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Saturday, 21 March 2015

I challenge you on the 80/20 Pareto Rule!


Have been coughing my lungs out this whole week and even losing my voice for a few days due to the sore throat...

Today feeling better and will be off to work soon.

Now that I've got most of my mojo back, can't help myself to have some fun...

Readers who have thin skins or if you are not familiar with my style, you may want to stop and desist - stop reading.

Only regular readers who are already immunised are recommended to read further. If not, guarantee you will be moody the whole weekend!


First, let me refer you to this interesting blog post by B (I like him; but not in that you OK?): 


The Pareto Principle (80/20) Investing Strategy


Let me ask you some poking questions to see if your understanding is only "skin deep":


1.  Look at your portfolio. Now tell me were they bought based on using the 80/20 rule? (Be honest now)

2.  Explain what is that -40% stock doing in your portfolio? Is it still part of your 20% focus?

3.  Between your earned income and investing returns, which is bigger? Pray tell how much time resources are you spending on your job versus your investments? Explain your understanding of the 80/20 rule to me again?  (And you wonder why you are not doing well in your career)

4.  And for those who have set your financial freedom goals, milestones, and plans; have you done the same for your career? Your family? How about your spiritual goals if you are not an atheist? No Life goals? 

So you are saying the rest are not part of the equation? They belong to the 80% trivial? Your happiness comes from the 20% activities that you have identified as financial freedom? (Please don't let your boss, wife, children, and spiritual leader know)

5.  Do you want our teachers and tuition teachers to practice the 80/20 rule on us and your child? In practice, what's reality? Who's your favourite teacher when you look back? Did they practice 80/20 on you? Are you one of those who support more resources should be spent on elite schools and less on neighbourhood schools?

6.  You are definitely not one of those who complain about income inequality. If those 20% of the elites are ones who generate 80% of the revenues, they should be rewarded with 80% share of the profits! Wrong meh? 

7.  If you are an aspiring writer, singer, or entrepreneur, and you are now "wasting" your evenings and weekends on doing what you really love - your passion. How would you respond to that well meaning friend/relative who is trying to convince you to end your dreams with: 

"Look, you are earning peanuts from your passion. Stop your silly dreams and focus on your day job - it's providing the 80% of your livelihood!"



Its fun and you feel empowered when you agree with the 80/20 rule. That's knowledge. 

You know what's wisdom?

Wisdom is what you do when you discover:

Your boss, your company;

your spouse and family;

your friends;

your teacher, spiritual leader, mentor;

your broker, insurance/property agent, banker;

big daddy


they somehow don't see you as belonging to that famed 20% that they should spend 80% of their time and resources on...




37 comments:

  1. Replies
    1. CW,

      No fun one. You already agree with LP it's an outcome. Then it's not something we can set goals to, plan with, or execute either as a strategy or tactic :(

      Like that how to poke you?



      Delete
  2. What i know is you just observe which page a person reads first most of the time, be it magazine, newspapers to cyber-news or how much time he spends a day on what, is also applicable to the Pareto Principles.

    It can not be he is always thinking and reading which horse to punt that he is also an investment expert in the stock market.
    i think "PP" it is very close to "What you sow , you shall reap". Same as the Chinese saying, "What seedlings you planted, is what fruits you get. It can never be you planted rambutan seedlings and you get durians. It never will.

    You never will become an investor when all you do is out at sea fishing.
    By the way what do you think i have been doing most the past 26 to 27 years, besides the normal wasting away the time of my life.
    And how should i count my time spent here based on Pareto Principle?
    20/80 or 80/20 or what?
    Never mind make money can liu.

    ReplyDelete
    Replies
    1. temperament,

      I always have a good laugh when I read about 5 minutes a day or weekend armchair investing.

      There's a difference between writing articles/authoring books and doing it in practice.

      Just look at Warren Buffet and Peter Lynch (and all the other acknowledged and verified gurus) - how much time do they spend on their craft? How many part-timers you see on the list?

      At least those who practice Low Cost Passive Index Investing with Dollar Cost Averaging are more honest with themselves when they admit they neither have the time or aptitude to practice Active Investing on their own ;)

      Delete
  3. Hi SMOL,

    I love the financial blogger space. To some, it is encouraging that investment is important and we should invest. Not only in stocks but ourselves.

    But one thing that can be detrimental is that the newbies will think that now investment can give you 6 figures 5 figures passive income. It is going to be their focus - 80% on investments. Then although they spent more time in work, its going to be their 20% focus. Then it is just sleepy and routine and boring.
    Even thinking that they are smarter than all their bosses and colleagues, because they know investments.

    The forget that the experienced ones online are sometimes only showing one side of the story. They themselves had already climb their way up to have the experience and salary comfortable enough, before they start to use investment as another tap of income or a backup.

    Anyway, I am 80% work, 20% leisure. My 20% leisure does not give me my 80% income. It actually takes away..haha

    ReplyDelete
    Replies
    1. You saying SMOL?

      Coming back to SG to turn on another tap in 2009

      :-)

      Delete
    2. What many investment bloggers didn't tell us how they build up their large account size?

      Delete
    3. CW,

      Just read my first blog post and My Story tab and you'll find for a snake-oil salesman, I'm surprisingly "transparent".

      My first pot of silver was from earned income as a corporate opportunist.

      I came back in Dec 2011 OK!?

      With my lifestyle secured, and my "plans" to backpack round the world "postponed" by mom's condition (life is not a straight line extrapolation), I switched to plan B - trade to achieve!

      And it turned out surprisingly well!?

      LOL!

      Hence you think why I am a cheerleader of being a leaf in the wind? Terrifying for those who can't "let go" ;)

      Delete
    4. Rolf,

      When it's a crowded trade - everyone on the same side of the boat - there will be a butterfly, or fisherman, or grasshopper to ask the silly question: Got shadow or not? 有影吗? Say it in hokkien.

      Now we have you - Rolf the Oil Man - to ask whether those people got wear clothes meh?

      LOL!

      Delete
    5. CW,

      Ha ha! Finally got chance to poke you!

      Look, let's take one of the top elite fresh grad, assume he earns $6,000 per month as starting pay, and let's believe he saves 80% of this salary - anyone with primary school math will know he had "outside" help if his portfolio value exceeds what he can earn and save at his age ;)

      Wait. This is not the poke.

      Since you like to measure your investment performance using XIRR in percentages.

      Why should you care whether that person has started with $10,000, $100,000, or $1 million? With or without outside help?

      Percentages remember?

      How?

      LOL!

      Delete
    6. I am not Oil Man.

      I know u r not a bleeding heart. Like u say, it can be hurting in the above post. Still reality is harsh.. haiz.

      My wife says I got ice-cream heart. I wanted to add some encouragement to the initiator of the 20/80 post. That is why after some thoughts, I "jam" brake and make a U-turn.

      but hor.. then I become a poor thing, who had foot in my mouth..

      ok foot in my mouth.. :-x

      Delete
    7. Rolf,

      Twist and turn - not oily? LOL!

      Well, you have to make up where mind who you want to be - an ice cream heart or someone who will tell it like it is.

      See? Write proper posts until no character; no soul. The best I can come out with is Oily Man since you're from the Oil & Gas industry ;)

      Delete
  4. few possibilities. Can be hurting if u r one of them..

    - the older ones are likely to profit from property. then start invest in stocks n then tell pple property is not a Gd investment..

    - Father n Mother money. Then pretend it's their own and say that their portfolio is v solid. or father n mother pay their property n marriage or kids so that they can save a lot for stocks.

    - normal income savings... like me.. most Cham... portfolio v slow.. Luckily I work hard earnestly in work.. but I remember someone laugh at me .. say Even I become CEO they r shareholders n can shake leg no stress while I got all the work stress n shit ..

    - many other means.. moonlighting?

    - sell books.. seminars...

    how about u..

    ReplyDelete
  5. CW,

    I know I Cham (cliche) becos I live my life myself. :-) paradoxically it's lucky.

    By the way, u do not live my life, how come u can compare n noe u chammer than me?

    focus on ourselves! haha :p

    ReplyDelete
  6. Hi SMOL,

    Haha, I had enough fun on B's blog already :) let others have their fun ;)

    Hey, you take care and drink more warm water to sooth out your cough :)

    ReplyDelete
    Replies
    1. LP,

      I know. Saw your excellent poke.

      They say cough cannot eat fruits or drink cold drinks. But how to get vitamin C then?

      I discovered hot Ribena!

      Try it. Hot Ribena taste just as good!!!

      Just don't mind the funny look mom gives me....

      LOL!

      Delete
    2. It's been years since I've drank ribena, don't say about hot ribena lol!

      But follow my wife's recipe lah :) she'll have a glass of lukewarm water, squeeze half a lemon into it and drink it. If you want some sweetness to go with the sourness, add some honey. It'll be quite soothing. All of us make a living by talking, so better take good care of voice ;)

      Delete
    3. LP,

      Thanks!

      Oh! I forgot about honey!

      Delete
  7. Bro u didn't follow the hidden rule haha
    Not swee also must say swee la
    No give face leh haha
    But I think u are right
    Admire you to speak your mind, that should be the way
    In work we already very careful with our words
    In this blog space we should speak our mind la

    U sick already so hiong if you recover it will be worst haha
    Take care and fast recovery bro

    ReplyDelete
    Replies
    1. Jimmy L,

      You joined this watering-hole recently.

      My early first year blog posts were where I've expressed how I used to wear a mask or wore amour.

      You may want to listen to this one of my favourites:

      I wear mask; I feel pain

      Hope you can read the chinese or japanese subtitles.

      One of the perks of being a man of leisure at 48 is I've reached the stages of what Confucius called: 40 不惑 and 50 知天命 ;)

      Remember! The strength of youth is you don't know what cannot be done!

      So don't be too quick to listen to older men.

      Listen to yourself. And don't be afraid of a few bruises and going on some detours....

      The journey is the fun part. Once you've reach your destination, you'll have to figure out this boring question: What now?

      Or this more infamous: Then what?

      Delete
  8. Hi SMOL,

    I just wrote in B post that ultimately he wrote a fantastic article for us to think.

    At least he make u write a proper blog post ... not just attach 1 or 2 pictures .. go take a look at ur last few post... 20/80 .. only 20% effort and want to get 80% result..

    Now go eat medicine, drink more water n recover fast... we await ur return comments..

    haha... :p

    ReplyDelete
    Replies
    1. Rolf,

      How about writing in your blog and share with us your wisdom on what you consider as a "proper" blog post?

      I think not only I will benefit.

      I'll jio the oat meal guy, the fisherman, and the butterfly to join me too ;)




      Delete
    2. Hehe..atmosphere is heating..

      Never step onto the tail of a cat.. a big cat in the jungle.

      Time to change subject to cool it down.

      Let's go fishing, eat oat meals and enjoy the butterflies. :-) And write some proper blog post.. hahaha


      Delete
    3. Rolf,

      It occurred to me I've not tested your poke tolerance yet. Was testing how much I can get away before you 反脸。

      Just like I wouldn't dare tell a woman what she can or cannot wear, you better open your eyes big big, don't anyhow poke hobbyists bloggers.

      Got consequences one.

      Hobbyists bloggers have no X pageview goals or Y earnings from blog objectives.

      Hence will not treat readers as "customers" ;)

      Delete
    4. Hi SMOL,

      So tolerance pass?

      I suspect my ice cream heart can be frozen at times! Depend to who? We r all nice pple here, so no need!

      Having reported at gate of King of Hades once (b4 U-turn), I treat pokes as mosquito bites. But, mosquito bites can be fatal also, so need to 反抗 at times! :-)

      Anyhow poke can also get HIV. And by a old man some more...yucks! LOL

      Ok noted on the consequences. Will "Zha Lart!" Hor?

      Btw... wats is on 30th?

      Delete
    5. Rolf,

      I rather mix with people who disagrees with me but have strong convictions in what they say or believe. I respect.

      I'm not so insecure that I must mix with people that always agree with me.

      Hence when I read some postings or comments I enjoy, I like to verify whether the person has conviction behind it.

      I think you have seen some bloggers after making a song and dance - with dragons and phoenixes some more - with just a simple poke, completely capitulates and make a complete 180 degree turn.

      Why should I take what he writes in future seriously? He just parrots what he read elsewhere and re-package it in new bottle...

      That does not mean I will not admit a mistake or wrong (one of my top 10 post is me admitting I were wrong); but must show and explain why I had a paradigm shift mah!

      输人不输阵

      Delete
  9. Hi SMOL

    Good to see you getting your mojo back ahead of the 30th (which Rolf is still figuring out what event is that) :)

    Your 3rd point came across very interesting to me because I just realized that Ive been putting in 80% of the time physically in the office with only 20% of the effort while for investment it's probably 80% time and 80% effort. Shucks, somewhere along the maths doesnt tie up no wonder I'm feeling as exhausted as it is :) I hv not even included time for family so everything needs to be pro rated again. Lol

    ReplyDelete
    Replies
    1. Hi B,

      Maybe that is what we trying to put across!
      Hands in.. hoosh.. hoosh...hoosh!

      Or take a break. Bali?

      :-)

      Delete
    2. B,

      Thanks, I'm feeling better (especially after playing with Rolf).

      If not for my cold, I would have also joined next Monday session to "kaypoh" a bit although I not on the panel.

      Don't forget our Asian strength - we are more holistic than Western thinkers when it comes to philosophy and view of life ;)

      But must give the West kudos for their single-minded focus on Divide and Conquer. With this simple blinkers-on 80/20 rule, they have colonized most of Asia! Incredible! OK, having bigger cannons help too.

      Divide and Conquer won't work on the 2 of us ;)

      Delete
  10. Huh ?

    Really got people spend 80% time on researching on investing and 20% on work meh? If he is still employee? Mathatically it is impossible?

    If u mean mental strength in always thinking about investment and not work, then your argument also mathematically flaw since if we mentally also think about family, work, friends spirtual, how to say one is 20% core and rest 80% trivial?

    I think B is talking about in investment 20-80,

    In your relationship also 20-80.

    We really care only about the 20% of people we know isn't it ? Unless you bleeding heart.

    In you lump all the domains together, you are just seeking to confuse, isn't it??

    ReplyDelete
    Replies
    1. Sillyinvestor,

      B was here and he has given his thoughts and opinions.

      We don't have presume or assume what he meant ;)

      You last question: "In you lump all the domains together, you are just seeking to confuse, isn't it??"

      Now that's very interesting!

      That may depend whether you are more a Dr Jekyll and Mr Hyde person - you see the work professional you as different from the family man you; the investor you is different from the spiritual you, and so on...

      The alternative view is you see a HOLISTIC you - you may have different roles at different times of the day, but its still the same ONE you.

      That means you can't be the same spiritual person during the weekend that sings against greed (its a sin in some faiths) yet feverishly set goals during the nights to increase your wealth by X folds because you have no desire to work (sloth)...

      And you won't say family comes first in a survey, yet work 60 hours a week in actuality because you simply LOVE what you do at work...


      Still crystal like mud?

      Delete
  11. Hello SMOL,

    You have a knack for generating comments longer than your blog post.

    Not jumping into "here's-my-take-on-your-article" here, because (1) I'm lazy; and (2) my opinion hardly matters.

    To me, life is never black & white, but many shades of grey. If we can reduce life/investing into a mathematical formula, perhaps there won't be so many miserable folks in life.

    All right. Enough said. Time to MMOB (mind my own business). :X

    ReplyDelete
    Replies
    1. SRSI,

      Welcome to shades of grey!

      Liberal arts and right-brained people like me always have a field day when we play with CNC precision black and white tinklers ;)

      You know what's interesting?

      The original writer B wrote a good piece. I merely expanded it to include a wider holistic viewpoint. B wasn't offended; and even big- hearted enough to share one of the poke I inserted - the math just don't add up....

      This is what's so great about this little community of ours - speaking our minds and sharing different viewpoints from different angles. It's a nurtured community; and I don't take it for granted ;)


      SRSI,

      I don't blog with any "rules" in mind. I am a swan that's here and gone; I'm not tied up to the ground ;)

      Similarly, you won't find any "No slippers; T-shirts; bermudas" rules here on commenting :)

      So chill and say what you want to say, whenever you feel like it. Just as long you happy can oredi!

      No need must make sense or be serious one :)



      Delete
  12. investing 20/80

    trading 01/99 (or smaller)

    ReplyDelete
    Replies
    1. coconut,

      Yes, the last 10 months I've finally managed to experience what it means to have 1 big winning trade that over shadows all the rest of small cut-losses.

      Reading about it is one thing; having experienced it personally is another. My understudy of Trend following has been verified ;)

      And at the same time, this also translates to my first virgin 10 bagger. Yup, Peter Lynch was right. One 10 bagger can make up for a lot of lemons and duds.

      There you go!

      I bear testimony to the unification of Growth at Reasonable Price (GARP) investing and Trend following trading styles.

      Ying and Yang in harmony with the Oneness of being.

      Delete

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