Readers who attended InvestX Congress last month would remember that I quoted Charlie Munger:
"It takes character to sit there with all that cash and do nothing. I didn’t get to where I am by going after mediocre opportunities." Charlie Munger
We always need a war chest.
There will be great opportunities to make money. Be patient.
Progressing from this, readers will also remember that, at the event, I attributed the moderate success I have had in my stock investing journey to my inclination to take a look when there is blood on the streets.
"When there is blood on the streets, go take a look lah," AK.
This is, of course, a Singlish version of what Sir John Templeton said, "buy when there's blood in the streets". Like my fellow blogger, SMOL, I borrow with pride.
|AK is a frog in a well.|
"... know what is the best way to make money from the stock market? It is to buy at the depths of a bear market when even the best blue chips are bombed out. During the GFC, I bought many more units of First REIT at 42c and LMIR at 18.5c. During the deep correction at the end of 2011, I bought more AIMS AMP Capital Industrial REIT at 95c and Sabana REIT at 86.5c. There are many such examples.
"However, without any money put aside, there is no way we would be able to take advantage of opportunities to buy on the cheap! Indeed, we might not even have to wait for a bear market to buy bombed out stocks as mispricing by Mr. Market could happen anytime and my large purchase of units of Saizen REIT at under 13c per unit middle of (2012) is a good example."
Source: Achieving $1 million in retirement funds.
To cut losses and to sell out of fear then would have been a terribly wrong thing to do. Not having a war chest ready to take advantage of the opportunities would have been a terribly regretful situation.
"If you took our top fifteen decisions out, we’d have a pretty average record. It wasn’t hyperactivity, but a hell of a lot of patience. You stuck to your principles and when opportunities came along, you pounced on them with vigor." Charlie Munger
Remember, we do not have to be 100% invested all the time although it is easy to feel a bit left out or a bit regretful that we are not putting more of our money to work as stock prices climb higher. Now, it might not be a bad thing to have a war chest full of cash and not do anything with it.
"There are worse situations than drowning in cash and sitting, sitting, sitting. I remember when I wasn’t awash in cash and I don’t want to go back." Charlie Munger
By now, my war chest is quite heavy and this blog post is to remind myself that patience is a virtue.
1. Journey to financial freedom needs preparation.
2. To retire by age 45, start with a plan.
3. The mystical art of wealth accumulation.
4. Three points in stock investing.
5. AK71's simple strategy (Sep 2012).