Reflections 2018

I was recently reading this post by Kyith, about tracking our net worth.

I do it all the time (well, not every day, periodically, sometimes, a few times a week or once a month when I am busy).

You see I have this goal, this purpose to achieve a certain net worth. I have this number in my mind. I think it is great… it keeps me motivated.

Remind me of this speech by Arnold Schwarzenegger below.

And yes, the markets did not do well this year. The post by Invest in Yourself below resonates with me.

I am feeling cash poor this year (read here)

Ever had the feeling whereby you take 1 step forward, but end up 3 steps back? I kind of feel like that looking at my net worth this year.

It was a busy year for me (both at work and with the family). It was especially hectic at work during the 2nd part of the year. You know the situation whereby people resigned with no replacement hired, and the ‘ball’ sort of landed in my lap.

At the beginning of this year (2018), looking at my net worth then, I thought to myself, hey perhaps I can finally achieve my financial target. Even if I am just depending on my active job income (with no capital appreciation from stocks), it might be within reach at last.

But alas… the prices of the remaining stocks I was holding tanked dragging down my net worth. My net worth did go up this year, but far lesser than I have anticipated.

So it is now, what it is… The focus now is on strategizing moving forward, and since it is now near the end of the year, it is a good time for some self-reflection.

It has been a bad year so far (financially), BUT…

Yes, there is actually a BUT. A silver lining so to speak. Yeah, I reckon many of us focus too much on the negative and did not think about the ‘what if’. We are often too hard on ourselves.

The thing is I have been selling off most of my shareholdings since late 2017 (or even earlier). Currently, shareholdings make up just 12% of my overall net worth (excluding the property I am staying in). Yes, it still hurts, when prices drop, but it could have been worse.

And if I just consider shares vs cash/SRS/SSB/Money Market funds (basically liquid funds), the percentage ratio is 20:80. Actually, I think for this year, by just doing almost nothing, this percentage dropped further due to the share price drop (used to be 35:65 at the beginning of the year).

If I had not sold off and kept the majority of my net worth in stocks, the pain would be much more, if not intolerable. We all have different threshold levels for pain (for unrealised losses). For some, they are well aware of this threshold, for others, not so (and starting to find out).

It is easy to say – Stay invested at all times. But try being 90%-100% invested at all times, and see how it feels when the markets tank. Use all you have, your CPF, SRS, Cash, Emergency funds – just dump in stocks…

Imagine your whole net worth dropped by 30% within a few months… your colleague, Mr Do Nothing (who happens to sit beside you, and who just bought a new car), who is a below average worker, who did not track his spending, did not care about his savings and did not spend his time studying stocks/companies, did not invest in stocks, basically heck-care, actually end up miles ahead of you financially..You did not even get to smell or touch the 30% cash. And you start to wonder how long the market will stay in bear market mode. And what if it goes even lower, and you need the cash for some emergencies.

On the other hand, I could also be bashing myself with no selling off ALL my shareholdings early enough. There is simply no end. There is always a better ending. But why go into that now. Can I change history?

You know, I seldom go into Stocks Cafe, but when I do go in occasionally, I will look at some of the portfolios listed there (under the “Shared” link). I do recall that when I went in some time at the beginning of the year, many of the portfolios showed positive returns (in green) – YTD, 1yr, 3yr… Today when I went in, the majority of the portfolios (I reckon more than 90%) show negative returns for YTD or 1yr…some with close to negative 30% YTD returns.

There are many methods in investing… the dollar cost averaging, the buy and hold forever strategy, the active trading version, etc. To me, there is really no right or wrong method, but rather what suits you.

And I guess, it also depends on how dependent one is on passive income (eg. at which stage of life you are at). If I am a retiree who is heavily dependent on dividend income, then it does make sense to be invested all the time. My focus would then be not on the net worth, but the income (and really I think that is one good way to view stock price fluctuations).

On another note, despite the big drop in percentage in holdings of stocks (from 2017 to now), the annual amount of passive income actually only drop by 24% yoy. Then again, my passive income wasn’t big, to begin with.

Well, I reckon ‘I invest like a girl’ this year (or even last year). However, the fact is, I still have my goal in sight. If I don’t achieve via passive stock investing income, then I will do it the old fashion way – via my job income (even if that means late nights every weekday night if my health permits), or the little steps in being careful with my spendings and saving as much as I could.

Warren Buffett Invests Like a Girl: why women are investment naturals (read here)

If I don’t achieve my ‘magic figure’ this year, then I aim for next year, or if not, the year after. Yes, it might be a low figure for some, or given my pace, a loser’s pace… well, heck, I do it my way, the way I am comfortable with.

The truth is, I personally feel that we would see more pain moving forward, and a longer one at that. I did peep at some of the stocks I have been eyeing and they did not reach the bargain bottom prices yet. That is the more frustrating part. I am a sloth when it comes to investing, always late to the party… I don’t even know if they will ever reach those prices with a good enough margin of safety. I could be waiting for nothing, ever. And I have no target date to invest.

The S&P 500 chart looks bad for this year.

• S&P 500 drops more than 2% to new low for 2018, Dow dives 500 points (read here)
• We are now in a bear market — here’s what that means (read here)

But in the bigger scheme of things, it is a mere blip.

To quote from this post by A Wealth of Common Sense:

“But I do know that human nature makes it difficult for people to handle the types of losses we’ve experienced over the past few months. It invites overreactions and increased volatility of emotions.

It’s always possible these losses are an outlier…or they’re a sign of things to come and things only get worse from here…..

What I do know is the history of stock market performance shows that the longer you extend your time horizon, the higher the probability you have of seeing gains. This relationship seems to hold following a big down quarter in stocks, as well.

I’m not positive this will happen again because nothing is ever guaranteed but expected returns have likely risen from where they were just 3 months ago.”

Warren Buffett is famous for holding his stocks forever, but he is also famous for sitting on a huge pile of cash for a very very long time… Yes, personally, I dislike holding a high percentage of cash earning next to nothing. Currently, some are in the bank, some are in Singapore Saving Bonds while the majority are in a Money Market Fund – the current interest I receive (pathetic yield) just about right to give me more than enough “lim kopi” money per day :p

Well, if no bargains I like, then I have to make do with these.

Yeah, kind of an anti-climax. All along I just thought investing is the way forward. I save, I invest… but invest in what. I have a small circle of competence. I only have so many hours per week to research in stocks/ companies. Companies I knew well.

For some stocks with strong fundamentals and stable businesses, with good dividend yields, their stock prices actually went up (some by a lot) during this correction. I reckon it is the flight to safety. Makes the waiting longer.

It also takes determination to sit with that pile of cash and wait for the right price. Damn frustrating at times. Yes, shorting is one way, but if I am thinking about long-term, that is not the route.

In the end, moving forward, instead of thinking of selling to stop the pain, my mentality now is on how to slowly pick up bargains. And given the war-chest, it might take some time (if I am not progressively buy in).

Don’t give up on your goal.