One of the most common feedback I hear is this,
“Wilfred, I always lose money in investments. I have no luck.” OR
“Wilfred, I have invested with many financial advisers and I always lose money.”
Sounds familiar?
What are the reasons why investors lose money? Let me relate to you a story.
Mr Tan (not his real name), invested with me in 2007. At that time, the Singapore economy and the region was growing rapidly. The stock market has done extremely well for a few years since SARS in 2003. Mr Tan has a job and not just another job. It was his dream job. Then came the global financial crisis in 2008. His portfolio with me crashed to nearly 50%. Every day he would text me asking me when the nightmare was going to end because everyday the stock market went down by a few percent. There was no such thing as a rebound then. Unlike other investors, Mr Tan did not sell his investments at a loss. He trusted me and waited for recovery. In 2013, his portfolio recovered to its original value. That was 6 years of wait! Unfortunately, he ran out of patience and decided to sell everything at the breakeven prices. Although i advised him it was unwise to liquidate everything, he still proceeded with it. We lost contact for many years since.
A few weeks ago, we got reconnected back again. He shared with me that over the last many years, he still did not make money from investments and he lamented that he has no luck. However, I told him if he had stayed with me until now, he would have tripled his capital because what came after 2013 was nearly 10 years of bull run!
So now, he is getting interested to invest with me after 10 years of bull run. What do you think will be his return moving forward?
If you think about it, was it really bad luck? I am not sure whether you see a pattern and whether you can relate.
Most investors are keen to invest when they are happy. They are happy with their job. The economy is doing well. Governments are stable and stock markets doing well. Because they are optimistic and look forward to a bright future, they are keen to invest for the future. However, that is actually the worst time to invest.
You see, the stock market anticipates the future. We call this the leading indicator. That is to say that the happy rosy and the feel good factor of your job, economy, stability etc are already priced into the stock market. That is why, you could be investing in the worst possible time because the market may have peaked.
Looking at this S&P 500 chart below, if you have invested in the US stock market in 2000 which is at its peak, you would have suffered losses for 13 years before you actually breakeven.
You see, the best time to invest is when everyone is pessimistic. Pessimistic about the economy, worried over political instability, war and the loss of job. The question is this, will you invest when you are depressed? The likely answer is no….
Just as you are likely to tighten your belt during a recession or when you lose your job, it is highly likely you will not invest during bad times. Even if you did invest during bad times, how much will you invest? If you have invested say $10,000 and made 200% in profit, you will have $30,000 which is too small to have a meaningful impact to your retirement expenses. To invest, the end goal is to have a meaningful impact to your financial situation and this requires a substantial amount.
During the past months when Russia invaded Ukraine, I invested more than $100,000 into stocks and funds. I should think this is meaningful amount. Do you think so?
Although I have no idea how will it be like in the next few years, I do have the assurance that I will make money through such investments. In fact, I always make money on the long-run because I do not do what everyone does, I always do the opposite of everyone else.
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If he really re-invest with you, you should put his money into ARKK and BTC lol. Scary thing is that that has 1 in 3 chance of making him rich in 10 yrs.