An Inflection Point in your Investment Journey?

At the start of our investment journey, we tend to get really enthusiastic. This motivation is useful in helping us learn basic concepts quickly. This is the point in which 80% of the knowledge can be learnt in 20% of the time – A common 80/20 rule.

As we repeat the same investment approach over and over again, our learning starts to “stall”. It is human to want to shift our attention to other investment approaches in order to get back the “ growth excitement”.

What many failed to realise is that after the “stall”, there will be an inflection point that will drive our learning curve back up again. This would also enable us to gain deep proficiency. 

This was well summarised by the “Bipolar Learning Graph” from Timothy Ferris in “The 4-Hour Chef” (This is an affiliate link. See disclosure below.). It was interesting how Tim explains the use of Warren Buffett's margin of safety concept to design "bullet-proof recipes" as well as his methodologies to learning anything.

I firmly believed in staying FOCUS before and during the "stall" in order to break out and gain deep proficiency in our investment skills. 

Focus has been crucial throughout my life. During secondary school, I was initially ranked last among my cohort for chess. Even though I set the record for losing the most number of consecutive matches, I persevered to improve my skills. This enabled me to become the best player within 2 years. I went on to repeat the same formula in other aspects of my life.

Our family finance journey is right before the inflection point now. In my earlier post, we shared our goal of achieving family finance freedom. Besides our family finance habits, we are sticking closely to our investment approaches that have helped to achieve fairly reasonable gains while building up new skills sets. Boring yes, but focus we must :) 

GoHuat

Related Post

1.       Link to Amazon for The 4-Hour Chef
2.       A definition of success by a Millennial Family

3.      Our 7 Simple Family Finance Habits

4.      Can investment help us to keep our emotions in check? Yes it can!

Disclosure: The link for "The 4-Hour Chef " is an affiliate link. At no additional cost to you, I will earn a commission if you click through and make a purchase. 

A Definition of Success by a Millennial Family

I came across several posts that discussed how millennial define success including today's report on Business Times: https://www.businesstimes.com.sg/brunch/young-and-not-so-upwardly-mobile

This inspired me to think through my family's definition of success, and that is to achieve family financial freedom. 

Money is required for basic daily needs such as paying for our meals, as well as electrical, water, gas bills. To support these needs, we have to work very hard to earn our paycheck. Gradually work becomes a priority and later on, we regretted  not spending enough time with our family.

Financial freedom offers a choice to escape this rat race and allow us to focus on things that we believe should be our priorities. Many people might think that financial freedom requires a lot of money.

But... is it true that financial freedom equate to being wealthy? Need not be!

It simply means having constant cash inflow that can comfortably cover our expenditure. Hence if your monthly family expenditure is low, you would require lesser cash inflow to achieve financial freedom.

So how does our family plan to achieve this? Through 3 steps:

1^st is to follow good family financial habits. Will elaborate more in our subsequent blog post.

2^nd is to maintain family lifestyle spending even as salaries grew each year. This can also help mitigate some family financial risks. Again, will share more soon.

3^rd is to generate more passive cash inflow through investment e.g stocks, fixed deposit, etc. There are many choices and considerations e.g. market outlook, inflation etc. So we should adopt an approach that best fit our investment needs, profile and goals. It is important to do the math and assess the length of time needed to realistically achieve your goals, level of investment risks versus its reward and your risk mitigation measures. 

Hope you enjoyed this post. Would be keen to find out what is your family's definition of success. Feel free to share!

GoHuat

Related Post

1.      How have our financial perspective changed over the years?

Enjoying our Gains with a Heart

Amidst the fast pace of living and demand for cash, our family saw the importance of taking time off to count our blessings. 

There are many things that we can be grateful about. This can be as plain as having a roof to stay in, having 3 full meals to eat, clothes to wear, harmonious family relationship with our families and siblings. These are some areas that we tend to take them for granted and only realise it on hind-sight.

My wife and I believed in giving back to society including quarterly blood donation, monthly cash donations, etc. We had considered volunteering but have yet to find a suitable cause and will keep looking for one. 

We had achieved some gains in our investments and work performance bonus . Hence decided to contribute some token to charity. We then spent some time to screen through the charity organisations before making our choice. Though our token is not that significant, we hoped that it could still benefit those who really needs it. May those who receive it be well and happy! 

Enjoying our gains with a heart 😊

GoHuat

Can investment help us to stay discipline and keep emotions in check? Yes it can!

My biggest lesson in investment is to learn how to constantly keep my emotions in check. Whenever emotions take over, we tend to easily lose discipline from our original gameplan. 

Sounds familiar? 

I made many “emotional” mistakes at the start of my investment journey. In 2011, I bought SGX when its share price rose suddenly. But after my purchase, the price dropped. Ok, my luck. Thankfully, the dividends were not too bad and the price recovered 3 years later. Twice I bought SIA and both ended in similar fate. I sold them within months at a loss when news on sharp reduction in global oil supply circulated. Then, I justified to myself that it was just a “cut-loss”. Was this part of my plan? Honestly, no. And I did not have a better answer why I did so. Thinking back, it was simply reacting based on emotions.

So how did I keep my emotions in check now? As a fundamental investor, I simply focus on numbers only i.e. to buy when price is at least 10% below its intrinsic value, and sell when the price is above its intrinsic value (usually from 20%). Using numbers has certainly helped me in making many rationale investment decisions and maintain my discipline. Sharing a quote from Mr Warren Buffett...

There might be some “feel-good” sentiments in the market including temporary easing of trade war, extension of oil supply cuts by OPEC & Russia, potential interest rate cuts by FED, etc. It might be easy to get really optimistic and buy into the market. Before deciding to go aggressive, it could be useful to first take a step back. Consider carefully whether this is part of your investment plan, or whether your remaining finances are sufficient for daily livelihood without  having to sell your stocks, even if the market crashes tomorrow. 

Returning to my investment principles, most importantly to first set aside the money for our family’s immediate needs and only invest with spare cash that I could afford to hold/lose.

Looking forward to hear from you too! 

GoHuat

How have our financial perspective changed over the years?

My wife and I were chatting about our childhood days and somehow this led to a conversation on how our finance perspectives have changed over the years.

Measuring wealth by the weight of piggy bank !

Going back to my primary school days, the measurement of my wealth was initially by the weight of my piggy bank rather than by conventional numerical digits. Then, my father would give me a $1 coin every day for my pocket money and at the end of the day, I would drop all the coins into my piggy bank which is really just a plastic cylindrical can. It brought me tremendous joy upon hearing the echo of the coins as they dropped in. After that I would hold the can in my hands to feel the difference in weight. Every slight increase in weight made me feel richer as days went by. After the can has been filled up, I would proudly declare to my parents that it was time for them to get me another piggy bank. 

Learning to earn “free money” !

It was not long before the national bank came to our school to help young students open a bank account. My “wealth” was suddenly transformed into a small and thin book. It was depressing at the start. However, I soon found out, to great joy, that the bank system would make a mistake at the end of every year by sending me “free money”. At that time, it did not make sense why somebody would give out money for free so I was pretty certain that it was a mistake on their part. Nevertheless, I don’t really care as long as my “free money” comes in every year. It was only later on that I realised the “free money” is in fact bank interest that I had “earned” by putting money in my bank account. The thought of more money coming in motivated me to save even more. You could say that this was the start of my investment journey.

Learning the “Art of Financial Prudence”!

At the start of my secondary school days, I began a serious negotiation for a “pay rise” with my parents. When asked about the amount needed, I confidently replied “$2”. Deal! This negotiation felt like a coup as my pocket money suddenly doubled. Interestingly, I became even more cautious of my spending after that. Soon, I found myself drinking more from the water cooler instead of buying soft drinks. I also began to target the more “value-for-money” food stalls. When my parents saw that I was prudent in my spending, they trusted me with more pocket money which increased my wealth further. So this was the “Art of Financial Prudence”!

Looking for Value-For-Money !

I started to socialise more in the 2^nd half of my teenage years. Expenses started to rise while my income (pocket money) remained stagnant. Negotiation with my parents for a “pay rise” failed. This was the time when many of my classmates started to wear more branded items such as Ripcurl, Stussy, Nike etc. Many times, I almost succumbed to peer pressure. Somehow I resisted the urge to touch my bank account and instead, decided to be more creative with my limited budget such as buying things that look more expensive than it seems (but never illegal goods!!). My teenage experiences helped to build up my mental resilience and more importantly, shaped my belief in buying only “value-for-money” items. Even better is when the quality item comes at a price that is way below its value. This was the same philosophy that I adopt for my investment now.

Strong Family Finance to retire together !

My views on finance has changed ever since I got together with my ex-girlfriend-now-wife. The key shift is in perspective, from an individual (I) to family view (we). This is why we decided to share about our 3 tips on building a happy family financial relationship in our earlier post. In essence, we wanted to build a strong family finance so that we can retire well together and spend time doing the things that we love.

I hope you enjoyed my sharing and would love to hear how your financial perspectives changed with time!

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