Anyone remember the story of that taxi-driver who shared he earned $7,000 a month?
Then it was discovered the $7,000 were his best months; not the average per month...
Hold this thought.
It never fails to tickle me pink when I read about self-professed long term "investors" are so enthused into comparing annual performance returns, benchmarking this, benchmarking that.
It can become like during the Cultural Revolution in China.
"Next year my annual production will be 10% higher than last year!" village A chief shouts.
"Our village will hit 20%!!!" exclaimed village B chief with an even louder voice.
Village chief C stands up in a superman pose, one arm on his hip and the other pumped up to the sky, "Our village will strive for 50% increase!!!" (Is this or-yi-or Tarzan power or what?)
Everyone claps; everyone cheers!
Long term benchmarking for long term investors
I often poke this CW qian-bei whenever he writes about goal settings and KPIs. That's because it's a wonderful tool used by land owners and puppet masters on their minions. But why would free man use it on themselves? (That's another story for another day)
 |
| Long Term Benchmarking for Long Term Investors |
But I have to give credit where credit is due. His kung fu deep or what?
Do you judge the performance of a marathon based on the timing of the first 2.5 km?
Annual performance results are merely milestones; not destination.
The minimum period for CAGR is about 10 years - around 2 Bull/Bear cycles.
Huh? So long... No fun one!
Well, if you want bragging rights that you beat Warren Buffett and Peter Lynch last year, don't let me stop you. Like they say, face is what others give you; shame is what you brought upon yourself. Cultural Revolution benchmarking! Who shouts the loudest wins (just don't ask about delivery...)
Far from being a party pooper, if you starting your journey, just have fun and make as many mistakes as you can during the early stages of your journey. Numbers per se don't mean as much as the learning along this journey of yours.
Whether your strategy today is dollar cost averaging, buying into low cost index funds, dividend stocks investing, DIY value or growth investing; it's mostly based on trust.
A day will come when you will have your own mind-flip, epiphany, paradigm shift, "a-ha" moment or whatever you choose to call it.
That's when you can verify the actual results of your trust.
Trust but verify.
This is the time you either exclaim "This shit really works!", or you go dejectedly "I have to make a change... This is not working as well as I thought...."
If anyone and everyone can do it, we would have to import more foreign talent as no Singaporeans would be working after 40. Or?
Short-term benchmarking for short term traders
Traders are more practical. Especially if trading full-time. You can't buy anything with percentages, so it's always about "show me the money!"
Day traders are more interested on improving themselves from an average $50 per day to $200 per day, to $1,000 per day trader.
Something is not right if day traders ask for annual performance returns in percentages...
For swing traders, it would be like our tax-driver in the beginning - how much we make on average on a monthly basis..
Who uses annual performance returns in percentages?
If long term investors and short term traders don't use annual returns in percentages as their main KPI, who the freaking hell use it?
1) Professional money managers. Duh? Their annual performance bonus is based on it. Have you heard of year end "window-dressing"?
2) Salespersons and promoters. I'll let you figure this one out yourself.
Amazing ... muted response from those who visited and read this article so far. Anyway, l prefer looking at absolute numbers comparing to percentages. The only time when percentage becomes important is when l set my exit selling price to either match or higher than the bank savings rate or fixed deposit rate. l do not want to be Peter Lynch, Warren Buffett or Walter Schloss. l am, myself.
ReplyDeleteSometime good to set low target like beating bank savings rate or fixed deposit rate. Getting more passes than failures. :-)
DeleteMoney Honey,
DeleteSometimes all it takes is the first person to sing a tune and the whole group will sing along.
We see this a lot in business meetings. During meetings, quiet like church mouse; outside at the water cooler dragons and phoenixes...
It a priviledge to meet you Money Honey - not a someone wannebe ;)
CW,
DeleteTo get average 10% a year for 14 years, those weak in maths (slapping myself again) may not realise that it's par for the course that in some years, you will get an euphoric +50%, and in some years you get a miserable -30% return.
Getting too excited or despondent can be bad for staying the course with our long term strategy.
Especially if we switch strategies every 2-3 years based on our annual returns and comparing to the benchmarks of anonymous people.... (when we have published benchmarks of recognised gurus and institutions)
that is why investor has to stay invested at all times, regardless of how bad or how good the market becomes.
Deletegetting out from your investment actually run a bigger risk of not getting the long term returns.
if you are a investor, always stay invested, thats the name of that game if you want to win.
Psst.
DeleteTrading around a core position helps to relieve the boredom and itchiness of sitting tight. We are always vested; just varying the position size according to the tides of the market.
thats more like position trading, not investing!
Deleteyou can't call yourself an investor, but if you like, be my guest haha.
So Coconut is Positioning and SMOL is Swinging?
Deleteto make money in investing, you first must get the concept right. so far the best investment blog i follow are the followings.
Delete1, CW blog
2, AK blog.
i would be very surprise if they can't make money in the long run.
sorry smol, i can't include yours cos er er er...you don't "sound" like an investor to me.
swinging? my position does not really swing, i don't know how smol swing haha.
Deletethe concept of position trading is quite similar to investing such that no portfolio, no returns. no positions, no profit to extract. i must maintain a sizable position most of the time.
coconut,
DeleteDon't insult me by calling me an investor OK? I'm a swinging bachelor, a man-whore, and a free-loader.
I know you are mechanical trader, but I saw you roaming around some investment blogs... You want to become a hybrid?
you know most investor are also mechanical based? they just sit there and do nothing except collect dividends. their system say do nothing! thtas what they do, nothing.
DeleteHmm...
DeleteYou are so cute and "different" that I don't know how to poke you.
I'll leave it to real investor comment on what you have just wrote.
LOL!
i'll repeat what i say. the best way to invest is to stay invest and do nothing!
Deletecome, poke me haha
DeleteOK!
DeleteThis is a bit rich coming from someone who made 63 trades a day!
Song bo?
Real investor don't stay invest and do nothing. Rich people practice asset allocation. They move money around. Invest for the long term and trade inside the invested counter.
Delete1) SGYI,
DeleteWonderful!
I wish more youngsters can be like you in 2014 - step up and don't be afraid to challenge the views of qian-beis!
This is a risk-free environment (especially if most of you are not using real names).
It's not about winning an argument or earning brownie points. It's more about iron getting stronger the more it's hammered under the heat of fire at the anvil.
I benefit a lot when I got poked and I go:
"Hey! That's interesting! I never saw it that way..."
2) coconut,
Be nice now.
And don't play dirty by throwing down the "I eat salt more than you eat rice" card!
Wriggle and turn!
LOL!
Hi SMOL,
Deletecoconut is qian bei? Opps, i really didn't know that. I'm new here anyway.
SGYI,
DeleteLOL! There you go! That's the advantage of youth! Not knowing is your strength!
Don't worry. He is a teddy bear although I not sure he got "ang kong" on his body. He used to play at Geylang area one.... (you die!)
Qian bei coconut is a full time trader who trades from his dungeon at home. Makes and loses in multiples of $100,000.
He is ex-business owner (puppet master class), and one time billiard hustler (rogue class).
Just walk back slowly and whistle the smurf song - la la lala la.
haha happy new year everyone.
Deletei'm up not to do count down but looking again to short the US index.
well, somehow you 2 are right, especially SGYI, i'm old school investor and i don't even invest at the present. but that doesn't mean old school are dead either.
anywhere i stick to what i say, trading round our position or moving around our porforlio is great but you have to be careful of not losing your positions.
i think i'll wait for next year to look for entry point.
Hi SMOL,
DeleteYou describe coconut until so scary. But powerful too. Lol
Hi coconut,
Wise words from you. I agree we have to be careful of not losing our positions. Trading and investing are 2 different thing in the end. It's already mext year. Time to look again :p
Happy new year to both of you. Have a prosperous 2014!
think about it, cutting losses is important but i put letting profit run on top of that. if you can't achieve that, most likely you are not going to survive for very long. same principle applies to trading and investing.
Deletemany investor don't even bother to cut loss, as long as they offset it by not cutting their profit as well, it works for them.
hey, the man got to say what he got to say, what salt and pepper.
oh nice knowing you SGYI.
Deletepsst smol, my secret life goal is to achieve one more zero behind, don't tell my wife! (2009 and 2010 were flude)
DeleteSGYI,
DeleteSee? Teddy bear right? Makes you want to hug him! OK, maybe that's a bit over!
Have fun and enjoy your youth!
Do more; listen less.
coconut,
DeleteI think you are a good example of what it takes to be a REAL trader - not what you say, but what you do.
New Year's eve and still watching the US market for shorting opportunities. Now that's dedication!
All we want is just a small tiny zero behind our account only...
Are we modest or what? (sticking out my tongue)
LOL!
to tell the truth, most of the time spend dedicate to trading are not during trading hours.
Deletetrading hours are merely going through motion based on the system. the bulk of real trading are done off trading hours, seriously!
coconut,
DeleteMy sentiments exactly. It's what we do outside the "official" hours that separates the winners from the average performers.
We see it at school and at work.
I have a neighbour that used to be in our Singapore water polo team.
Train before going to school. Train after school. Train during weekdays. Train during weekends. That's how he finally made it to the Singapore water polo team.
I am too damn lazy... (excuses, excuses...)
Steve Jobs is right. Everyone wants to go to heaven; but no one wants to die first to get there.
i think you are right, me being a thinker makes thing easy for me. is not that i think very hard, its comes naturally. in fact if i don't think, i will go mad!
Deleteso i don't think you are lazy, your brain are not wired to do so.
add some screws la!
coconut,
DeleteWait.
BANG, BANG, BANG.
That's me banging my head against the wall.
Tak boleh tahan. Someone with no screws in his head asking me to add more screws... So I can be a "natural" thinker!?
Wait.
BANG, BANG, BANG
Readers, that's how you supper poke someone. coconut power!
coconut, I'll remember it. Pain man...
%$#$^&*^$!!!@!
LOL!
the best benchmarking in my opinion is yourself. you vs you in the flow of time.
ReplyDeletecoconut,
DeleteSomehow I am not surprised ;)
You are "different"; I am not mainstream.
If I am not defeated by myself, that's already a victory!
Laziness, sloth, inertia, procrastination, tardiness... I don't have to look at others. I am already my own worst enemy!
LOL!
Hi SMOL,
ReplyDeleteThis is my maiden post. Haha.
Personally, I think benchmark is important and useful if the end goal is to improve oneself. Of course, we might fall into the trap of boasting or denial. If we do not fall into the trap, it is a good monitor, anyway, long term goals need short term milestones to guide the journey, so no problem looking at annual performance relative to the market and other performance.
The weird thing is, when I blog about how poor my records is when compare to others. Many comments that offer encouragements (seriously hope I dun offend anyone, I sincerely appreciate the kind words ), start with denial of others' credit or performance, like no point looking at short term, only tell the good, fluke ...
It remain me of 士气论，in my favorite comic 火凤燎原，if during a personal dual, our general lost, say the enemy general is lucky, if he won again, say our second general is complacent, if he won the third time, say he 有勇无谋。well, if that's the definition, I rather be 有勇无谋in other eyes...
Haha...
sillyinvestor,
DeleteThis is what I like about blogging - the cut and thrust in debating an opinion.
And then we get a gem like yours that illuminates us from a different direction - denial.
The limitation of experience is knowing setting a CARG goal of beyond 30% can be setting one up for disappointments.
The advantage of youth is not knowing that it cannot be done! So you go an achieve a +30% return for the next 10 years despite the odds against you!
Records are there to be broken.
Hey SMOL,
Deletemaybe that is what they call“初生之犊不畏虎”，the young cub is not afraid of the tiger. If anyone is wondering, the phrase is usually used in a demeaning way, so I am chiding myself...
Anyway, the milestones and end points, aka returns and capital gains are all but the various end points, I enjoy the journey much more!
No pointt missing the trees for the forest, the thinking behind business, the trying out of various hypothesis, the understanding of various concepts, I think it really helped me cognitively.
I was rather surprised when I went for those sleepy and slogan shouting year end seminar at work, I can actually remembered what are presented after seeing it only once, and applying it during small group discusion. I usually can only remember the gist of presentation, but this time round, I remember the whole process of creativity (*yawn yawn) they are trying to present.
Guess trying to decipher "Security analysis" by Graham, does help sharpen the mind, although I cannot last more than 1 chapter a day...
sillyinvestor,
DeleteHow do you eat an elephant?
Do what you do; eat one mouthful at a time!
Yup, I was one of those cheerleading facilitators at those seminars and workshops ;)
Hype up the flock so they can help me achieve my goals (we don't tell them that!), and this in turns help to achieve my boss' goals and up the food chain it goes.
It's good to stop and smell the flowers and remember why we started this journey in the first place - for others or for ourselves?
Happy New Year!
How do you eat an elephant?
DeleteAns: Use Mouse to eat Elephant.
Think Gen X, Y or Z may not know this.
Coconut will know. Right?
huh...
DeleteAre you talking about the animal chess? I know lor... I Gen Y thou
CW and sillyinvestor,
DeleteI am born in the 60s - that should make me Gen X - the Star Wars, Ultraman, and Xiao Tian Tian generation.
Oh my god! Xiao Tian Tian? I actually got watch this girlie cartoon!? Anthony! The girls were all interested in him!
LOL!
Yes, the Animal Chess game.
In real world, Man scared of Wife, Wife scared of Mouse, Mouse scared of Man.
Lom Jiam Pass?
" face is what others give you; shame is what you brought upon yourself" - SMOL
ReplyDeleteThank you sir for these excellent words to close the year off. Definitely one that I should ALWAYS remember - too often I give myself more credit than is due.
ckw - love long long,
DeleteThanks for liking my cheena england! (My england teacher must be face palming now)
Ah! Someone with love in his/her heart. What else matters?
Love oneself; but don't take ourselves too seriously.
Travel light and always moisturise!
Have a super new year!
Just wanted to wish you a Happy New Years to you Sir
ReplyDeleteThank you Tseten and right back at you!
DeleteI simply love your profile pic!
You're the man!
Now to see if I can convince my busty friend to pose that way with me. Wait... She's married :(
Personally I think for traders Percentages are important. However I see what you are trying to say. Something to think about.
ReplyDeleteHappy New Year Kate!
DeleteDon't take what I say too seriously. I merely shooting the breeze here now ;)
Hi Smol,
ReplyDeleteWhat we do actually no matter what is your plan or investing style or your intellect?
We just buy, keep for a little while, keep for a bit longer, keep for years and then sell. And then we repeat. For those who sell first then buy at times and make money, my respects.
i just have to remember the process is more important than the result:-
Extract:-
There is a nice story to illustrate this: in a US jet engine factory, a defective engine has just been produced - it has a cracked turbine blade. The engine is due for delivery today, and there are six engineers working on it to try to fix it. In their process-oriented Japanese competitor's plant, a defective jet engine has also been produced, also with a cracked turbine blade. It's also due for delivery today, but no-one is trying to fix it. Instead, there are six engineers trying to figure out how the blade got cracked in the first place.
temperament,
DeleteThere lies the nugget of gold from veterans who learnt the hard way about the real essence of an Investing Diary or Trading Journal.
It's not about XIRR, ROC, or AR numbers. It's about what you have shared ;)
Happy New Year and peace be with you.
Hey Mate,
ReplyDeleteHappy New Year in the first day of 2014! Huat ah to start with!!
Benchmarking against our own target growth will be good enough in my view. If we start comparing, will we feel miserable or more motivated? Guess different ppl got different perspective on this. Dont need to argue lah! Haha
Life's too short to worry of this, money is just a tool for us to give a comfortable life to our family. They happy then I am more happy! I will grow them at a my own comfortable rate of returns because I know I am not Warren Buffett but an average Singaporean! Keep it simple, Save -> Invest -> Retire!
For me, I will continue to add laughter and value to people around me in 2014 as my main goal!! Hopefully I will also be able to adjust back to Singapore life after staying here for a year!
Ending off with another rounds of Huat Huat Huat!
G-day mate!
DeleteYou are indeed refreshing!
Yes, love yourself, love our family, love thy neighbour.
Don't forget to get that tan while your're there down-under!
Makes your wifefy want to scratch your back and go MEOW!