5 Life Lessons Learnt from Investing
Investment has been a big part of my personal finance journey. There are so many things we can learn about investing in the modern society (share market, private equities, debt, commodities, properties, mutual funds, derivatives, robo-advisors, crowdfunding, digital assets, etc) that it seems far-fetched to ever think of mastering them all.
As I sit back on a cooling day away from the daily bustle of life itself, like today (Happy Birthday, Malaysia!), I get to reflect on a few things. One of the things I was mulling on was the similarities between investing and life itself.
It is also interesting to see that how we invest kind of reflects how we live our lives. Here I’d like to share 5 life lessons that I observed from my own investing journey.
(1) Hard Work Pays Off (eventually)
All seasoned investors will know that proper analysis is the key to successful investments. Although all investment comes with risks, it is important to make sure that the reward more than compensate the risks of the investment itself.
If we want our long-term investment to pay off in the end, we have to put in the work to ensure that:
- Our investments are aligned to our own investing principles
- We are comfortable with our asset allocation and not taking on too much risks
- We know exactly what are the investments that we are entering into (e.g. equities, ETFs, robo-advisors, StashAway Simple, ASNB funds, mutual funds, etc)
Similarly in life, we work for what we want. Successful people don’t get to where they are overnight. It takes years of hard work, building the foundation in knowledge and experience, to be able to eventually become a master of something in life.
Take our career for example. When we come out as fresh graduates and not knowing a thing about the working world, we are like kids learning to walk. We learn on the job by observing and learning from our colleagues and superiors.
How do we then advance faster in our career? We go the extra mile and contribute to the betterment of the business. We upskill ourselves in aspects that can contribute to our work. The hard work that we put in will eventually pay off as we get better at what we do.
An important T&C of this is that the effort put in has to be something that contributes to the goal or all the hard work will be worthless. This is like looking to invest into the property market but analysing the materials used to build the place. Not exactly useless, but definitely pointless for the purpose of an investment property.
(2) Diversification vs Focus
All too often we have heard of investment professionals mentioning the need to diversify our investments. It is a valid argument for us to distribute and lower our risks across different assets. This is so that if one asset class / industry drops in value, our other investments can help to alleviate the damage.
However, the counter argument to that is that our returns are also muted in conjunction with lower risks. Consider if we have the benefit of accurately predicting the movements of our investments (and no one can, obviously), we will not diversify and focus all our investments into glove stocks in May 2020 which saw 3x – 5x growth in the short span of 4 months. Of course, the risk is that we may also lose all our capital if this one bet we take didn’t turn out well. Is it worth it?
We are also often faced with the same in other aspects of life. This happens in:
- Studies (double / triple degree, ACCA, doctor, law, psychology)
- Career path (Work and side hustle or all-in start a business)
- Employment (Stay in one job for a long time or keep moving through various jobs)
- Skills (Master in one with supplementary skills or learn up multiple skills)
- Holiday (Save and go somewhere far and exoctic or go various areas nearby but cheaper)
- Kids (bet all on one kid or get a few kids so that at least one turn out all right) <– Only joking!
(3) People Will Talk, Regardless
In investing, every news / announcement that is released by the market will be met with 2 sides – those who support and those who are against. Short term traders will trade based on news, whilst fundamentalists will always look at each news with a long term view in mind.
As long as an investor believes that any negative news do not affect its long term prospects, then the investor will disregard all the noise in the market (mainly in forums / news / analysts). Conversely, even if the news is fantastic and the market keeps pushing the prices higher, the investor will assess the company based on his / her on gauge to ensure that the investment is still sound.
In life, all decisions that we make will be met with judgmental eyes and “advices” from all angles – family, friends, colleagues, people we just met, etc. It takes a lot of mental discipline to shut out the noise and focus on what we want to do in life.
I remember when I opted for finance degree it was a surprise for some because I excelled in my science subjects in high school. Then the biggest noise I got was when I dived into network marketing, where it was met with the most negativity ever. Did I regret? No, because it made me into a better person overall.
We live our lives, so don’t let others dictate what we should do to our lives. Remember, even if we get “advice” from others, we are the one who ultimately makes the decision of the actions that we take.
(4) Be Clear on the Goal and Know When to Cut Loss
Straightforward as it is and applicable both in investing and life.
When investing, we must know the reason we are investing into the particular asset / share / business. Each investment carry their own goals, be it for capital preservation, income generation or capital gains. We have got to keep our eyes fixed to the goal. If there somehow the investment turned sour, then we have to cut our losses and move on to the next.
Similar to other aspects of life. The epitome of this is when we discovered our purpose in life and focus all our energy into achieving it. Of course, in small bite sizes, we also have things that we want to achieve in life and plan for it. Such as, save an emergency fund, to accumulate first RM100k, to get the next promotion at work, to score straight As in school, etc.
On the other hand, we also need to acknowledge when we’ve given it all and things just don’t work out for us. Knowing when to cut loss is a valuable skill in life to save time to work on something else more worthy of our time. I will be first to acknowledge that I am very bad at cutting losses when it matters. Hence, I usually suffer an infinite time more than I should need to because of that. This happened with my first romantic relationship (where I gave more chances than I should have) and also for the job with a lot of toxicity. Still learning!
(5) Luck is a Factor of Success
Ever heard of the saying:
Luck is what happens when preparation meets opportunity
Seneca
Whilst the majority of life and investment is true to this notion, I believe that there is a part where luck is purely just that… luck.
In investing, we don’t control the market movements. It is made up of various different gears (business direction, scandal, market makers, insider movements, retail investors, traders, fund managers, etc) that are set into motion every time the market is active. In most cases, we invest without knowing which way the market will go. By pure luck, when the gears decide to move in our favour, we will get the prices going in our estimated direction. Maybe tomorrow, a week, a month, 6 months, or even years.
It is similar in other aspects of life where I would ascribe it due to pure luck.
- When my speaker breaks down and just so happen I have enough credit card points to exchange for my new speaker.
- The time when I wasn’t able to stay in Australia after graduation but managed to land a decent job in Malaysia at the same time.
- Me surviving one of the major car crash due to driver fatigue.
- That “luck” of landing a job in an industry that I was looking for… but had to put up with a one-of-a-kind boss.
Some may call it attraction or the guidance by some higher power or the sorts. All in all, I’d say it is luck and it plays a part in our lives to get us around.
We are who we are
As someone once mentioned to me, “how we do one thing is how we do everything.”
Many of our characteristics can be seen when we are investing. There are too many people who takes others’ advice at face value when investing. I believe the key is finding the style that works for us and a lot of that stems from who we are as a person.
By knowing who we truly are, we can cater our every aspect to what we are comfortable with, including investing. I am a *mostly* conservative person in nature and hence my investment style is mostly geared towards defensive portfolio investing. I like the occasional thrill and so I keep a small part of my portfolio on speculative investments.
The main question here is… Who are you?
