by theknownothinginvestor

It has been a while since I wrote in the KnowNothingInvestor blog. More than seven months have passed and if I didn’t write it’s because there’s nothing out there worthy to learn. Nahhh, that’s not true, there’s always room for improvement. So why am I not looking for improvement? But I am. Nevertheless I now have a system that have been guaranteeing me a fair share of profit and thus I’ve become more cautious. There is no need to rush or spoil what i have been working on, now I can take time and decide later what will be the next step.

Since I begun back in 2013, I’ve had returns in line with what I have expected. These are the returns after taxes and fees:

  • 2013 – -3.53%
  • 2014 – + 16.81%
  • 2015 – + 4.98 %
  • YTD – + 0.35%

But why should I bother to improve my returns if I’m doing good? I guess we humans want always more and I, not being an alien, I’m not different. One of major faults appointed to a multi-asset portfolio is that we’re aiming for average instead of grandiosity. I can live with the fact of being average, specially if in the long run I’ll beat the majority of those aiming for grandiosity. Living to be average is hard because since childhood we are taught to achieve greatness, so when we assume that we’re investing in markets to get average returns our brains start to question us if shouldn’t we be looking for greatness!?  When I started trading I was aiming for grandiosity and that didn’t go well and I learnt a lesson “I prefer to be average than broke”.

In the end, a diversified portfolio will beat the majority of hedge funds and day-traders returns, so how can this be an average strategy? I think it’s because it takes time. A lot of time and pacient, 30 or 40 years of hard saving and investing. It will be when we are too old to “live deep and suck out all the marrow of life”, as taught by the great Henry David Thoreau. But If I didn’t put my savings in a couch potato strategy I wouldn’t also spend it until my last penny “living la vida loca”. Probably, I would look for a bank deposit and then after 40 years neither “vida loca” memoires or nice retirement account. Once again I turn to Thoreau, trying to appreciate small thing in life over material stuff and realise how much I’ve already own. The plain reality is I wouldn’t spend all my money in the material world, because that isn’t who I am. It would be nice to buy more goodies, but I can perfectly live a comfort life without them.

But if I save I need to invest properly, which I am. So why do I need more? Because I’m still curious and I want to keep tuning my system to improve it. I’ll do this using a very small portion of my total capital, maximum of 4 or 5%, as taught by John C. Boogle. The way I’ll do it is yet to be decided, but value investing or hedging the portfolio assets when their going down could be the answer. I’ll take my time, there is no need to rush. After all I’m already winning the fool’s game. If I fail, I’ll rapidly quit and I’ll look elsewhere for that extra return of my portfolio.

Now it’s time to do some studying.