Time flies and 2023 is coming to an end.
Most investors will be heaving a sigh of relief as the curtain comes down on a tumultuous year filled with interest rate worries and inflation fears.
The start of the New Year is a great time for making resolutions on how to improve your investment performance.
By doing so, you can improve your investment process and position yourself to enjoy a better return than you did for 2023.
Here are several resolutions that I plan to make as 2024 rolls along.
I am going to share them with you.
Maybe you’ll find some of them useful and inspiring and adopt them as your own resolutions.
Ready? Let’s go.
Casting my investment net wider
Around 95% of my portfolio is invested in Singapore stocks, so my daily news diet consists of Singapore news.
I follow the local news closely to keep track of company announcements and regional developments which may impact the stocks I own.
I also have US stocks, but they make up just 5% of my portfolio. These stocks were placed on “auto-pilot” as I am more focused on my Singapore stocks.
But I realise that this approach is not the best.
I’m missing out on the bigger picture. I’m limiting myself to my home market by not exploring the opportunities in other countries.
That is what psychologists call home bias.
Stay within your circle of competence ensures that I am investing in what I understand.
But I also want to learn new and different things. That’s why I have been expanding my circle of competence.
I want to diversify my portfolio and broaden my horizons. To do that, I need to read more and learn more about the world’s markets and industries.
Don’t get me wrong.
No one can be an expert on a sector or stock in a short period.
What you can do is gradually expand your circle of competence by reading about US companies and imbibing this knowledge over time.
By doing so, you will be in a better position to pull the trigger should the stock market present opportunities.
Thinking in a multi-faceted way
As an investor, I admire Charlie Munger, the right-hand man of Warren Buffett.
Together, they run Berkshire Hathaway (NYSE: BRK.B), which has created significant wealth for its shareholders.
Sadly, Charlie Munger passed away recently at the age of 99.
Munger has always touted the benefits of using a multi-disciplinary model when looking at investments.
Munger is well known for his multidisciplinary model to analyse investments.
He called it the “latticework of mental models”. It was a collection of concepts and frameworks from different fields. He used them to think, solve problems, and make decisions.
By doing so, you can think broader and solve problems that may have stumped you had you stuck with just one way of thinking.
Munger taught me that having more options in your toolkit can help you overcome challenges that you might otherwise miss.
He inspired me to read more widely and learn more about not just investing, but also psychology, management, marketing, and social skills.
Munger showed me how using different mental models can help me see the world more clearly and make better investment decisions.
He also showed me that this can improve other aspects of my life, such as how I deal with events, people, and problems.
Munger was not only a great investor, but also a great human being. He left us a legacy of wisdom and insight.
We should carry on his legacy by following his lead and expand our worldview by adopting his latticework of mental models.
A diary of investment decisions and mistakes
Do you write down your investment decisions?
If not, you should start doing it. It can make a big difference in your investment performance.
I learned this the hard way. I used to make investment decisions without documenting them. I didn’t explain why I bought or sold a stock, or how much I invested. It felt like too much trouble.
But I was wrong.
I was missing out on a powerful tool to improve my investment process. When you write down your thoughts on paper, your thought process is laid bare for you to review.
That’s why I decided to keep an investment diary.
I write down every investment decision I make, and the rationale behind why I bought the stock and the size of the position.
I also review my diary regularly to see how I did, and what I can learn.
This practice has helped me in many ways. It has made me more disciplined and rational.
With your hard-earned money on the line, investing can be an emotional roller-coaster.
But if you can justify each decision and write down its rationale, I guarantee that, over time, your investment track record will greatly improve.
Journalling has also helped me to learn from my mistakes, and from others’. I don’t have to lose money to learn a lesson. I can write down the mistakes I see other investors make, and avoid them in the future.
By writing down my investment decisions, I have improved my investment track record over time. I have also refined my investment process and achieved better results.
I resolve to continue doing so as we head into 2024.
Growing my dividend stream
Those who have watched the movie Jerry Maguire will recognise the famous line “Show me the Money!”.
And that is precisely what I plan to do with my investment portfolio as 2024 beckons.
Over the years, I built up a reliable dividend stream by adding solid REITs such as Keppel DC REIT (SGX: AJBU) and Mapletree Industrial Trust (SGX: ME8U) to my portfolio.
I then layered on resilient dividend-paying blue-chip stocks such as DBS Group (SGX: D05) and Singapore Exchange Limited (SGX: S68).
These moves have helped me to build a steady stream of passive income that not only helps to supplement my earned income but also helps me to stay ahead of inflation.
In the spirit of compounding, my resolution for 2024 is to continue to grow this dividend stream by selectively adding to existing and new dividend stocks.
By reinvesting my dividends and allocating capital in a disciplined manner, I will be one step closer to creating sufficient passive income to allow my family and myself to enjoy a blissful retirement.
Get Smart: Monitor your investment resolutions
For many, making New Year Resolutions is akin to a rush of blood to the head.
The thrill of holiday festivities makes us come up with a laundry list of investment resolutions.
But as the year passes, we tend to lose the discipline to follow through with these resolutions.
I recommend doing a quarterly milestone check on whether you are still on track with the resolutions you made at the beginning of the year.
This check serves two purposes.
The first is a timely reminder of what you resolved to do while the second allows you to assess your progress in implementing useful changes to your investment process.
If done right, these resolutions will not only improve your investment performance but also enrich your personal life.
Note: An earlier version of this article appeared in The Business Times.
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Disclosure: Royston Yang owns shares of Keppel DC REIT, DBS Group, Mapletree Industrial Trust and Singapore Exchange Limited.