Wednesday, 17 February 2016

Thoughts on volatility

Back in 2007 / 2008, I was still in college when the global economy went through a market meltdown. For those who could use a primer in what caused the crisis back then, a useful and entertaining short 3 hour option would be to catch "The Big Short", a movie that does just about enough to encapsulate the origins of the global financial crisis back in the day, while providing a modicum of entertainment (hey finance can be pretty boring to most people alright).

I recall being feeling a little frustrated then, at being left on the sidelines, given a lack of income at that point in life and being unable to make decisions that could have reaped monetary benefits a couple of years later (case in point: wanted to place a punt when Citibank was c. US$1, but lacked savings and income to do so.)

History never repeats itself, but it certainly does rhyme. 8 years later, a similar form of market volatility has persisted since last summer, but the good thing about it is that I possess some existing ammunition and monthly re-supplies that will help in taking advantage of this situation. Now the thing about market volatility is that whilst the large majority of people do find it fear-inducing and even abhorrent to a certain extent, is that it allows one to to engage in the age of adage of buying low and selling high. And this is as good as a time to engage in setting oneself up for financial independence, or even fast forwarding the date come a few years later.

So even though I find myself facing more headwinds in my current job, and an increased apathy towards it given recent circumstances, I do think I'll be doing myself a big disservice by saying fuck it. Maybe the best play would be to stick with it and play down the efforts until one gets fired, but that itself would be going against my inherent characteristics of basically giving it my best shot, all of the time.

So the best play would be to stick with it, and invest every single available dollar in the market, whilst waiting for the bulls to takeover the market and history to rhyme again, which it most certainly will in due time, or at least play that hand until the referee calls time on musical chairs and one gets canned. It does certainly suck when one experiences c. S$90k in paper losses in one month, but one needs to be disciplined, resilient and persevere with the planned course of action, because these times are the the times that would make or break your goals in a couple of years time.

The worst thing an investor can do is to liquidate his portfolio right now and seek "safe harbor" in investments that are perceived to be safe, such as fixed income instruments, when prices on that front are going up. If you believe your investment thesis to be right, you should stick the course and not do a switcheroo when markets are going against you. That'll be disastrous.

Mark those words on this day, and hopefully in a year or two, one can look back at this blog post to see how their results have panned out.

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