3M's in investing - Method, Mind and Money Management!
If you are among those who kept searching for the best Method or the best "Gurus" to teach you the best Method to invest for sustainable dividend income across market and economic cycles for FIRE or Retirement; you may not be able to discover the true secrets to sustainable dividend income investing.
Who can train your Mind?
Who can train your discipline?
You and yourself?
Mind part - Secret No 1 is your Holding power
How strong?
Will you be forced into selling some of your dividend stocks during market low to make up for lost of dividend income?
Money Management part - Secret No 2 is your Firing power
How large is your War Chest when market turning bearish and going to crash soon?
If you happen to win this battle; you will strengthen your Holding power for next market cycles; your dividend yield will be stronger and sweeter. You may even hold some Touchstones generating dividend income for life!
BTW; anyone also heard about these two secrets in investment seminars, webinars, roadshows, social media or course previews?
Share share hor :-)
Posts
CW,
ReplyDeleteThe markets will "train" us.
Or to be precise, "crash got sound" will help us discover what we are made of?
Rubber? Steel? Glass?
Start young (don't plan or set goals too much) is the few times I would do cheerleading without being too Indian Chief about it.
I mean how much can we lose when we get it wrong in our youths?
Once we know our pain thresholds and our own abilities, there's no shame whatsoever to pivot towards the Save More shoes if they fit better for you!
For the rest of us, its lick our wounds and come back stronger. And promise ourselves don't make the same mistake twice!
Better this than all our lives we play it "safe" with the Save More path... Then in our 50s or 60s, flushed with cash being a Save More "millionaire", suddenly discover your animal spirits to make up for lost time...
I don't know about you, but a bei kambing "millionaire" has a big bullseye target above your head for snake-oils to target!
Now smaller bullseye targets hanging above CPF members head. Endless social media ads on how to become CPF millionaires through investing your CPF money
DeletePeter Lynch achieved CAGR of 29% from 1977 to 1990 when he was running the Magellan Fund.
ReplyDeleteBut the average Magellan Fund investor lost money!
An older study of US investor behaviour from 1984 to 1995 revealed that the average stock mutual funds achieved CAGR of 12.3% (302% total return), but the average investor in the same mutual funds earned only CAGR of 6.3% (108%).
Otoh, the same study revealed much closer performances for bond mutual funds -- 9.7% CAGR for the average bond funds vs 8% CAGR for the average bond funds investor.
Reason for all the above is simple.
When it comes to volatile assets (like stocks), people are much more emotional.
They buy big after seeing something going up 30%, 50% in 1 year ... and then sell at a big loss near the bottom of bear markets, or even just corrections.
Most of the time it's not even forced selling to pay the bills. It's unforced error triggered by their mental state.
All of us are vulnerable to this mental state. The trick is to structure our investments & allocations appropriate for our own unique mentality.
How to train our investing Mind to be less sensitive to market volatility?
DeleteAttend courses or seeking pyschologists help?
Or join Support group?
Get trained by crypto market.
DeleteMr Market is the best teacher but not every student can excel.
ReplyDeleteStart small.
If lose money, get smaller. If keep losing money, it's time to give up. There are other ways to get rich. Each of us is bestowed with different strengths.
If make money, get bigger. If keep making money, get ALL IN. If a person is still able to keep making money while keeping losses manageable, use some leverage. That person has found his strength to earn a decent living.
Ultimately, one has to start somewhere. If he's nervous about it, start small. Starting early is always better than late because school fees to Mr Market is the cheapest when one is young.
Train your mind is to start with a smaller portion of your money. Coz you'll definitely suffer paper losses at some point.
ReplyDeleteIf a -20% or -30% drop doesn't faze you, then maybe you can increase your risk exposure.
Everyone is different. Some can't take a $100 paper loss even if he has another $1M in cash.
During bull runs, everybody is a Tarzan (and a genius).
It's only during major corrections & bear markets that we discover our true risk appetite ... the red line that when crossed, cause us to do foolish things in the markets. ;)