Opening up our minds to the possibilities of financial freedom

In my journey towards financial freedom, I realise that my reality is starting to be stretched day by day, little by little as I focus my mind on the possibilities of achieving financial freedom.

At the beginning of this journey towards financial freedom
Before I embarked on this journey during the last 5 years or so, I was a typical salary worker. Just work hard, save money and hope for the best. As I started to open my ears and eyes to the changing world around me, it dawned that this tried and tested formula gives one a stable life but very little chance of becoming financially free. [Financial freedom for me is where I achieve portfolio and passive income exceeding my living expenses.]

To be financially free, I realise that working hard, saving money and living a simple life are still valid steps in climbing the ladder to financial freedom. But you have to save and make smart investments in order to move closer to financial freedom. You must be open to the world of possibilities in achieving financial freedom.

How to tap on this potential world of possibilities?
Have you ever wondered why people like Warren Buffet become as rich as they have? How about Roger Federer or Bill Gates? These people are born with certain innate talents which they have worked hard and honed to a degree that is unmatched by their peers. Warren Buffet is the undisputed king of investing. Roger Federer is the reigning number one ranked mens' tennis player and has just won the US Open tennis tournament. Bill Gates built Microsoft into the technology juggernaut that sees its software in virtually every computer on this planet.

Each of you (and I) are born differently and we have different talents and different skills. But one of the most powerful forces that we can tap on is our innate curiosity about things. That is quite universal in most of us when we were children and it gets suppressed as we grow older and learn to adapt to the "need-to-know" approach to understanding the world around us.

This is what I found about the journey to financial freedom. We must re-ignite this innate curiosity in us and channel it to find out more about different ways to grow our passive income, become more receptive to investment opportunities and learn to develop that financial quotient or financial literacy that we see us navigate safely through the pitfalls of investing while moving us ever closer to our goal of financial freedom.

Get interested and curious today!
I learnt to be interested in stocks and shares after getting burnt by unit trusts that consistently under-performed their benchmarks and yet I had to pay their management fees for mediocre performance. That was the last straw for me and ignited my interest in getting my hands dirty by learning to buy, hold and sell shares in SGX. I was fortunate in that the timing of my entry was during the SARS period around 2003 where the SGX had corrected significantly and it was a good buying opportunity for blue-chip quality shares. On hindsight, if I had put almost all of my investible savings (and more!) into any of the bank shares or other quality blue-chips, I would most likely have doubled if not tripled my money in 5 years!

That is one of the lessons I learnt in investing, you cannot 100% time the market because no-one, not Alan Greenspan, Ben Bernanke not Peter Lynch can predict the market all the time. But these talented individuals are able to see key market trends and developments which help them understand the underlying forces behind financial markets. We can also learn from these luminaries and get interested in what moves the financial markets and the real economy as that impacts on our decisions affecting our career choices, our savings and investment decisions.

My own thinking about financial freedom is that it is achievable in my lifetime way before age 55. I am now rather overweight in equities on SGX mainly because the August correction presented some buying opportunities in blue-chips. In addition, the returns on fixed deposits and treasury bills are still relatively abysmal compared to potential gains in equities. Of course, equities carry with them the risk of complete capital loss of investment amounts and require one to have some knowledge about how they work and the factors that cause their price to go up or down. Investing in equities also requires some understanding of the sentiments and emotions of the market players as the August correction showed that sentiment can overpower economic fundamentals.

The more you learn, the more you earn!
The saying, "The more you learn, the more you earn" rings true even right now! While it was used to refer to our academic qualifications to allow us to get a good job, it also applies for you when you want to achieve financial freedom because you need to learn more about the various asset classes e.g. stocks and shares, fixed income (bonds/treasury bills), time deposits, property, and even derivatives (if you are sophisticated enough to manage the risks) and how you can build your portfolio of assets that generates that income streams that will provide you with sufficient passive income to be financially free.

So remember to hit the library, internet and talk to people about investments, because the more you learn, the more you earn!

Be well and prosper.