A reader left an interesting question after reading my post on Investing Is A Life-Long Learning Journey. His question was "28 years is almost 3 decades, if you can start all over again, what would be your best advice to the past you?" This is by far the most thought-provoking question I have ever received on my blog. I replied with a short answer, but after thinking more thoroughly about it, I decided to post a fuller answer to this question.
There are many investment strategies that work, be it value investing, growth investing, dividend investing, index investing, etc. We have seen many highly successful masters in investing, each adopting a different strategy. In value investing, we have Benjamin Graham and his many disciples, including Warren Buffett. In growth investing, we have Thomas Rowe Price, Jr.. In index investing, we have John Bogle. We also have a number of other equally legendary investors whose investment strategies do not fit nicely into any of the investment strategies mentioned above.
However, although the investment strategies mentioned above work, they do not always work. If value investing works perfectly, there would not be any value-traps. If growth investing works fully, no price is too high to pay for growth stocks. If dividend investing works forever, we would not have the Mini-bonds saga. Yet, the presence of value-traps, overpriced growth stocks, Mini-bonds, etc. do not negate the fact that these time-tested investment strategies work. They just do not work all the time. There is no need to be too dogmatic about an investment strategy and continue to average down as the stock declines, believing that the investment strategy will turn out well at the end. There is a Chinese saying, "成也风云，败也风云", which translates to "the same factors that brought you prosperity could also lead to your downfall". Do not be dragged down by the dogma of sticking to an investment strategy that has worked well. Occasionally, it is important suspend your belief in your "winning" investment strategy and let risk management measures take over. There is another Chinese saying, "留得青山在，不怕没柴烧", which means "live to fight another day". It is no shame to make mistakes and learn from them. Many famous investors have recovered from mistakes early in their investment journeys and become stronger as a result.
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How to know our investing strategy is still working?ReplyDelete
We should put in our time and effort to track and measure our performance so that we can change or revise our strategies much earlier as we don't have that many decades to realize that the investing strategies have not working well for us.
Everyone has find out really works for themselves and better not to wait too long to find out. That is why I always stress much on measuring.
Many still confuse "recording their investment transactions" as same as "tracking and measuring their investment performance." They are absolutely not!
Read? More on measuring
Not to be pedantic, but Record, Track, and Measure are all in the same synonym family...
What you do with your "Track and Measure" is more like:
Repent (like you discover contra is bad for your pocket)
What you do overtly is "measuring". What you really do is landowner verification to ensure your shepherd self is delivering the goods ;)
Anyone and everyone can say: "Boss, no worry. In 30 years time, I'll multiply your flock by 100 folds!"
Agree. That's why I think it is important to start investing early. By the time we understand the pros and cons of each investment strategy and decide on a suitable one for us, there won't be much time left until retirement for investing.
This may take newbies sometime to appreciate for themselves.
It's like listening to others describe the taste of mango. Until you tasted one yourself, it's one of those things you think you know,,,,
Good post ;)
True. You won't know until you experience it.Delete
Very good advice.ReplyDelete
Do not be afraid to get out of your comfort zone to find out how much further you can go. And there is no way to know yourself better unless you pluck up enough courage to doing it differently.
Also a good read :-
Thanks for sharing the post.Delete
Searching for the right 3M. Once we found it, we still have to take it with a punch of salt...
Cool. I can accept one or two counters failed. But I think accepting the whole approach is wrong take a lot more courage and wisdom
It is amazing that we spent so much time searching for investment strategies that work, only to realise that they don't actually work all the time when we found them.Delete
Very true... every strategy/method we use could be a double-sided sword if we didn't handle it properly!ReplyDelete
Things can have undesirable effects when taken to extremes. Always do in moderation.Delete