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When Things Go South...

It started with a conversation...

Some background about my friend:

  • He's very new to investing but is very hardworking and willing to learn about investing.

  • He wants to grow his money faster. He hopes that when he stops work at 45, he will be able to return to his hometown and retire comfortably.

  • He started investing a large sum on my end and was taken aback by the high volatility despite a balanced portfolio I had tailored for him.

It took me some time to formulate my thoughts and I realized it is a common challenge most investors face during these volatile times. Perhaps especially so for investors who are just starting out.

Below are my thoughts on how I think about volatility. Hopefully, it will benefit you as it did for him.

In case you are wondering I have some superhuman abilities or don't feel any pain (or panic) when I see my portfolio go down, it is quite the opposite. I had learned to be more rational during this period.

Here are the 7 points I shared with him. Pardon if the points have some overlapping areas as I was doing it on the fly.

I picked up this trick from a podcast.

Out of sight, out of mind.

We will not be so worried if we don't check our returns on a daily basis. Hard to do, but once you get the habit of skipping the routine checks, you'll get used to it.

A flat market reminds me of the SGX market. I have received feedback from friends that the local market is relatively flat.

However, as we are on the hunt for massive winners, we often overlooked the huge volatility that comes with it.

Sometimes, the path forward is not necessarily as clear. Yet, that is the entry price we pay when we invest in the market.

I firmly believe this.

Take a look at the S&P500 across the past 10 years...

It continues to trend up despite the Covid crash last year.

Disclaimer: this rule does not apply to all investments. Kindly do your own due diligence and see if it should be trimmed from your portfolio if the fundamentals have changed.

Reminds me of a quote from Benjamin Graham,

In the short run, the market is like a voting machine but in the long run, the market is like a weighing machine.

My friend is also a Toastmaster. Hence, I used his Toastmaster speaking experience to draw relevance.

For non-Toastmaster folks, the easier way to understand is like riding a bike or learning to drive. When we first started, we will have both hands on the bike handle or steering wheel with full concentration on the road ahead.

As we gain more confidence and experience, we can afford to bike around with just 1 hand or perhaps at times with no hands (though not encouraged).

It's this point that gives me my "superhuman ability" to overcome my fear of volatility.

Honestly, I'm super guilty of this 😅. Because I had not been exercising regularly. That's why I started running more regularly now :P

Finally, here's my favourite among all the points discussed...

Sometimes the best course of action in investing is no action!

Or maybe I'm just plain lazy 🤣

P.S: if you find that the market now is too volatile for your liking and would like to diversify into more structured and guaranteed investment tools, I'm happy to share that I managed to find a vehicle that can give about 2+% guaranteed returns. Interest parties feel free to pm me.

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