I am going to share with you guys something interesting.
But first, I need to give you guys some context. As of the time of writing, I hold only 6 different stocks. I will not show you the full name of these companies , but I will only show you the parts and pieces of the first alphabet to add a little adventure into your life.
At the same time, I hold less than 25% cash. In fact, my cash has always been less than 10% of my portfolio. It is only recently I managed to save up some extra cash in June 2021 that I decided to dump it into my portfolio. I have not decided what to invest in yet. Majority of my positions are in stocks, followed by cash and ZERO Options.
Below was my portfolio performance around the end of May 2021. In 2021, although I started the year with a minor loss, my portfolio managed to grow by an astounding 60% and I can tell you, the feeling was wonderful. I thought I was going to double my portfolio again like I did in 2020. But then come the 2nd half of 2021. That was when the entire investing community was spooked by inflation and interest rate. During that time, as you can see, I gave back all those juicy returns. My portfolio went from a +60% all the way to a negative 7% (Approximately) in May 2021.
If you wish to know what that feels like, refer below:
But this is the portfolio performance today (as of the point of this writing):
Quite a number of my stocks have yet to recover. 2 of them have only recovered 50% of their previous high. But yet my portfolio is back at the all time high. In fact, as of this point of writing, the market sentiment is still pretty fearful.
Bringing back this picture again (Below), you can see that during the time the correction occurred, I had literally no cash left. Without cash, how could I average down?
So here’s what I did:
Prior to the correction, I was holding 8 different stocks. I invest only high growth companies that I have rock solid conviction. When the correction occurred, I sold 2 of the weakest performing (fundamentally, not based on stock price) stocks even at a loss.
Using the proceeds from the sale of those 2 stocks, I added to the fastest growing, highest conviction stock I have in the portfolio.
I thought I managed to buy more at the bottom. But guess what, it is NOT the bottom. If you want to know what that feels like, refer below:
So I did the only thing I can do every weekday night at 9.30pm when the market continued to tank…
And with that, even if my stocks have not recovered to its all time high, my portfolio managed to recover to its all time high. I do feel a little sad because some of the stocks I sold off actually recovered a lot faster compared to the ones I held on. But hey, life happens…
So these are my personal learning experiences (which works for me, but not necessarily for you):
I am almost fully invested most of the time. I see no point in holding cash as I can still earn active income and save money. Imagine doing all the research, proven that you are right and the stock price went up by 100%, 200% or more. But you have invested so little that your portfolio barely moved. I would rather respect my effort. I don’t mind riding the waves up and down. It’s something that I must accept as part and parcel of investing in the stock market.
One of my stocks is now > 40% of my portfolio. That would never have happened if there wasn’t any solid conviction. You need to know the company inside out and obsessed over it for a very long time to accumulate such a position.
Understand that a concentrated portfolio is going to be extremely volatile. It flies up and down like an untamed dragon. But if it goes down fast, it can also go up very fast. And although I am investing for the long term, I would prefer faster and higher returns. I would rather be financially free before I am 35 rather than after I am 35. If I am investing in a very safe and stable dividend company that is paying me even 10% a year, how am I going to hit my goals?
But most importantly, remember, I am not a “Risk Averse” investor hence what I do may not be suitable for everyone.
My style of investing is that I love investing in life changing trades. Think about it as watching a movie. I love investing like how Bilbo leaves his peaceful life in the Shire to go on an adventure:
I understand, it’s crazy risking hard earned money like that. But personally, in the future, I would rather tell an exciting story rather than a boring one of how I played it safe.
And I think I have an exciting chapter reserved just for you guys.
Want to hear it? Let me know if I should share in the comments section :)