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How to have peace of mind as an investor?

Friday, February 13, 2015

I was invited to give a 45 minutes talk which went on to be 1 hour 15 minutes. I talked mostly about how to have peace of mind as an investor because having peace of mind will help us to think clearly, not panic and make the best of market opportunities. I would like to share with all readers here the 5 words I shared during the event:

"Eat bread with ink slowly."

Yes, this is in keeping with AK blogging more about food these days but bread with ink? Yikes! Has AK gone nuts? Hey! Squid ink happens to be a delicacy. Don't you know?

Well, some of you might already have guessed it. AK is using mnemonics. It is something I used to do a lot of as a student to help remember long lists and facts. I also taught my students in the past to use mnemonics to help them remember things.

Eat bread with ink?!
OK, before I go off tangent again, what does each word stand for?

The letter "e" in "eat" stands for emergency fund. All of us should have an emergency fund. During good times, build an emergency fund. We do not know when we might need it. Having an emergency fund gives me peace of mind during good and bad times.

The letter "b" in "bread" stands for borrowed funds. Don't borrow money to invest.  This does not only mean borrowing from institutions like banks and brokerages. It also means borrowing from friends and relatives.

In both "e" and "b", we don't want to be caught in a situation where we might have to liquidate our investments at times not of our own choosing. If the money is needed elsewhere or asked to be returned, we might end up liquidating at prices we would not have sold at otherwise.


Remember, always Gardenia!


The letter "w" in "with" stands for war chest. We must always have money put aside for opportunities. Remember that this is not just cash in our bank accounts but also money in our SRS account and CPF-OA. I explained how the CPF-OA money should be the last war chest we use because it earns 2.5% per annum in interest, risk free.

The letter "i" in "ink" doesn't stand for squid ink. It stands for income, specifically investing for income. I explained how all of us have to have earned income unless we are born with a spoon made of some precious metal in our mouth. If we invest for income, we would be able to benefit from a growing stream of dividends.

Investing for income is important in providing me with peace of mind because it is:

1. The best form of insurance, self insurance.
2. A fountain of wealth that fills my war chest.
3. A contributor to my improving financial resilience.

Finally, the letter "s" in "slowly". It stands for sizing. More specifically, position sizing. I explained before that if we lose sleep over an investment, then, very possibly, we have too much money in it. We might want to whittle the position to a size that will allow us to sleep better at night.

So, do you want to have peace of mind as an investor at any one time? You do?

Then, remember to eat bread with ink slowly.

Related posts:
1. Financial security: 5 points.
2. Making recovery from losses easier.
3. Investing for income and position sizing.

4 comments:

Sillyinvestor said...

Hi AK,

Thanks for the reminder, but the way, you are vested in QAF? Why gardenia? I always buy long value pack from NTUC or cold storage house brand

Sillyinvestor said...

Cow head 3 packs in 1 bundle cheese at less than. 8 dollars. Value for money and also by QAF

AK71 said...

Hi Mike,

Aiyoh, why you liddat say? OK, you got me. I am a QAF shareholder. -.-"

Supporting my companies and getting paid in the process.

I bought the cheese liao. You buy more, OK? ;p

E H said...

Devondale better. Also 3 for $7.95

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