The basis of all learning lies in the Questions. If you are hungry for knowledge, the first thing you will have in your mind is a question.
If you have kids at home, you would know what I mean. You are subjected to a constant barrage of questions on anything and everything. Kids are hungry to know more and more about the world and things around them. Questions is their way. A why, what, how, when, where.
Socrates, the Greek philosopher, had a method, famously called the Socratic method, where a series of questions were asked to delve deeper into the issues at hand. Questions is what he emphasised on.
Questions or Answers
Someone did say, “the questions are more important than the answers“.
The aim of questions is to provoke your thought process which can then lead you to seek possible answers.
The answers may not be available to you now, may be not in the near future too. But as long as you keep asking and looking, they will appear, sometimes almost magically.
Questions to you – the thinking Investor
Coming to the topic of investing and behaviour that leads to investing success, I ask you these 5 questions. Let me remind, the purpose of these questions is to get you to think. And when you read these questions, read them without bias and think about them without any bias.
You would like to spend at least a couple of minutes on each one of them.
Here we go.
Question #1
Is my investment portfolio a reflection of what is important to me?
Question #2
How much risk can I tolerate in my investment portfolio? How much is actually required?
Question #3
How does each of the investment in my portfolio bring unique value?
Question #4
What factor accounts for over 90% of my investment portfolio returns?
Question #5
What will I do after I have retired, financially?
No prizes for any answers here. The clarity in your own mind will be your biggest reward.
With clarity, you will achieve the true alpha, a life of difference.
If you would like, do share your thoughts on these questions in the comments or as a reply to this email. I await for them on the other side.
Question #1
Is my investment portfolio a reflection of what is important to me?
Ans: Yes, I believe so. Every penny I am putting in is linked to a goal which in turn has specific time-frame, which in turn helps me in deciding the asset allocation. My target is to reach my goals by taking as less risk as possible and not bothering too much about the return, this helps me sleep better at night. Also for me, Investing is about effectiveness. My family is not concerned with how much returns or how many multi-baggers I have in my portfolio. Investing for me is about fulfilling every financial goal with the least amount of stress.
Question #2
How much risk can I tolerate in my investment portfolio? How much is actually required?
Goal-based investing’s biggest virtue is that you don’t have to measure/worry individuals’ risk appetite rather you take risks as per the time-frame and importance of reaching your goal. Eg. Buying a car can be delayed by an year or two but kid’s education can’t be delayed. Now you know where you can take more risk.
Question #3
How does each of the investment in my portfolio bring unique value?
I am slowly moving to an index investor. I understand the pros and cons of it. The biggest virtue of index Investing is it’s simplicity and cost. Returns could be moderate but I am investing more to compensate.
Question #4
What factor accounts for over 90% of my investment portfolio returns?
Time in the market, patience and most importantly my own behavior.
Question #5
What will I do after I have retired, financially?
I will work as long I like and whatever I like to do then (Mostly teach college kids) Will read books and watch movies, lots and lots of it.