Defining My Investing Philosophy

I had a post half-written about the start of my new job and the steps I took to negotiate, but then the markets started going on a decline. I believe that crystalizing my thoughts and philosophy of how I invest would make for both a good reminder, as well as being an assurance to myself.

So here goes!

An investment philosophy is simply a set of principles that will guide your actions when making portfolio decisions. It’s your core beliefs.

A Wealth of Common Sense, Ben Carlson

1. Investments fees must be low cost

Like so many in the FIRE space, I believe in the idea of low cost passive investing. I had the misconception that all kinds of stock investing would require plenty of knowing the industries, reading annual reports, and scrutinizing the numbers.

Unfortunately, living in Singapore means I don’t have access to index funds. None of the fun Vanguard acronyms you hear and see, like VTSAX, VTI, VFIAX etc!

But, if you’re like me and you’re interested in the ETFs that replicate the total stock market, there are a few options you can go with:

  1. VWRD [Vanguard FTSE All-World UCITS ETF]
  3. IWDA [iShares Core MSCI World UCITS ETF]

You can check out FIRE-Path Lion’s post, where he breaks down the expense ratios and the more technical aspects of his selection. For myself, though, IWDA remains my pick (even with a slightly higher expense ratio – 0.2% vs SWRD’s 0.12%), since it’s what I have been invested in for a few months now.

Something something sunk cost fallacy, maybe? I’m hopeful that iShares would adjust its expense ratio, as long as SWRD remains competitive. I’ll have to reevaluate for sure, in order to adhere to this philosophy!

2. The process must be convenient

Since I plan on retiring in Singapore (for the most part… more about this in another post!) it would make sense for me to use the STI ETF [The Straits Times ETF, a blue chip index that tracks the 30 top companies listed on the SGX] as a good hedge.

Unfortunately, that means that I have two different brokerages to keep track of my investments:

  • For IWDA, I use Interactive Brokers, for the access to the London Stock Exchange and a good forex spread, as well as lower commission fees compared to Standard Chartered (which I was using before), FSM One or Saxo
  • For the STI ETF (I buy into ES3), I use my DBS Vickers Cash Upfront account, where its 0.12% commission rate is the lowest I can find and most of my banking is done through DBS anyway

So, not quite the most convenient process, but it’s the best I can work with right now!

3. Replicable steps with no additional cognitive load each time

Lastly, this process needs to be repeatable with as little input from me as possible. I have most of my bills automated, and I would love to figure out a way to automate wiring of funds to Interactive Brokers on a cadence too.

As it is, though, it’s something I still have to do manually, but at least it’s getting done the same way.

This step will become important when paired with the following and last principle:

4. Ignore both the signal and the noise

Over the course of the last week, the markets have fallen ~15% and looks poised to decline even more, thanks to COVID-19. While some people might be panic-selling their holdings, I have been trying to pump in as much money as I can.

I’ve gone as far as dismantling my vacation and shopping/entertainment sinking funds – my rationale is I can’t travel anywhere right now anyway, and do I really need things?

This means I’m definitely reacting to the situation, rather than staying more clear-headed about it.

In the near future, I might even look back and say that my very cash-light position as a result is a mistake. My emergency fund is still intact, but believe me when I say that I had to talk myself out of putting everything into my investments.

It almost feels like I’m in a car moving at top speed, and I’ve only just managed to step on the brakes at the very last moment.

I definitely think that I would’ve been rash (well, even more rash) and wired every cent I had if I didn’t have these principles making up my philosophy, and would have ran into problems when my bills needed to get paid and not having enough for that.

What’s next?

As with any framework, you can only find out the gaps once you get into the swing of things. I’ve been doing this for the past few months, so I think there are still lots of things to iron out.

As far as making course corrections, I definitely think I need to evaluate my position on IWDA and seeing if switching to SWRD makes sense. Same with figuring out a way to automate my savings so that I can see how it flows to either my Cash Upfront, or Interactive Brokers accounts.

If you’d like, I would love to hear more about your own investing/investment philosophy! How are you reacting in this market, or have you managed to stay the course? Let me know!

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