Non-financial aspects of becoming a full-time investor

[weijian]

Borrowing a concept from Jeff Bezos' "Regrets Minimization Framework": When you're 80, which outcome is likely to make you regret the most? Taking the more uncertain full-time role but being able to fulfill your greater passion than an engineer job or having the stability of a monthly salary and yet having enough time to feed your investing hobby.

Sometimes I don't like management talk is because they talk only. The qn cannot be answered until I reach 80 and I know the results of the outcome. 

if I chose 1, and I perform not as well compared to having a full time job, then the outcome is I regret choosing 1.
If I chose 2 and end up more stress from juggling work and investments and end up dying early, then the outcome is I regret choosing 2.

I do generally agree it is outcome dependent  Humans have short memories and generally we remember results better than the process itself.

But, it's the end of the year and so it's time to inspire - As Randy Pausch said in the last lecture, "It is not the things that we do in life that we regret at the dead bed. It's the things that we do not" - Coming from the mouth of someone who has been there at the end (in other words, has meat in the game), I will give more weight to it.

[specuvestor]

Specuvestor mentioned that I have the wrong psychology for a full-time investor. I pondered what he meant by that. I guess it is that I do not respect myself as an investor. Is this what you mean, specuvestor? 

A value investor usually doesn't go with the herd because we train ourselves mentally to be objective when we analyse and listen to opinions, news flows, brokers' report and forum analysis but not led by them.

If you can be swayed by simply how people look at you, then it is difficult to be a value investors let alone full-time investor cause the stocks we look at are usually not well covered ones, or even bombed out ones. If you cannot be independent in your thoughts and smile when sneered at, it's going to be difficult.

As opmi remarked I think passion is very important to go full-time rather than hate the status quo. It's a boring occupation. There are movies about flamboyant traders but next to nothing about investors. Disclaimer: I am full-time in the industry but not at my own capacity cause I think too much about being sole breadwinner for my family.

[tonylim]

Specuvestor mentioned that I have the wrong psychology for a full-time investor. I pondered what he meant by that. I guess it is that I do not respect myself as an investor. Is this what you mean, specuvestor? 

A value investor usually doesn't go with the herd because we train ourselves mentally to be objective when we analyse and listen to opinions, news flows, brokers' report and forum analysis but not led by them.

If you can be swayed by simply how people look at you, then it is difficult to be a value investors let alone full-time investor cause the stocks we look at are usually not well covered ones, or even bombed out ones. If you cannot be independent in your thoughts and smile when sneered at, it's going to be difficult.

As opmi remarked I think passion is very important to go full-time rather than hate the status quo. It's a boring occupation. There are movies about flamboyant traders but next to nothing about investors. Disclaimer: I am full-time in the industry but not at my own capacity cause I think too much about being sole breadwinner for my family.

Hard to comprehend at this age , one still live for others .

[tmhy]

Specuvestor mentioned that I have the wrong psychology for a full-time investor. I pondered what he meant by that. I guess it is that I do not respect myself as an investor. Is this what you mean, specuvestor? 

A value investor usually doesn't go with the herd because we train ourselves mentally to be objective when we analyse and listen to opinions, news flows, brokers' report and forum analysis but not led by them.

If you can be swayed by simply how people look at you, then it is difficult to be a value investors let alone full-time investor cause the stocks we look at are usually not well covered ones, or even bombed out ones. If you cannot be independent in your thoughts and smile when sneered at, it's going to be difficult.

As opmi remarked I think passion is very important to go full-time rather than hate the status quo. It's a boring occupation. There are movies about flamboyant traders but next to nothing about investors. Disclaimer: I am full-time in the industry but not at my own capacity cause I think too much about being sole breadwinner for my family.

Ah ... I absolutely agree with your reasoning. A value investor cannot follow the herd if he wants to outperform because the herd cannot outperform by definition. However, you missed out one thing. I am a retail investor/trader. I play a complete lone hand by myself. I need not get permission from anyone to buy and sell. I need not tell anyone about my stock picks. If I do not tell anyone, no one will criticize my stock picks. No one will sneer at them or laugh at them or make discouraging remarks. I cannot be swayed because there is no one to sway me. Professional fund managers have a much more difficult time as they cannot totally hide their stock picks. I don't work in the fund management industry but I expect the stock picks of a fund manager to be reviewed by colleagues. Compared to a retail investor, it is harder for a professional money manager to be contrarian if many of his peers disagree with his investment choices. This is actually a small edge that retail investors/traders like me have over  smarter and better trained professional fund managers with more time on their hands to invest.

As a full-time investor, you cannot hide that status because there is Chinese New Year, family reunion events, the occasional meet-up with friends and neighbors will be wondering why is this able-bodied man sitting at home all day and not going out to work.

[specuvestor]

You're not getting what other VBs and myself are saying why should you hide

Probably Tonylim is right

[HitandRun]

I've got 2 points to highlight:

1. Methinks that some folks, e.g. Opmi is giving really sound advice.

2. I do not know the exact motivation behind tmhy but he has created threads in several forums including hwz, elitetrader talking about exactly the same things. (But I can speculate privately and no, I'm not stalking him)

Ciao!

[Big Toe]

If a person is affected by what people around might say in carrying out his task, the person should just listen to the other people and just quit....seriously. Simply because in starting a business or being a full time investor, one needs to be a self starter, have conviction and totally committed in your craft. No excuses, no distractions, go in 100%, no what ifs, does not matter what others say or think.

tmhy, forget about being a full time investor, just stick to your old job, that's my opinion.-Advice from an unknown to another unknown person.
Specuvestor is saying the same thing, in a different way. I am a toe, nice is not in my dictionary. The people who are usually ultra nice to you without a reason probably are out to swindle or cheat.

[ValueMushroom]

I must add that investors like other people live together in a society. They have family and friends and they dont live alone in a cave ; l Investors need to socialise too with other non-investors.

[tmhy]

Here are my final thoughts on this topic. I try to make this post applicable to most people but minimise the specific concerns peculiar to me. Enough of your time is spent replying about it. I hope this post on the topic "full-time investor" does justice to the folks here who have given their time to reply.

While this post talks about the psychological aspects of being a full-time investor, the most important aspects are still the financial. I believe before one embarks on this risky journey, he must have enough financial resources on hand to make sure his family finances are protected should he fail to do perform for at least the duration of a bear market(~3 years). I use this duration as a proxy for Mr Market to recognize the value of his stock picks. Because much of investment success is dependent on having the right psychology, this financial buffer also acts as a psychological buffer. The speculator who speculates with scared money operates at a severe disadvantage over his competitors who operates objectively.

The financial buffer should consist of a mixture of cash, fixed income and dividends. If you are a full-time speculator, I would recommend that the weightage of cash and fixed income to be higher than dividends to protect your psychology during a financial crisis. During a financial crisis, equities can drop >40%. When that happens, relying too much on dividends from equities will damage your psychology. In the Singapore context, because of the poor access to fixed income for retail investors, several investors have replaced fixed income with REITs. Be careful. REITs behave more like equities than fixed income during a financial crisis. REITs can also drop >40% in a financial crisis. Check out what happened during 2008.

I do not agree with Big Toe about going in 100% with no "what ifs". There shoul be a back-up plan if the main plan fails. And if the back-up plan fails as well, then the estimated damage from the fall-out should be within tolerable limits. I don't believe in burning bridges and going 100% in with no what-ifs. On this note, I think full-time speculators should create an alternative stable income by using their other skills and hobbies. They can become free-lancers or consultants. These are low capital business activities that continue to keep the full-time speculators' other skills intact. I believe the greatest asset is still human capital. The skills in your head that no hostile enemy can take away by force. Don't lose it after becoming a full-time speculator. Some full-time speculators create a side income by teaching people how to speculate. On this, the skepticism expressed on this forum is absolutely healthy. I would personally recommend that retail investors learn from books and free internet resources than attend expensive courses which charges thousands for a few days. It is simply not value for money.
 
For someone to become a full-time speculator, the most important human capital is his investing skill. This can be assessed objectively assuming he has a track record long enough to cover at least 1 (preferably 2) boom-bust business cycle. During the bust period, how much did he lose compared to the benchmark? This is a measure of his risk management skills which is vital given that the full-time speculator no longer has the stable cashflow of a salary worker. Can his past investment gains cover his past and estimated projected expenses throughout the business cycle with a margin of safety? If not, he had better stay patient and build up his skills and financial buffer before taking the plunge. Does he like the job of a speculator or is he thinking of becoming one because he hates his current job? (Would-be speculators thinking of going full-time had better be honest with themselves on this point). Can he deal with the loneliness? Introverts have an advantage here. Does he possess the intellectual honesty to admit he is wrong, see things objectively as they are and not be clouded by personal biases? A high-IQ person can actually be disadvantaged because it is easy to self-rationalize and come out with good reasons to support his biased position.

Finally, for those who have reservations over how society would view them when they become full-time speculators, it is a personal problem that they have to sort out themselves first. Not resolving it will result in self-sabotage in their journey as full-time speculators even if they meet the above criteria that I mention above.

I would like to end with this final note by a kind soul who wrote this to me;
“It is better to go wrong in freedom,....then to go right in chains”

PS: I apologize to fellow investors if I have given offence with some opinions held in my initial post.

[brattzz]

"As a full-time investor, you cannot hide that status because there is Chinese New Year, family reunion events, the occasional meet-up with friends and neighbors will be wondering why is this able-bodied man sitting at home all day and not going out to work."

alamak, why bother? just say i can afford not to work, shiok wat!