Posted: 24 Sep 2008 08:50 PM CDT
A Young man and his CFA notes
I was sitting in the MRT in my daily commute and noticed a young chap reading Chartered Financial Analyst (CFA) notes relating to fixed income and equities. In my years looking at what people are reading, I realise there are many people in Singapore who spend time, money and energy pursuing professional certifications as well as academic qualifications. This is usually after obtaining their basic qualifications to secure a job or career.
As an accounting professional, I realise the importance of keeping up with your profession and standards as well as life-long learning. But I also realise the limitation of what you study vs. what you want to learn. Increasingly, in my explorations along my journey towards financial freedom, I’ve noticed that there is NO ONE TRUE PATH towards you goals in life i.e. financial freedom or to be successful in whatever you do. Indeed, successful investing and personal finance lies in not doing the crowd does, but doing something that is fundamentally common-sense which works in the long-term.
Undergoing a structured learning course such as taking the CFA exams certainly helps you understand investments and finance better but it costs money and effort. I’ve realised that you can be fairly effective in managing your investments if you have a decent amount of common sense, am able to understand your own emotions of greed and fear and have a realistic view of how equity and security markets work.
The main quality required for being able to manage your own money is patience and an ability to live within your means. With these two, coupled with a clear head and a plan, you can grow your money and safeguard yourself from the more common pitfalls of investing.
Lessons from the Financial Crisis in Global Credit Markets
The lesson I learnt from the current financial crisis is that even battalions of MBAs, CFAs and PhDs in finance and investing were not able to steer the investment banks out of this whole mess of investing more than they were worth. With the subprime fallout and US housing slump affecting the value of the mortgage securities, the entire market ground to a virtual standstill because there were no willing and able buyers and sellers who were able to transact at “fair” market prices. What were once tradeable mortgage backed securities ended up as “toxic” and are virtually untradeable without US Treasury and Federal Reserve intervention.
If the experts can get it so wrong, there is some chance for us relative layman to avoid some of the mistakes of the investment banks such as Lehman Brothers and even for insurance giant AIG.
Having a CFA is useful as it provides a structured learning process based on a syllabus and an examination to test one’s understanding and knowledge. In terms of whether it can guarantee that you will make successful investment gains all the time, I seriously doubt it because really, no one can predict and beat the market all the time.
I wish the young man sitting next to me well in his quest for CFA and hope his expectations of what he gets out of the program can be met.
Be well and prosper.