Tuesday, November 20, 2007

My Investing Journey: Full-time investing 3 comments

(P.S: Sorry for any disturbances the advertisements above may have caused you)
In fact in 2004, I was effectively doing full-time investing. I was on a one-year sabbatical and would not resume working until the following year. And hence I led a life that many market players would envy.

Well, not really full-time in the strict sense, as I had some other personal ventures going on, and besides, my style had never been to stay glued to the screen and day-trade. That's why investing was a more appropriate word than trading. Indeed, I did considerably more reading off books than off the computer screen during my time off in this period.

It was with the benefit of this experience that I wrote two articles on full time trading (Part 1 and Part 2), where I highlighted the pitfalls, tangible and intangible, that should be considered by those planning to take this route. One needs the passion to sustain himself, especially when the market takes a downturn. Some ability to manage risk and the stomach to take it won't hurt either.

The fact is that, at least for my case, full-time doesn't mean one has the luxury of time to cover the market comprehensively. Whether one has one or twelve hours every day, he must learn to optimise it and select the focus of his investment attention, otherwise there will never be enough time.

I focused my time on doing investment research across greater breadth and depth than I could have afforded when I was working. I read newspaper reports in more detail, finally got to pore through the Newsweek magazines I regularly subscribed but previously could only skim through, and got my hands on numerous brokerage reports where I sifted the wheat (facts) from the chaff (opinions). I read investment books of all varieties at the rate of one a week. I read through numerous annual reports and IPO prospectuses to cultivate an instinct for industry value chain dynamics. I built up more fundamental analysis knowledge that year than would have been possible in five or ten if I had been working.

The second thing I did more of was that I did more thinking. About my investment approach and philosophy, my portfolio stocks, various potential stock themes. It is amazing how one realises his beliefs are just a patchwork of haphazard ideas from various books he has read if he just thinks about it; that is why one is easily confused when his stock drops and one part of his brain tells him Warren Buffett says buy and hold while another part of his brain says all savvy traders cut loss to preserve capital. Without a coherent and internalised investment philosophy, one cannot have the conviction to take decisive action. Some daily ruminations on the stocks one holds and on likely hot themes in the near future kept unearthing new daily insights while further anchoring my conviction on my stock holdings.

The third thing was that I exercised more. I did regular swimming and jogging, and I cannot overemphasise the importance of physical fitness should one want to do such a sedentary activity like trading full-time. Mental alertness and discipline must be inculcated, and physical exercise will bring that.

And my results? Not as great as I had hoped at the end of that year, partly because of the market ("The Scandals of 2004"). But the fruits of my fundamental analysis training, which is basically what I had undergone, would bear me benefits over the longer term. But that is another story for another day.




Blogger sm@ll.fry said...

Hi DanielXXX,

You are right!

Definitely was envious that you had an entire year to focus on learning and thinking about Fundamental Analysis.

I think your point on how time is utilised is also very true. No point having twelve hours to use, but only an hour was spent constructively. Applies to everything in life in fact.

Honestly, I hope to have the opportuinity to to be a full time investor one day. Hope!


11/20/2007 11:24 PM  
Anonymous Anonymous said...

Hello daniel,

a well written piece and one that I could have written for myself as I did and had exactly the same experiences. I wish I could have done this in my younger days and took some time off to do this. Well never late than never.

After doing this for 1 yr I went back to work again as a good opportunity came up. Regular wage income wasn't the pull factor. I just need to feel the pulse of the business and the economy. Yes I could have read it from various sources but then it's not the same as you are in it. Many young people thinking of going into full time investment misses this point. They don't have enough experience to understand how businesses earn their money. Business is a brutal world out there and every penny has to be earned the hard way.

Let me wish you luck and hope we can meet some day to share more expereinces.it's a bear mkt and all our experiences is put to the test, including emotional ones.


11/21/2007 2:42 AM  
Blogger DanielXX said...

Hello fishman & anonymous,
Indeed, doing investing/trading full-time is a momentous decision not to be taken lightly, not just the financial aspect of it. Indeed, when I did it in 2005-06, I was inspired by the saying:

There is a tide in the affairs of men;
Which taken at the flood, leads on to fortune;
Omitted, all the voyage of their life Is bound in shallows and in miseries"
(from Julius Caesar, Shakespeare)

Although my results at the end of the year were mixed (I later realised I had taken too little risks to expect high return), the experience had done me a whole of good. I will elaborate in later tales of my investing life.

11/24/2007 8:53 PM  

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