End of month wrap up
The market in in a sideways, albeit recovery like phase, as the panic and volatility subsides. We have a handful of new cases of the virus and most states except VIC and NSW are not reporting new cases.
5 strategies that doubled our money in 2 months on the ASX share market in the COVID-19 crash
$45k now worth over $100k
Fahd and I put a big chunk of our savings, about $45,000 AUD, into the share market in March and April. Today it’s doubled and is still growing! I share what we did and exactly how the last 2 and half months unfolded.
The ongoing financial crisis had markets hit bottom on the 23rd March 2020, and is proving to be worse than the global financial crisis in 2008 and perhaps even the 1920s great depression. These crashes are a once-or-twice in a lifetime opportunity to multiply wealth.
How it all started
Fahd and I met as kids 25 years ago in the Middle East. Our fathers worked together in an Islamic bank. We reconnected again in Australia while studying and found common interests in cricket and Islamic investing. Fahd had followed his dad by becoming a savvy investment analyst. I kept investing on the side, as my father had taught me, but forged a successful career in IT.
Our passion for ethical investing, often had us answering questions to help friends and family get similar results. This led us to launch Tabarruk, where anyone can learn how to grow wealth. We focus on buying sharia-compliant shares in Australian companies listed on the ASX share market.
The COVID-19 crash
Fahd had sold his entire portfolio of shares in January 2020 for a good profit, partly because he felt the market was overvalued and partly out of instinct that something didn’t feel right. I had my money tied up elsewhere and was waiting to get back into the share market.
When COVID-19 started, fear crept into the economy and panic selling ensued on global share markets including the ASX. Fahd and I were calm and objective, applying everything we had learnt over the years. Most of our purchases ended up being on the 23rd of March, the absolute bottom so far. We didn’t predict it. We were simply prepared for the market to go up or down, and had a clear strategy to execute in either scenario.
The 5 strategies we used during the crash
The infographic below shows the Australian sharemarket weighted index chart, pinpoints when we bought shares using our 5 key strategies for investing:
Our key strategy as shown above is the following 5 points:
- Buying quality, long term, ethical company shares
- Buying the same company shares if they dropped in price
- In-depth analysis of company fundamentals and financial reports
- Tracking macro-economic indicators like unemployment etc.
- Studying the market sentiment
Our home page has a summarised table showing the totals of our folio live. Members can see the entire folio live with each company stock with our analysis, purchase dates and prices.
The proof for those who need to see it
We’ve had people ask for screenshots. We’re happy to share, as we’re all about transparency. On request, we can also provide CHESS / HIN statements.
Here is my online broker screenshot as of 23rd May 2020.
And here is Fahd’s screenshot from his broker account as of 23rd May 2020.
Whats next? Is it too late? Absolutely Not!
The next 3-6 month period is an even more important phase of this crash. It’s a rare opportunity to invest in the best ethical companies in the right sectors on the ASX.
The 5 key strategies we used above continue to apply. Some additional criteria may be needed, depending on the change in circumstances or the specific companies we analyse.
Of course, you would have to get set up by knowing where and how you can start buying shares in Australia on the ASX sharemarket. With our referral link, you can get your first 5 share trades for free.
On tabarr.uk, subscribers can access:
- Tabarruk’s folio live
- Updates with every purchase
- In-depth analysis of companies
- Step by step guides
- Articles (though most are free)
Anyone can learn to do what we did. We started with as little as $500 when we began investing, and you can too!
How? Plan long term and apply our key and advanced strategies. Learn from our articles and updates as we share our ASX stock purchases.
How & where do I start buying shares in Australia on the ASX sharemarket?
To buy shares, you need to use an online broker. Most banks have an online broker product. We compare the most used products and list some information about each of them below.
SelfWealth
✅ #2 cheapest fee per trade at $9.50
✅ 1-2 day wait for transfers into and out of SelfWealth
✅ Live chat support
❌ Australian markets only
❌ Limited functionality in mobile app
If you choose SelfWealth as your broker, join using our referral button below and you save $50 by getting 5 trades for free. If you refer friends and family, everyone gets another 5 trades for free.
CommSec
✅ Detailed market data and interviews
✅ Basic research reports
✅ Decent mobile app
❌ Limited global markets
❌ Customer care phone support
ANZ Share Investing / St. George Direct Shares
✅ Same underlying platform and system branded for both banks
✅ Advanced Research and charting tools
✅ Customer care phone support and Live Chat
❌ Additional cost for live price data (Not a problem if you’re happy to hit refresh)
❌ Clunky mobile app
NABTrade
✅ Free live price data
✅ Advanced Research and Charting tools
✅ All international markets
✅ Customer care phone support
❌ Clunky mobile app
IG Trading
❌ #1 cheapest fee per trade at $6 (but be aware)
❌ Minimal deposit required
❌ Technically you don’t own the shares as they are not CHESS sponsored, you are the beneficiaries of the shares.
❌ Because of the above, you can’t take part in dividend reinvestment plans
What do we use?
We use what’s easiest, which for us was the online broker linked to the bank we were already with, with the advantage of instant transfers in and out of the broker account.
Fahd uses NABTrade.
Moin uses SelfWealth and St. George’s DirectShares.
If your bank doesn’t have an online broker platform, you can choose any of the above options. You’ll need to transfer money from your bank account into the your broker account.
5 online brokers compared
The secret to buying at the bottom
Let’s compare two scenarios from recent research, done over the same timeline that demonstrates the real secret behind getting as close to possible in buying at the bottom and in effect, timing the market.
The results from the outcomes of both scenarios are quite interesting.
Why we don’t depend on Charts & Indicators
Let’s talk about TA. Technical Analysis, the world of pretty charts, graphs, and indicators. I break down why we don’t depend on them, and where they’re actually relevant.
Our journey into investment started as people who did a lot of technical analysis while buying stocks. I used to develop strategies with alerts set that triggered when technical indicators reached certain levels.
Over time we realised that technical indicators started losing their relevance in the current market settings. This is because these indicators were created when the market was a completely different machine, it came about in a time when trading was a retail business and trading was done on the floor.
Trading on the floor is a thing of the past
Suits with phones yelling across a floor, looking at screens with tickers and numbers are almost non-existent now, which is why our focus at tabarruk is on the companies themselves, analysing the fundamentals and the prices they trade at. Today, of the total volume of stocks being traded on the market, less than 15% of the volume comes from active fund managers and the rest comes from passive managers. The indicators lose their relevance due to fewer people actively trading to creating the effects of the indicator.
The other reason for not being overly reliant on technical indicators is that we live in an age, where things are automated. A lot of algorithms are created, even bots to trade the market, and this changes the whole landscape of the share market as it’s impossible to make a bot understand human language and emotions to describe something even we do not understand or comprehend.
A big driver in markets is sentiment. We’re yet to see bots or algorithms that can factor in sentiment correctly. We know of situations when an algorithm has reacted to a tweet or social media post, or a news bulletin and bough up stocks or sold them off and till today we still don’t actually know why.
My first mentor made it a point to drill technical analysis into my head and I learnt it well. But over time, what makes more sense to us is to watch for trends and realise that there is no way we can trade faster than a machine. This is why we do not call ourselves day trader, we don’t want to trade and we don’t want anything to do with short term trading.
Weekly & Monthly over Daily & Hourly
We spend more time looking at weekly and monthly charts than daily and hourly ones. Especially monthly charts because it gives us some powerful trend signals. What we’re trying to highlight here is that even though we don’t depend on technical analysis, it doesn’t mean we ignore the charts. This is because a picture paints a 1000 words, sometimes visuals clear up something better than a report. There are occasions when Moin likes to look at the interesting trends within a day to pinpoint an entry.
We often get asked if we are fundamental or technical investors. We’re neither. These were terms that were created for a market that existed in a different time. We use every resource and tool to help make a decisions in a time when hyperconnected-ness and events cause reactions in seconds.
Stock analysis is like a Biryani and there are so many different types of Biryani. There is Lucknowi, Kolkata biryani, Hyderabadi biryani and Srilankan Biriyani. Why would I limit myself to only one type of Biryani, it makes no sense.
April Folio Update – Week 4
End of month wrap up
We share our analysis of what the market has done and will do next. Both of us also list every stock we purchased at the end of April and why.
3 habits that cost me until I changed them
I started investing seriously when I was 21. Even though I had some success, I kept making the same costly mistakes.
Forced to reflect
This made me reflect and come to a bitter conclusion that the success I experienced wasn’t mine to in the first place. It was because I followed my father’s advice. The disasters though, which taught me harsh lessons, were due to my hubris and bad habits.
I had the luxury of being someone who could make these costly mistakes and fall back in the safety net of a family that was supporting me through my university life, paying my fees and boarding. However, this was coming to an end and after a frank conversation with my Dad, who basically told me to pull my head in and that I had to change my habits.
We’re all creatures of habits and routines. Once set in our ways, we build a wall around our comfort zone and like staying within it to keep doing things the same old way. Initially unaware of my family paying the cost of the losses due to my bad habits, then being told to wake up by my father and being forced to look in the mirror was a very unpleasant experience.
I now realize the truth in the maxim that the catalyst any growth is one of two well-trodden paths. The first is change and the second is discomfort.
So what were the 3 habits that were holding me back and how did I get rid of them? Read on…
3 steps to start investing
This is a topic that I wish was taught in schools, primary schools even. Like a lot of things, the earlier you start investing the better. I strongly suggest researching the benefits of compounding interest. This is where your money grows exponentially over time, due to time the money spends in the investment, not ‘interest’ interest as that’s something we want to avoid.
In this article, I am going to break down the 3 steps anyone can, but especially the young ones can use to start investing. I also share my story of how I learned to be a successful investor by breaking it down into 3 steps.
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Step 1 – Learn, learn, learn
This may be a no brainer but you will be surprised how I had ZERO idea of how investing was done.
When I decided to make my money work for me, I was lucky I had my father, who mentored me and took the time to teach me the value of money and the rules of investment. It also helped that he was the Vice President of Treasury in Abu Dhabi Islamic Bank and the people I got to mingle with and ask questions to people who knew a lot about investing.
Step 2 – Pay off debts
The main rule my father imposed on me was that before starting to invest, you have to pay off your debts. There is no point investing if you have outstanding debts. This is because the way our current financial system is set up is to benefit the lender.
The longer you take to pay off a debt, the larger it grows. Interest makes the debt grow exponentially. Compound interest when used incorrectly, will work against you. Before you think of buying anything on the stock market, put that money towards your credit cards, personal loans or whatever form of debt you may have. They will hold you back long term.
Step 3 – Set aside a percentage
Next, think about your future and dedicate a percentage of your paycheque towards that. Rain or shine, you must automatically transfer 10-20% of your pay to this bucket. A separate account works best. This is where you will get the money to start your investing journey. No one becomes a millionaire overnight but every millionaire started with ZERO. Start your ZERO today.
In order to do this properly and decide how much you’re going to pay yourself, you need a budget. What this does is force you into limiting your spending. Sticking to a budget will help you get disciplined and decide how much you have that you can pay yourself with.
The more you pay yourself starting young, by giving up on the glitz and the glam, the better. I’m not suggesting avoid living altogether, rather make it work within your budget and not the other way around.
Your budget sets you up for success because the money you’re putting away can turn into hundreds of thousands of dollars. This is because your money can have the opportunity to work its compound magic over 20 to 30 years.
Bonus step – Write out a specific financial goal
Last but not the least, set yourself very specific financial goals.
Like, how much money you want to have invested by your 30s or 40s.
This will help you understand how much money you have to invest each year. Which in turn leads you to understand how much you have to invest each month. Which then helps you understand how much you need to pay yourself from each pay cheque and decides your budget.
Why saving money actually costs you over time
Saving money costs you? How is that even possible you ask? Read on with an open mind to find out.
Saving money is important, but there is a difference between an emergency fund and saving money because we fear losing it.
Two rules someone who knew a little about investing said;
Rule 1: Do not lose money
Mr. W. Buffet
Rule 2: Do not forget Rule 1
Paying yourself
If you’re an individual with a lot of savings, I have a lot of respect for you. That’s because you’ve understood the importance of paying yourself. A lot of people forget that when you get a payslip, it’s a reflection of your organisation paying you for your time.
From that payslip, how much do you pay yourself for your time and effort?
Regardless of what you’re earning, I think you should always set yourself a minimum of 10% from your pay to be put away as savings. This needs to be applied immediately if you want your financial vision to line up with reality.
Saving money is a very responsible thing to do, if you start this habit at a young age you generally end up in a good place financially. However, what will actually set you up for success is what you do with your savings! What you do with it decides how you live your life in the future. Whether you scrape by or live comfortably.
The invisible enemy
If the bulk of your money is going into a savings account, where you’re accumulating your cash, you’re actually losing an enormous sum of money in the long run. The reason you’re losing money is due to the invisible enemy.
No, not COVID-19 but the other deadly killer known as inflation. What is inflation? Put simply, inflation is the increase in prices of things and decrease in what your money can actually buy you. Ever heard your grandparents say how much bread, milk and eggs cost them in the past, and how ridiculous prices are today? Yup, that’s the invisible enemy.
Eggs as an analogy
Let’s compare $10 in the ’70s and $10 today in Melbourne. Let’s compare the purchasing power of a $10 note by looking at buying a dozen eggs.
In the ’70s a carton of 12 eggs cost $0.59 cents. $10 would buy you 16 cartons and you’d still have some change in hand.
Today, if you walked into Coles or Woolies, the same $10 will only buy you 2 cartons because a carton costs $4.70. That’s eggspensive!
This shows how the purchasing power of $10 reduced from 16 cartons to 2 cartons over the decades. This trend will continue into the future and we will be telling our grandkids how making eggs for breakfast today costs a fortune.
If that’s what inflation does to your eggs, imagine what it does to your savings.
Inflation & Interest
The annual rate of inflation is 3% per year. Therefore, it is shocking to see the average rate of interest for a typical savings account in Australia was only around 0.75% at the time of writing. This is more than three times less than the rate of inflation.
Effectively, we are faced with a unique situation where our savings, our hard-earned dollars, are losing their purchasing power and weakening as inflation eats away at it over time. As Muslims, this is amplified because we wouldn’t put money into interest-earning accounts!
You can probably wrap your head around the concept now. When you save money, over time it decreases in value and purchasing power. Wouldn’t you rather it work for you and increase in value? Despite knowing this as a concept, people continue to invest the traditional, interest-earning, safe-in-their eyes, way.
The fear of losing money
An important question to ask is, why do people rely on savings even if they know it to be an ineffective way to grow wealth?
The root cause is fear. People are afraid of losing money.
If you really think about it, not investing your money because you’re afraid of losing it is the same as saving your cash and losing its purchasing power due to inflation.
If you think you’re avoiding risk by saving your money, you will lose in the long run. I repeat, the lost opportunity that comes with saving money is the same as the money lost due to inflation. You are missing out on putting your money to work for you, by investing and growing your wealth.
What do you think the banks are doing with your savings anyway? They are investing it and saving the profit for themselves. The banking and lending industry did not become the behemoths they are today by equalising the playing field or helping the common person. They lend you peanuts and charge you an arm and a leg when they take it back.
Money invested makes money grow
Ever heard the phrase ‘You need money to make money’?
Let me expand that a little further; you need to spend money to make money.
If you use money to buy something, then sell that something for a profit, congrats, you just ‘made’ money make more money. Better than money sitting somewhere, not working, and deteriorating due to inflation.
This is the BIGGEST reason why investing in the stock market, regardless of its ups and downs, for the long term, gives you one of the best opportunities to grow your wealth.
Investing in the stock market, the Tabarruk way, helps your money make more money and benefit from the power of compounding.
Hopefully, you now agree with me, that saving money actually costs you.
How do you start saving and investing? Head over to our article, 3 steps to start investing? Generally speaking, I think people should focus on having a 3-6 months emergency fund in savings, and once you have put aside that, then enter the world of investing.
I’ll leave you with another quote from someone I should’ve listened to more often.
Before investing, learn how to save. If you don’t know how to save money you can’t learn how to invest it. Both these disciplines require discipline.
My dear father