We must avoid getting into large losses and the most commonly large losses are due to repetitive averaging down till a single stock position turned into a large percentage of one's investing capital e.g. 40 to 60%. Often it was too late when we suddenly realized it.
Now, Uncle8888 strongly believes he has understood it well. He has learned it first hand from his own investment marathon race from 2003 to 2011 to meet his Yearly Goals.
You can see what happened after a large loss in 2008! It became so difficult for him to recover from his large losses.
Prevention is better than cure! Avoid large losses.
For his next 10-years investment marathon race from 2012 to 2021; Uncle8888 has completed changed his investing strategies and Goals. There is no absolute need for him to actively trade for cash flow to meet his yearly target. No need!
What happened in 2008 will unlikely to happen again as his investing strategy has changed.
No more Snakes and Ladders game. Only Ladders game! :-)
Past Goals: Yearly Goals (2003 to 2011)
Future Goals: 10-years Yearly Cumulative Goals (2012 to 2021) i.e. focusing absolutely at the outcome on 2021.
Same but different!
In 2007, his War Chest was so low that recovery from losses was tough. He saw more fear than opportunities.
In 2015, his largest War Chest ever since Jan 2000, there is no sense of fear yet; but he still can't escape some feeling of regrets.
Patience and discipline must prevail!
So, remember my Sifu saying this: "It is better to regret NOT making more than to feel SO SORRY of losing our hard earned money!"
Prevention is better than cure! Avoid large losses.
Posts
Hi Uncle CW
ReplyDeleteWhen you say low for your warchest in 2007 is how low?
Hi Uncle CW
ReplyDeleteWhen you say low for your warchest in 2007 is how low?
In Oct 2007 Bull Peak, war chest is 12% of investing capital (I didn't have the financial capability to add more capital for investing due to single household income. Risk and money management is far more important than return on capital. I just go along with what I have since Jan 2000)
DeleteAt 3 Jul 2015, war chest is 136% of investing capital. (No decimal point for poking)
So I am more of kiasi type of retail investor who doesn't risk more than what he can afford to lose. I rather to be safe with more cash rotting in the bank so I will have little or no chance to go around shouting 6 digits passive income. :-( :-( :-(
DeleteHi CW,
ReplyDeleteGuess we need to be more cautious when investing, maybe practicing diversification and dollar-cost averaging to avoid crippling losses (or at least losses that are not due to market volatility). This reminds me of the phrase: "The number 0 doesn't compound very well" :)
From,
Just Some Thoughts
Uncle, I am keeping 50% in cold hard cash. Too kaisu? Sometimes I feel so tempted to go buy something. :-(
ReplyDeleteOne veteran sent me a note that he is 100% out of equities. LOL!
DeleteBut, but, but...
ReplyDeleteI thought all we need is a goal based strategy?
CW, this rhetorical question is not directed at you. We understood each other fine as opposite sides of the same coin ;)
Its for those who have only one goal based strategy of buying the freaking dip (and nothing else)!
LOL!
How come got large loss?
ReplyDeleteMarket correction? It's market volatility
Market volatility is not permanent losses.
DeletePermanent losses are real losses and will lock in negative return. Until we can recover these realized losses from highly profitable re-investment of recovered capital; if not some of these losses will be lost forever, hence it is permanent losses.
Read? Permanent losses
Read? Permanent losses
DeleteWe can fortified with one or more Taps solution like Singapore's New Water. We cannot be too dependent on single source of water from Boleh Land.
ReplyDelete