A fundamental shift in how I invest

Yes yes I know, in my previous analysis post on Ascendas REIT, I stated that the next post would be about something that has generated lots of hype. Fret not, that post would still definitely be coming up in the future.

In the meantime, I wanted to use this post to share and discuss something which I have been thinking about quite a bit in recent times.

The topic in question is investing style and methods. More specifically, how I will be altering my methods and style moving forth. So without further ado, let’s delve right in.

Investing style

When it comes to investing styles, there are a few common terms often thrown around. Value investing, growth investing, passive investing, active investing and yada yada yada

Now I will not be going individually into the different styles but rather briefly describe my current style. For my current style, I would say that I am a value investor. This means that I mainly invest in good companies which are below my perceived valuation of the company.

For example, if I value Apple at say $88 per share, I will only invest in Apple when the market price reaches that level or below.

In terms of how I choose which companies to invest in, below would be a general overview:

If you have read some of the analysis posts I put up on this blog, you would see that it also roughly follows the same thought process.

Returns wise, the abovementioned method has allowed my portfolio to grow at an estimated CAGR of 10% since the start of 2019. However, this might not be really accurate since it is only a short period of time, so take it with a pinch of salt.

Now you might be asking, given my (relatively)small success so far, why would I want to change it up? I will touch on that next.

Why the change?

There is a saying that you do not change what is working. Personally, I feel that thinking is flawed.

If there was a way to possibly achieve better results would you not want to experiment with it? Regardless of how tried and tested the current method might be. Ultimately, if the new way does not work out, you can still fall back on what you already know works.

This is my fundamental thought process behind altering my investment style. In addition, there are also two main factors that heavily influenced my thinking too.

The world is changing

If the Covid-19 pandemic has taught us anything in the past year, it is that changes and disruptions will come fast and hard. Those who are not prepared will be the ones most affected.

This also holds true for the investing landscape.

In recent years, we have seen a rise in the prominence of cryptocurrencies and blockchain technology. Additionally, environmental change has also taken centre stage in government and business policies all around the world.

In terms of the stock market, we have seen how irrational it can be with multiple all-time highs, despite a global pandemic, and the categorization of ‘meme’ stocks. With this irrationality, is it really wise to wait for stocks to correct to their ‘fair’ or ‘under’ valuation before buying?

While some might dismiss these occurrences as mere noise, I choose to see it another way. I see such events as indicators that there could be fundamental changes in the investing landscape moving forth.

Furthermore, with new technology, I believe that those who research into it will be the ones to gain the most. At the point of writing this post, there are already a few blockchain projects that have delivered sizeable returns for me. I will touch on some of these projects in future posts, so keep an eye out for them.😉

With all these changes, I thus feel that a change in investing style would help to boost my investment returns in the long run.

No one can predict the market

Ask any experienced investor and the answer would be the same, no one can predict how the market would perform. So if you come across someone or a course indicating that they can accurately predict the market, it is cap or basically pure BS.

While we cannot predict which direction the stock market would go in the short term, history has shown that it would always go up in the long term. Hence, we just need to be patient with our investments and let them grow.

This notion of not predicting the markets got me to rethink the valuation that I tag to companies.

You see, when I do my current valuations now, I tag a ‘buy-in’ price to a stock. This means that I would only buy at or below my perceived intrinsic value of a stock. However, doing so means that I am already predicting that the stock would rise or fall to that price. Thus, in some way, I am already predicting the markets.

Yes, I know the naysayers will say that companies will eventually correct to their intrinsic value. However, given the amount of subjectivity in valuation methods, what exactly is a company’s intrinsic value even? And what if our calculations are so far off market sentiments in the long run?

Hence, instead of putting so much effort into predicting a company’s intrinsic value, I will just be buying in at regular intervals.

Investing style 2.0

So…what exactly will I be doing differently moving forth?

For one, there will be a lesser emphasis on financial data. Don’t get me wrong, such data is still important as I would definitely not invest in non-profitable companies. Rather, I will not be relying as heavily on it when it comes to my decision whether to invest in a company or not.

Instead, I will look to whether a company can efficiently scale, innovate and bring value to the world. Any major potential disruption coming to the company’s industry would also be in my thought process.

In addition to traditional investment instruments such as bonds and stocks, I would also be exploring the cryptocurrency world. This asset class is one I feel can potentially yield great returns and alter the way things are done in the future. I guess only time will tell if this holds true or not.

To sum it all up, I think I will still be basing my investment decisions on fundamentals, just not the typical way it is understood in the investment landscape.

Conclusion

So there it is, a brief summary of how I will be altering my investing strategy moving forth. To be honest, I am quite jittery as I am not quite sure if it would work or not. Nevertheless, I would still carry on as I feel that it resonates with my thinking and belief about what investing should be.

Here’s to days with higher returns in the stock market.

I don’t drink alcohol but oh wells

What are some of the investing methods in which you have found success? Let me know in the comments below! I also welcome any criticisms or comments regarding my investing method and style.

As always, invest safely and for the long term.

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2 Comments

    1. Haha, Vince thanks for the support. Good to see you around👍. And don’t have high expectations ya even I’m not sure how this would turn out😬

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