Start investing – profit from knowledge

By Ravi Abeysuriya, CFA, MBA, FCMA, CGMA

All of us are eager to increase our wealth but do not know how to go about doing it. Some have entrusted their money to others with the hope that their investments will generate good returns on their behalf. A few have invested in the stock market directly, made some money during the period 2009 to 2010 but lost most of it now. It is no brainer that investing requires awareness and through understanding of the capital market to generate returns. This is where the book ‘Start Investing – Profit with Knowledge’ authored by Tushara Jayaratne truly helps.

For the majority of readers, there are hardly any good books written in Sinhala language to gain broad knowledge on investing. Many are petrified of the financial world, with its jargon, calculations and complicated theories. However, Tushara breaks new ground by imparting seemingly complex investment knowledge in simple language that anyone, from a small business owner to a homemaker, can relate to and easily understand.

In order for a properly functioning capital market to develop it is imperative to have investors with proper knowledge on investing. This book is a collection of articles originally published in the Lankadeepa newspaper to increase public awareness on investing by the Securities and Exchange Commission (SEC). The overwhelming response received from the readers of the usefulness of the articles has led SEC to publish them as a book. Below are some chapter highlights that I want to share:

The book contrasts saving verses investing and goes on to explain the basic principles of investing. It is well worth mentioning them because they are important. These are: developing a financial plan that meet your life goals, Then you should decide how much investing risk you can afford to take based on your unique circumstances, which will translate into a risk-appropriate asset allocation between stocks, fixed income and alternative investments. The next step is determining the right asset allocation; and diversifying within asset classes.

This book provides specifics on what you should consider before investing in the stock market. That is to “only invest in what you can afford to lose without that loss having an effect on your daily life in the foreseeable future”. The role and functions of Securities and Exchange Commission, Colombo Stock Exchange, Central Depository System, primary and secondary market, and stockbrokers are well explained.

Tushara believes that there can be simple solutions to such a complex subject as investing. In his book, he describes that the best place for the average retail investor who does not have the time to spend to learn all about investing directly in stock market is, to put his or her money in unit trusts. There are several chapters devoted to investing in the capital market through unit trusts.

Most importantly, the book has special focus on pitfalls of investing and common mistakes that investors do. Because psychology of market participants have not changed, will not change and it is human impulses that lead to speculative disasters. The dos and don’ts in the book are very relevant in today’s investing environment. He provides some insightful tips for shopping for a stockbroker who is qualified and will have your best interests at heart, what to keep in mind when dealing with stockbrokers, how to select stocks suitable for you, and so on.

In the final part of the book, Tushara recounts the timeless lessons he has learnt over the years working with CSE and SEC as a director in charge of public relations. He provides invaluable advice on borrowing and investing and speculative trading verses long term investing.

This book caters to first time investors who prefer to get it right the first time around; it is also meant for existing investors who simply want to do it right without losing their money again. Investing is, indeed, hard work and requires a lot of patience and persistence. A lot about investing is learnt by reading and re-reading. By reading this book and putting into practice the learning, your approach to investing will be clearer and you’ll have a better idea of how to invest given the right tools and mindset. After all, good investing depends on inculcating good habits and adopting a sound process.

As I have said earlier, this is a solid investment book that every serious investor must have. The principles it teaches are based on common sense and will stand the test of time, bull markets or not. So do yourself a favour and read this book. I’ve already recommended this book to numerous clients and friends, and I’m strongly recommending it to you, too, so that you can benefit from being a knowledgeable investor.