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After one year of blogging..

Updated: Dec 18, 2020

It's December again- time for some reflections for the year.

I started this blog sometime around Dec in 2019 so this could probably be considered as the "birthday post" for this blog.

Every once in a while, I tried to take a look at what has been done for the blog to consolidate learnings and pave the path forward. I did it once when the blog was around "6 months old".

After a year of continuous efforts, the blog now has a count of 600+ subscribers. While the blog is hardly raking in any earnings (in fact if you account for the time and effort to upkeep the blog, it's like going to be a huge deficit and I'm pretty sure the hourly wages you get from working in McDonalds could be a much better option ), it certainly aids in my own personal growth (especially in the area of investing).

And hence, this post will be dedicated to list down some of the key learnings I have gathered over the course of blogging. It serves more as a personal checkpoint to me, but of course I hope it could also be useful for the readers in one way or another.

So here are 7 pieces of advice I like to write to myself and remember. I hope you can gain value from it too.

1) If you don't know where is the goal post, you don't know where to shoot for

In all things that you do, it's important to know what your end goal is. In the area of investing, it could be to achieve FIRE (Financially Free, Retire Early) or any other financial goal (eg. buying a second property etc). If you don't sit down and think about what your end goal is, you are probably going to face difficulties coming up with the steps to achieve it. When I first started investing just after graduation, I didn't really have an end goal in mind. With no end goal in mind, I was essentially having no portfolio strategy at all. And this is actually very dangerous.

You are likely going to end up with a portfolio which either doesn't make sense at all (all strongly correlated to each other) or not diversified enough. You simply just go with the flow or sometimes your gut feel, and that usually does not bode well. To quote a phrase from the sitcom How I Met Your Mother, I was simply "too close to the puzzle to see the picture forming".

Hence, I couldn't stress enough how important it is to take a top down view of your investments and know where your end goal is. If you know what your end goal is, you will come up with an investing strategy. Based on this investing strategy, you would then know what are the various components you should be having in your portfolio and how much to allocate to each of these components. This is also why I have been writing quite a few articles on balancing portfolio and planning for retirement. Always remember to have your sights on your end goal and work towards that.

2) Use data, not your gut feel. The market isn't a betting outlet.

Since this is datascienceinvestor blog, this piece of advice shouldn't come as a surprise to you all. I think this piece of advice is pretty self-explanatory and I have been littering this blog with tons of data-driven research to aid you in your investing journey. If you are looking for a place to try your luck, I'm pretty sure there is a Singapore Pools outlet within a comfortable walking radius. But please remember the stock market isn't one. You use data and not your gut feel to make decisions in the stock market.

I always find it perplexing that people do not do any form of backtesting or correlation tests as part of their "investing homework", or do not bother to understand key investing metrics such as CAGR, sharpe ratio, maximum drawdown etc. It shows a lack of effort to understand the fundamentals of investing. Given the fact that data is all around us nowadays and there are tools such as Portfolio Visualizer to aid you in running test/simulations/checks without the need to write a single line of code, there is really no excuse for you to not take a more data-driven approach in making your investing decisions.

3) Everyone's investing journey is different

You are likely to hear very different kinds of advice from many different groups of people on your investing journey. Some might advocate you to buy the indices because it is diversified, some might encourage you to seek the alpha as they think buying the indices is a lazy way. Hell, some might even ask you to put all in Bitcoins- go big or go home.

The truth is everyone's investing journey is very different. You could be a 30 year-old busy climbing up the corporate ladder in your work that you don't have time to do any research hence investing in indices might be your best insurance. Or you could be a 21 year-old who happened to have some spare cash on hand and would like to go for investment assets which give you much higher returns amid the much higher risks too. Everyone's life is different and hence everyone's circumstances in their investing journey is also very different. There is no one blanket-fit-all investing advice and we shouldn't be too focused on what other people are doing in their investing journey. Everyone is running his/her own race.

4) Time is the best currency you can have

The most powerful currency that anyone can ever have is time. If you start investing at the age of 18, you definitely have a lot more advantages as compared to someone who only starts investing at the age of 38. The 20-years difference could prove to be a big difference when it comes to compounding. A dollar invested in an instrument with 4% CAGR could be more than doubled in 20 years. When you are young, you are holding on to a currency which is far more powerful than any other known currencies in the world as it is a gift which allows your investment to grow in a magnitude far beyond your imagination.

And the fact that the stock market has always been on an uptrend since its inception further validates the importance of time. You might be facing a loss in your investments for the first 3 years. However, the chances of you continuing to face a loss in your investments in the next 5-10 years become dramatically smaller as the market has proven to always recover and create new highs eventually. Of course, this mainly applies to indices rather than stocks as some stocks have never ever recovered to see the light of day. Investing with a long term horizon also takes the stresses away from the daily pricing fluctuations in the market. Like the famous saying goes- In the short run, the market is a voting machine but in the long run, it is a weighing machine.

Hence, start investing early. If I had known earlier, I could start investing as soon as I knew how to spell ABC.

5) Money is a funny thing

Money has very different meanings to us at different stages of our life. When we are young, money is obviously very significant to us as we could use it to improve our living standards, raise children and support our parents. When we get old, money probably becomes a bit less important to us as we come to the realisation that we will eventually have surplus of it to see us through to the end of life if we planned properly. Eventually, it will be worthless to us when we are on our deathbed.

In some sense, money has a very close and intense relationship (or perhaps inverse relationship) with time. A dollar invested now has the potential to grow a lot more in the future and provides you with the passive income (either in the form of dividends or withdrawal rate), and is hence worth a lot more as compared to the exact same dollar two decades later.

So, remember money is merely a tool. And a tool is only as good as how the user manages it.

6) Always make two plans

If you think about it simply, there are only two things that the market could do. It could either rise or fall. Granted, there will be periods where the market is hardly moving. But even so, these periods are also dictated by a mixture of two simple actions- either up and down.

While the above might sound silly, I think that it actually sets the tone on how we should approach our investing game plan. And that is to always make two plans- what to do if the market is going up and what to do if the market is going down.

To put it into visual perspective, it means to test the depth of the water with only one leg at all times so that you are always on the safe side. If you have $100,000 to invest, you should never invest all of $100,000. Always keep a portion of these $100,000 as a war chest so that you are ready to buy when the market is going down. Had you invested all of your $100,000, you would be left in a terrible position if there is a sudden crash in the market and you could simply do nothing. As simple as this might be, it's quite easy for investors to forget about the need to never test the depth of the water with both legs.

7) Buy the milk, not the cow

The last advice that I have might be more of a generic financial one than anything investing-related. When dealing with big purchases in life (such as property and car), we often have the concept that we need to be owning them. It's only till the recent years when companies like Grab appeared that we realised it's actually much cheaper and equally convenient for us to be hailing rides rather than owning a car (hence the idea of buying the milk, and not the cow).

In recent months, I have been thinking that most of us are caught up with the concept of buying a property which both suits our preference for staying AND have the potential to appreciate in price. What if you are constrained to stay near to your parents but the area they are in has very low potential for any price appreciation? Could it be possible for you to be renting a place near to your parents but invest your money in a property elsewhere which has much higher potential for price appreciation? Some might argue the viability of it due to various hidden costs (eg. more property tax) but that is something I could be keen to explore more on (perhaps in a later blog post).

It will be interesting to revisit this article in a year again and see if these advices still hold true then.

Till then, do

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