In late August 2018, I bought 1000 shares of YangZiJiang, a ship building company. It was $1.14 per share then.
Just yesterday, the share sold at a high of around $1.30. With a simple calculation, my investment has returned a profit of 14% of my initial capital in this short 2 months. This also means that the return is around 98.5% per annum. Indeed, this calls for a celebration. I have beaten the average market return of around 10% by close to ten-fold!
I think I can start calling myself a ‘legend’.
However, for some reasons, I am still not happy with such a stellar investment result. In fact, I’m quite pissed off as I guess a big part of me is still insecure about such winnings. If I can earn money so easily, I think it is common sense that I can lose money that easily too. Now, I feel that I have a greater responsibility to ‘guard’ my winnings.
More importantly, this is a result of hard work; work that is too hard for me to bear. In relation to my previous post ‘As a small investor’, I realised that I am unhappy because earning money was not what I wanted to do with investing in the first place.
All I wanted to do is to grow my money at a reasonably exponential pace.
“Earning money suggests the use of substantial personal time and effort while growing money suggests the increase of money without substantial personal time and effort.”
Even if I wanted to earn money from investing, can I sustain this performance? 14% growth in two months? Maybe yes, maybe no. Can I bear spending so much time to determine a suitable company with suitable price, only to face an unexpected external factor causing me to reevaluate my analysis?
Too much to sacrifice. In Benjamin Graham’s words, “An investment operation is one which, upon thorough analysis promises safety of principal and an adequate return. Operations not meeting these requirements are speculative.”
I personally feel that investing is not about trying to be the guy who gets the highest investment returns in town. I think investment can be more of reaching my financial goal through ‘adequate returns’ in a long period of time. 10% per annum can be a good adequate return to achieve for 20 years or more. Surely, I may find that my capital will grow exponentially fast but at a small rate everyday.
Quite ironic right? Grow fast at a small rate. I think that is how compounding works. The magic shall only come through at the later part of one’s investing journey where the growth gains momentum due to a large capital amassed. Well, after all, Warren Buffett earned about 99.7% of his wealth only after his 52nd birthday even though he started investing at the age of 11.
Investing shall not be a game. I will prefer to call it a lifestyle. I will feel very happy for people getting 10% returns every month. But, that shall not change the course of my own investments. I will be contented with a 10% annual returns from ETFs that I plan to hold for life.
To me, true investing is when I can make it automated. When I spend time thinking when to buy and sell, which company to invest, how much to invest in a company, I feel like I’m back in my office working for money again. I am trading time for money without me even realising it. Scary. Again, we fall back to the very reasons why we want to invest in the first place; which is to make money work for us.
To my friends trying to make money work for you. Think again. Can you truly say so if you spend so much time doing the analysis? I feel that we are likely working for money since we decided to trade substantial personal time and effort for analyses.
So how do we solve this paradox?
One way that I think can work is by investing in the whole economy through ETFs without thinking about them conscientiously everyday.
I think that investing has two types; making money really work for you and thinking that money is working for you.
While both active and passive investing are equally respected in my opinion, I feel that one should know clearly what one is signing oneself up for.
At the end of the day, one should be clear about each ways of investing and check whether they align with one’s investment goal ultimately.
For me, I am not happy with earning $160 from YangZijiang stocks. I will be happier if I didn’t buy YangZijiang in the first place. I will have been a more carefree man.
What kind of investor are you?
Update: The share price of YangZiJiang has since risen further to a high of $1.36 per share as of 18th October. Ughh.