Full-time Investor

[funman168]

Hi all,
any full-time investor here can advise me whether i am financially capabke to become a full-time investor?
I have recently quit my corporate job that pays me abt $100k/yr.
i am planning if i could just get abt $30k/yr from trading, it will be more than sufficient to cater for my lifestyle.

A) Asset
1) Condo fully paid calued@$1.2M
2) Fixed deposit: $150k
3) Reits & dividend stocks: $50k
4) Speculative stocks: $30k
5) Cash: $50k

B) Liabilities
None, others than the usual bills

Thanks very much in advance!

[corydorus]

To collect 30K dividends with 5% dividends, you need 600k stock capital.

[d.o.g.]

Hi all,
any full-time investor here can advise me whether i am financially capabke to become a full-time investor?
I have recently quit my corporate job that pays me abt $100k/yr.
i am planning if i could just get abt $30k/yr from trading, it will be more than sufficient to cater for my lifestyle.

A) Asset
1) Condo fully paid calued@$1.2M
2) Fixed deposit: $150k
3) Reits & dividend stocks: $50k
4) Speculative stocks: $30k
5) Cash: $50k

B) Liabilities
None, others than the usual bills

Thanks very much in advance!

Disclaimer: I am a full-time investor in the sense that I spend most of my waking hours managing money. However I am also a professional investor, I manage money via a fund, on behalf of clients.

What I say will be biased in favour of either acquiring the necessary knowledge to invest on your own, or hiring a professional to help you invest. But I think I am qualified to ask a few questions and make a few remarks.

===
1. How much experience do you have in investing?

The more time you have spent in the stock market, the less mistakes you are likely to make in future. The size and frequency of mistakes have a big impact on your future returns. Many people can pick winners, but few can avoid losers.

If you have been investing for less than 5 years on your own, it is unlikely that you have the skills to successfully survive solely on your investment returns. Even if you start with a large amount of capital, a few years of poor returns will quickly erode it.

If you have been investing on your own for 10 years or more, your track record should make it clear whether or not you have the chops to do the job.

If you haven't tracked your returns carefully and have no clear idea what your historical rate of return was, this is your first task - to track down all your individual trades and figure out, on a portfolio basis, what your returns were. You can use an Excel spreadsheet and the XIRR function to figure things out.

2. How much of your current net worth do you attribute to a) savings from salary; b) property investment; c) stock investing; and d) marriage/inheritance? Over what period of time did you accumulate your current net worth?

Obviously, if most of your net worth did not come from stock market profits, or if your net worth was acquired quickly (less than 5 years), perhaps you might want to improve your investment skills before taking the plunge to be a full-time investor.

On the other hand, if a large proportion of your current net worth comes from stock market profits over a long period of time (10+ years), then you probably already have a good idea of what you are doing. For example, over 80% of my own net worth has come from stock market profits (both on my own capital and profit-sharing from clients), and this was earned over 14 years, so it's clear to me, even in bad years, that investing is a skill that I do possess.

3. How much volatility can you tolerate?

Stock market investing is not for the faint-hearted. While it can be exciting to see individual stocks climb 100% or more in a year, they can also plunge 50% or more in weeks, and poor quality companies can suffer a 100% loss from bankruptcy or fraud.

Yet, if you stick only to the "safe" blue chips, the return may not be satisfactory, whether in terms of expectations or the lifestyle these returns can support.

A desire for high returns must be matched by a high tolerance for volatility. A trekker who refuses to descend when climbing a mountain cannot hope to reach the summit. If you wish only to climb and not descend, only the lowest-return stocks and bonds will be available to you. It is not possible to consistently buy at the very bottom and sell at the very top. This means that almost invariably, a stock will go down after your purchase it (since you didn't buy at the very bottom) and it will go up after you sell (since you didn't sell at the very top). Maybe you can do it once in your life. But not consistently.

If you cannot tolerate large temporary declines in your portfolio, you may not have the stomach for a successful investing career. And by temporary I do not mean days or weeks, I mean months or even years. Even the best investors in the world (as identified in Warren Buffett's article "The Superinvestors of Graham and Doddsville") had losing years, many had 2-year losing streaks. They all compiled fantastic long-term records, but not without bad years.

4. What are your current recurrent expenses?

A single, healthy man who does not drink, smoke, gamble or own a car has a very different expense profile from a man who has diabetes, a drinking habit, two young children, a non-working wife and two expensive cars.

As a full-time investor it would probably be prudent to set aside 2-3 years of living expenses as working capital. This would just be cash to be used for living expenses and cannot be invested. Any amount beyond this can then be safely invested without worrying about having to sell down in a bear market in order to fund living expenses.

Although 2-3 years may seem excessive, a bear market can last a few years, and selling in a bear market is highly detrimental to overall returns. You should be buying in a bear market, but if you cannot buy, at least don't sell.

===
As usual, YMMV.

[CityFarmer]

Excellence comments from Mr. d.o.g.

IMO, the proposal of 2-3 years of emergency fund, isn't excessive at all. Most professional value investing fund managers are having their average "liquidity period" of 2-3 years, i.e. the lock-up period for new investors. It should be the average period, that you can orderly liquidate your fund, for any reason.

(sharing a minor point)

[funman168]

Hi all,
any full-time investor here can advise me whether i am financially capabke to become a full-time investor?
I have recently quit my corporate job that pays me abt $100k/yr.
i am planning if i could just get abt $30k/yr from trading, it will be more than sufficient to cater for my lifestyle.

A) Asset
1) Condo fully paid calued@$1.2M
2) Fixed deposit: $150k
3) Reits & dividend stocks: $50k
4) Speculative stocks: $30k
5) Cash: $50k

B) Liabilities
None, others than the usual bills

Thanks very much in advance!

Disclaimer: I am a full-time investor in the sense that I spend most of my waking hours managing money. However I am also a professional investor, I manage money via a fund, on behalf of clients.

What I say will be biased in favour of either acquiring the necessary knowledge to invest on your own, or hiring a professional to help you invest. But I think I am qualified to ask a few questions and make a few remarks.

===
1. How much experience do you have in investing?

The more time you have spent in the stock market, the less mistakes you are likely to make in future. The size and frequency of mistakes have a big impact on your future returns. Many people can pick winners, but few can avoid losers.

If you have been investing for less than 5 years on your own, it is unlikely that you have the skills to successfully survive solely on your investment returns. Even if you start with a large amount of capital, a few years of poor returns will quickly erode it.

If you have been investing on your own for 10 years or more, your track record should make it clear whether or not you have the chops to do the job.

If you haven't tracked your returns carefully and have no clear idea what your historical rate of return was, this is your first task - to track down all your individual trades and figure out, on a portfolio basis, what your returns were. You can use an Excel spreadsheet and the XIRR function to figure things out.

2. How much of your current net worth do you attribute to a) savings from salary; b) property investment; c) stock investing; and d) marriage/inheritance? Over what period of time did you accumulate your current net worth?

Obviously, if most of your net worth did not come from stock market profits, or if your net worth was acquired quickly (less than 5 years), perhaps you might want to improve your investment skills before taking the plunge to be a full-time investor.

On the other hand, if a large proportion of your current net worth comes from stock market profits over a long period of time (10+ years), then you probably already have a good idea of what you are doing. For example, over 80% of my own net worth has come from stock market profits (both on my own capital and profit-sharing from clients), and this was earned over 14 years, so it's clear to me, even in bad years, that investing is a skill that I do possess.

3. How much volatility can you tolerate?

Stock market investing is not for the faint-hearted. While it can be exciting to see individual stocks climb 100% or more in a year, they can also plunge 50% or more in weeks, and poor quality companies can suffer a 100% loss from bankruptcy or fraud.

Yet, if you stick only to the "safe" blue chips, the return may not be satisfactory, whether in terms of expectations or the lifestyle these returns can support.

A desire for high returns must be matched by a high tolerance for volatility. A trekker who refuses to descend when climbing a mountain cannot hope to reach the summit. If you wish only to climb and not descend, only the lowest-return stocks and bonds will be available to you. It is not possible to consistently buy at the very bottom and sell at the very top. This means that almost invariably, a stock will go down after your purchase it (since you didn't buy at the very bottom) and it will go up after you sell (since you didn't sell at the very top). Maybe you can do it once in your life. But not consistently.

If you cannot tolerate large temporary declines in your portfolio, you may not have the stomach for a successful investing career. And by temporary I do not mean days or weeks, I mean months or even years. Even the best investors in the world (as identified in Warren Buffett's article "The Superinvestors of Graham and Doddsville") had losing years, many had 2-year losing streaks. They all compiled fantastic long-term records, but not without bad years.

4. What are your current recurrent expenses?

A single, healthy man who does not drink, smoke, gamble or own a car has a very different expense profile from a man who has diabetes, a drinking habit, two young children, a non-working wife and two expensive cars.

As a full-time investor it would probably be prudent to set aside 2-3 years of living expenses as working capital. This would just be cash to be used for living expenses and cannot be invested. Any amount beyond this can then be safely invested without worrying about having to sell down in a bear market in order to fund living expenses.

Although 2-3 years may seem excessive, a bear market can last a few years, and selling in a bear market is highly detrimental to overall returns. You should be buying in a bear market, but if you cannot buy, at least don't sell.

===
As usual, YMMV.

[smallcaps]

for myself i would probably look at an equity loan for the 1.2mil property to increase funds for investment, if substantial cash had been used to pay it up. No idea wats the rate now but i suppose its not high with property as collateral.

[funman168]

for myself i would probably look at an equity loan for the 1.2mil property to increase funds for investment, if substantial cash had been used to pay it up. No idea wats the rate now but i suppose its not high with property as collateral.

thanks smallcap, that is a gd suggestion. But i will not be using it unless prices reach crisis level.

[weijian]

for myself i would probably look at an equity loan for the 1.2mil property to increase funds for investment, if substantial cash had been used to pay it up. No idea wats the rate now but i suppose its not high with property as collateral.

thanks smallcap, that is a gd suggestion. But i will not be using it unless prices reach crisis level.

Hi funman168,
It is interesting that you only published your balance sheet for VB to review your financial capability, when the better (or additional) information to publish would be your investment capability for VB to assess accordingly. Nonetheless, in addition to the comments given, I would like to add from a personal financial planning standpoint that you should consider your insurance coverage.

By the way, you need to be sure that your other half or the one who co-funded your property (if there is any), shares your enthusiasm of investing in depressed markets, when that "leap of faith" moment presents itself one day.

[funman168]

for myself i would probably look at an equity loan for the 1.2mil property to increase funds for investment, if substantial cash had been used to pay it up. No idea wats the rate now but i suppose its not high with property as collateral.

thanks smallcap, that is a gd suggestion. But i will not be using it unless prices reach crisis level.

Hi funman168,
It is interesting that you only published your balance sheet for VB to review your financial capability, when the better (or additional) information to publish would be your investment capability for VB to assess accordingly. Nonetheless, in addition to the comments given, I would like to add from a personal financial planning standpoint that you should consider your insurance coverage.

By the way, you need to be sure that your other half or the one who co-funded your property (if there is any), shares your enthusiasm of investing in depressed markets, when that "leap of faith" moment presents itself one day.

My property is fully paid up by myself & i had bought comprehensive medical & life insurance.

Savings from job over last 15 yrs: est to be $150k as i barely can hardly save any $$  in my younger years
Investment gain from several mega baggers, raffles edu,midas, vibrant,penguin,yoma, est close to $1M

[brattzz]

life is short! just do what you want to do and be happy!
Wish u good luck and huat har!!