Quote:
Originally Posted by anoldanalyst
The issue of "How much is enough?" is a difficult one. When you have $100K, you want $1m. When you have $1m, you want $3m. When you have $3m, you want $10m. When you have $10m, you want $50m. It was quite hard to step away from earning a huge amount of money. Even now, I wonder if I should go back so I can buy that Chateau my colleague has in the south of France. All it takes to dissuade me is to meet my old colleagues still in the game. The rings around their eyes, their intensity talking about the deals they did, their holidays in first class paid by frequent flyer miles makes me realize that I *really* don't want to go back. I'm much happier taking economy (well... admittedly business for long haul vacations).
I think the most important thing is to diversify. I think 50% property 50% financial instruments is the way to go and to try to time the cycle but only in the very long-term i.e., 5-10 years. Learning to tame the emotions of greed and fear (I'm a Chris Wood fan) is the key skill for an investor.
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Dear Anoldanalyst,
Agree with you that the most difficult bit about investing and trading is to control one's emotions. Probably that's why so many get it wrong, afterall humans ARE creatures of emotion.
In terms of how much is enough, my personal preference is to look at it from a cashflow point of view as I really loath to drawdown on my accummulated capital (obviously, accummulated returns could also be capital in nature). Hence, as long as I can generate more than sufficient regular cashflow to support my lifestyle on a consistent basis, anything more is a "nice to have" rather than "die, die must have". You are right to say that cashflow is dependent upon capital and a good part of cashflow is also dependent on how active and how well one manages his returns and I need to keep refining this bit.
I agree with you totally that diversification is the only sustainable and tolerable way to invest. When I was younger and my capital was small, my investments tend to be "bang everything on one" and then hoping and praying that I got it right. Over time, I realised that the volatility is just too great for me to stomach and the only way to sleep soundly is to have a diversified portfolio that gives a more regular and consistent return.
Trading and timing the markets is exciting but, requires one to be on your toes and stay up-to-date on world events. Whenever you get it right, the rush is till there but wears off pretty quickly, I must add. Haha.
Have a great weekend!
