Sunday, September 26, 2010

Sing When You're Winning : How do you know if you are successful in investing?

This has been a familiar theme for those who trawl investment blogs: how many years must it take for you to be a "successful investor". This question came after someone in the forums quipped that it is very easy to achieve strong gains during the V-shaped recovery. One even mentioned another blogger, who for a time kept regular posts on his portfolio. I did a quick check and found that this blogger's stock holdings was worth more than $500,000 prior to the great crash, with his portfolio cost at around $270,000. His last update was 8 May 2008 and has not been heard since. Maybe he forgot his password?

For those who have been reading, this blog is not to showoff. While it might massage my ego if I made strong gains, the main purpose is to track how the journey towards wealth creation has been. Going forward, as a result of the change of work scope, I may post only monthly updates.

To answer the question "how do you know if you are successful at investing?", it really depends on the parameters that you have set for yourself. But usually, that means consistently outperforming the appropriate benchmark selected.

I will be honest and say that I have been deceiving myself by comparing my portfolio performance with that of the STI. This is inappropriate because the STI comprise mainly of large market capitalization companies, whereas my portfolio comprise mainly small caps. Nonetheless, it is useful for some illustrative purposes.

So for most investors in the Singapore stock market, if you cannot beat the STI when you include transaction costs and exclude dividends, it might mean having to read up more to refine your strategy.

For myself, I have stated in one of my earlier posts, that I would like "to reach $700,000 in stock investment by 55, excluding CPF and House." To achieve it, I mentioned that I would regularly invest in the stock market.

Choose your finishing line. Run your own race.

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