A couple of weeks ago, I wrote about how I lost $15k in the stock market and learnt some hard lessons… including how to fear it.
I’m still afraid of the stock market today. Don’t believe me? Try putting your hand over a burning stove and see what you think of it.
Back in 2014, I was sitting alone in my rented apartment in Taipei, pondering whether life is just a cycle of work, commute, laundry and food, with seemingly no way out. Yeah, definitely not with the pay I had at that time, and definitely not without going through the route of investing — of course, short of winning the grand prize lottery, or starting a successful business.
I didn’t find a solution that day, but I did move back to Singapore to chase a higher salary. So half of my problem seemed to be solved. Now for the other half.
After being fooled by the Internet for nearly 2 years due to the abuse of search terms like “how to invest” or “how to start a business”, I decided to give old-school a try. So in 2015, I made a trip down to the library and went to the “investing” section… and found this
Back then, I had just 2 things on my mind.
- I want to invest.
- I don’t want to lose money again.
- I want a simple solution because I can’t count if my life depended on it.
So when I flipped open to read the foreword, a few things caught my eye straight away.
“Smart investing is simple. And easy.”
It was starting to sound like the Internet all over again. But then, I flipped to the last page. Hmmm… 352. Well, if this guy’s trying to sell me something, he’s trying really really hard.
So I flipped back to the foreword and continued scanning the text, and then the next few paragraphs came along:
“To use the Permanent Portfolio, you simply divide your investment capital into 4 equal chunks, one for each asset class.”
Those turned out to be 25% in stocks, 25% in bonds, 25% in gold and 25% in cash.
What literally followed was…
“That’s it. That’s all the work involved.”
That’s just page 21I kid you not, take a free preview of the book via the cover link above..
Who is this guy anyway?
Turns out there’s TWO guys, Craig Rowland and J.M. Lawson. Well, let’s not talk about selling some shady overpriced online course, if these guys were planning to write this book AND sell it, they’ve definitely got their strategy backwards. The truth is, I could’ve just put the book back onto the shelf and gone home.
Well, as it turned out, that’s EXACTLY why I took the book to the check-out counter. If it’s REALLY that simple, the remaining 350 pages better do a good job to convince me so.
Convince me they did. They introduced me to the wonderful world of index investing, the history of gold and the intricacies of bonds were all laid out in great detail. I used to think cold hard cash is something familiar to all — you buy things with it. Yet this book took it a step further by making me realize the power of cash when the it comes to bargain hunting for cheap assets.
There’s plenty more in the book than I’ve initially thought. It goes on to explain the 4 main economic cycles and how each asset has reacted historically to those events — and how they played their role in stabilizing the portfolio. It also goes into how to balance the portfolio while minimizing fees, as well as a whole lot of other the dos and don’ts.
By the time I was done with the book, which was sometime around the end of June 2015. I had $19,332.57 under my name.
The book stated that the proper way to start a permanent portfolio, is to buy into all 4 asset classes together — to lock in the state of the economy as reflected by the prices of each asset class at that point in time.
It was time to make a decision. I did what many people should but don’t — I took immediate action.
I’ve been maintaining the portfolio ever since. Initially feeding it with 20% of my monthly salary.
Now I feed my permanent portfolio 14% of my monthly salary, the remaining 6% and whatever that’s left at the end of the month goes into my variable portfolio.
The returns of my Permanent Portfolio were not fantastic over the past 2-3 years, but it did allow me to sleep well since I took the plunge back into the market. Banks did not offer the type of interests they do today, and my Permanent Portfolio did kinda do better than a fixed deposit.
Most importantly, it got me interested in the entire topic of personal finance and investing and started me down the path of learning about managing risks, the different types of asset classes and how one can leverage them to fit their risk appetite.
It also got me to build up enough confidence to start a variable portfolio for more risky investments — which has been playing a part in my overall investment returns today.
Footnotes [ + ]
|1.||↑||I kid you not, take a free preview of the book via the cover link above.|