. And you will be surprised when you go on the internet to find a lot of strategies actually don't make money over time. So how much time can you dedicate because this is going to be a bit of a commitment when it comes to learning by yourself. So I just want to mentally prepare you for that.

What are the common elements that you should test first? So obviously I might cover that in a future video. But testing is a very in depth topic. Now the next one is cost and benefits. You know, if you are able to make 10% return from investing, what would that mean to you? Maybe right now you don't have enough capital so it doesn't even make sense to invest at all. Because if you make 10% it's like a hundred dollars for you, then it's probably not worth it. If you make 10% is like $30,000 for you, then it's fantastic. So it's all about cost and benefits and how much time you should dedicate to it versus how much you make per hour. And the last question is, if you are able to 30% return from investing, what would that mean to you? So based on my investing career so far, the highest reasonable return you can get when it comes to investing is around 30% when you look at S and P 500 is around 7%.

So if you are getting 7% right now and you're investing by yourself, then you might as well just put it in mutual fund because that's what they can get for you anyways without all the hassle. So my mission is really to help people without a financial background to target 30% a year from the market, using an hour a week through a coaching program, investing accelerator, and also made this YouTube channel. So then I can share some free contents, some investing tips with you as you progress through your investing journey. So if you like this video, please click like subscribe and you will see the next one ad for some of the food for Fox questions I gave you earlier, I might cover that in a future video. If there's a specific question you want me to cover for you, then yeah, make sure you leave it in the comment below and I'll consider it.

Now if you want to speed up your learning, if you want to master investing as soon as possible because you're trying to retire faster or you're trying to travel more, then you probably want to attend the free webinar in this link, which is five minute investing.com/free case study. So the webinars call how to get 30% for the markets and I outline my investing strategy and I give you a ton of tips within this webinar. Now this webinar is not a short one. There's not like a 20 minute webinar or whatnot. This is a three hour webinar East. This is an absolute BS and every single person who went through the entire webinar is always very impressed by the content I put within it. So if you have a Sunday morning, a Saturday morning watching this video, then you can grab a cup of coffee, get a notebook and go through this webinar because it will make, it will save you years of researching and doing all this crap by herself.

And this will put you ahead a lot of other investor just by watching this three hour webinar alone. So again, this is a three hour webinar. This is not like a 30 minute thing. So make sure you go to washroom before that is like watching a movie. Okay? So make sure you take notes as well because that's really going to help you out. And based on what I observed today, one of my most successful students, he is a fantastic note taker. And whenever I go to meetings myself, I always take notes. So make sure when you attend this webinar you take notes. So once you attend a webinar and if you decide to join the full program, which is investing a celebrator, then you can schedule a call with me to see if you're a good fit. So hop on a call for 45 minutes and I'll understand your current situation. I'll ask about your investing strategy, your portfolio, and so on to see if you're a good fit for the program because investing is not for everyone and I'll personally talk to you for 45 minutes so we can click on the link below, which is five minute investing.com/book a strategy session as well. And that is pretty much it for this video. Thank you very much for watching and I'll see you in the next one.

So thank you for watching and I hope you enjoy the video. Please help support me by like subscribe and you can watch the next recommended video here as well. So I'll see you next one.

About the author 

Eric Seto

Investor, CPA (Canada) based in Hong Kong and Vancouver

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