Dear Smart Investor,
Have you made your new year’s resolution?
Recently, I came across a novel way for this yearly activity loved by many.
The idea originated from Farnam Street which was then adopted by Wired magazine’s co-founder, Kevin Kelly, in place of his new year’s resolution.
Simply said, rather than making a new year’s resolution, Kelly answered a list of questions instead.
Inspired by the series, I have tweaked the queries to make them more relevant for investors.
So, here goes.
1. “Sell Everything”
No, you don’t have to press the sell button for real.
The past three years have been a roller coaster ride for investors. Unless you have experienced a pandemic before COVID-19 spread worldwide, it won’t be surprising if you are left flustered by the series of events.
At this point, a good way to take stock of the situation would be to do what hedge fund Michael Steinhardt does.
You see, from time to time, Steinhardt would liquidate all his stock positions.
In an instant, he would start on a clean slate. He said that it felt refreshing to rebuild a portfolio from scratch, free from wishy-washy legacy holdings.
It’s an introspective way to review your portfolio of stocks.
By thinking through — but not necessarily doing — what Steinhardt suggests, we can free ourselves from our past decisions and errors.
Instead, we look at the stock market as if we are looking at it for the first time.
Which stock would you choose if you were starting out today?
Does your current stock portfolio reflect what you would have bought if you started again?
My co-founder, David Kuo, is a fan of Steinhardt’s thought process too but with one big difference: David doesn’t sell his stocks. Ever.
2. More or Less
Investing is a lifelong activity.
It follows that endurance is more important than speed.
As such, it’s useful to reflect back at the things that you have spent time on, as an investor, over the past three years.
What are the activities that have helped you gain more insight and provided the boost of energy to continue?
For us, we have always been advocates of spending time looking at the underlying business behind the stock ticker.
That way, you can stay at the forefront of new developments such as Microsoft’s (NASDAQ: MSFT) bid to take a stake in ChatGPT, an AI-powered conversational chatbot.
Or the fact that Keppel DC REIT (SGX: AJBU) has raised its distribution per unit (DPU) even as its unit price has fallen.
Spending time looking at share prices, on the other hand, is mostly wasted energy.
As Warren Buffett once said, games are won by players who focus on the playing field, not on the scoreboard.
If we do our job well in the former (studying the business), then our reward will be reflected in the latter (higher share price or dividends over time).
3. Planting seeds for the future
As the Oracle of Omaha once said, someone is sitting in the shade today because someone planted a tree long ago.
Along these lines, a key question to answer is …
… what can you do this year that will leave your stock portfolio in a better position five to 10 years in the future?
The noise in the financial media is often centred around the uncertainties in the short term. But over the long term, there are certainties that we cannot avoid.
One of these days, we will be calling it a day.
One of these days, we will no longer be able to earn and have to rely on what we have accumulated over our lifetimes.
One of these days, we may want to provide for our loved ones so that they can live their lives without financial worries.
Again, what can be done today that will lead to a better tomorrow?
Get Smart: Going far together
As the saying goes, if you want to travel fast, travel alone.
But if you want to travel far, travel together.
While your endurance is important to realise the rewards in the future, you don’t have to go about it alone.
At the Smart Investor, we are proud to be a part of a tribe of like-minded investors, many of whom have taken the last three years to their stride.
Now, you’ll be mistaken if you thought that investing in the post-pandemic world was easy.
Yet, the burden is a lot lighter when you share in the ups and downs with fellow travellers who, like yourself, are simply trying to be a little better each day.
Step by step, day by day, month by month, year by year, and decade by decade.
Simply, being better.
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Disclosure: Chin Hui Leong owns shares of Keppel DC REIT and Microsoft.