Adventures in Financial Independence

Share this post

Be willing to look stupid but don't do stupid things

adventuresinfi.substack.com

Be willing to look stupid but don't do stupid things

You can't be normal and expect abnormal returns

Adventuresinfi
Jan 21, 2021
4
10
Share this post

Be willing to look stupid but don't do stupid things

adventuresinfi.substack.com

I recently spent far too long on a Reddit forum on financial independence. I had outlined my unconventional approach to investing and shared a few thoughts as to why it was a good fit for my particular situation. I was a little taken aback by the level of vitriol in the responses.

On reflection, I should not have been surprised. Going against a community's worldview will almost always trigger a visceral reaction.

Twitter avatar for @adventuresinfi
Adventures in Financial Independence @adventuresinfi
If you are ever worried getting in an infinite loop echo chamber on Twitter... I'd recommend posting on a reddit forum than has a different investing philosophy to you. Refreshing!
Image
5:18 PM ∙ Jan 17, 2021


You either have some insane ability and confidence or you're really dumb. You borrowed 40k to invest in individual companies? That's practically gambling.


I'm honestly just so glad to see most people recognise what a bad idea this is.

Or I should say ideas.

  1. Borrowing to invest is a bad idea.

  2. Individual stock picking is a bad idea, unless you happen to be 'the one'.

in some virtual ivory towers somewhere, there are scores of Harvard-level full-time professionals with technology you can only dream of analysing the market to death with decades of success and hard work behind them.


It’s fair to admit that my approach was pretty non-consensus. I’ve previously outlined why it makes sense for me.

Twitter avatar for @adventuresinfi
Adventures in Financial Independence @adventuresinfi
Why I used a loan to buy stocks [THREAD] Accepted "fact": Using debt to buy stocks is a always a terrible idea Accepted "fact": Using debt to buy property is a smart idea Accepted "fact": property is wealth I felt comfortable taking out a loan to buy stocks Here's why:
Image
9:46 AM ∙ Apr 18, 2020
75Likes7Retweets

For those who fear the armies of smart professional investors, there is a big difference between hard and impossible. It’s not plain sailing for professionals either.

Why would what I’m doing cause such a dramatic response from people who are unaffected by the consequences?

A lot comes down to mindset and culture. British people have a tendency to be pretty conservative in their thinking and aspirations, compared to my experiences of people from many other countries. That probably extends to investing, a minority interest in this country. The historical UK wealth generation formula has largely been property-based. But that model is broken for most of the middle-class, probably for good. It’s time to accept it and move on.

The UK is not a nation of individual investors. In total there are 6.6 million investing accounts, which includes ISA and SIPP figures. Most people taking investing seriously as an individual DIY endeavour with significant amounts of money are likely to be using a SIPP (self investing personal pension - free money due to employer contributions) or an ISA (individual savings account - free of capital gains tax, and £20K max post-tax contributions per year).

There were 1.4 million SIPP (self-invested personal pension) accounts in 2016. Fewer than 3 million people in the UK have a stocks and shares tax-free ISA accounts. The majority of people who have an ISA are hoarding cash.

At a population level, UK retail investors would not be my first choice of people to take inspiration from when it comes to deep investing insights. I guess shouldn’t be surprised that my investing in individual companies was readily criticised.

Before taking any criticism to heart, you need to consider how much weight you should put on the opinion of those who are throwing shade. I listen much more attentively to those who have walked the path I’m trying to follow.

What most critics are really saying is:

you shouldn’t do that because it wouldn’t work for me

I don’t think that I am special. I have an above-average understanding of technology but am not a hardcore technologist. As a failed entrepreneur, I probably also have an above-average risk tolerance, and a greater willingness to accept the risk that things may not work out.

Twitter avatar for @jackbutcher
Jack Butcher @jackbutcher
If you try more you'll fail more. If you fail more you'll care less. If you care less you'll try more.
3:13 PM ∙ Jan 20, 2021
262Likes67Retweets

Criticism of the loan is much more understandable, but context is everything. I can see why it might look stupid, but I don’t think that it was stupid. The worst-case was always within my range of acceptable outcomes.

Twitter avatar for @adventuresinfi
Adventures in Financial Independence @adventuresinfi
@playwithfireuk I know it's pretty unconventional But I don't see that the logic is that different from what people do with property The biggest challenge is behaviour - it's not for the undisciplined speculator + it's not a good idea if you can't handle the downside regardless of outcome
1:34 PM ∙ Dec 9, 2020

Listening to other people’s opinions too closely would not have led me down this path, which is working out so far and has the potential to change our family’s life for the better.

Twitter avatar for @adventuresinfi
Adventures in Financial Independence @adventuresinfi
My favourite YTD chart Leverage is just a tool if you have discipline *Not advice!*
Image
12:17 PM ∙ Dec 3, 2020


I wonder if the vitriolic response speaks more to a fear of the risk of being ridiculed, and an unspoken desire to conform. Caring less about what other people think is a key component to unlocking unusual outcomes, but it’s not a very British. As a second-generation immigrant, I feel lucky to have a range of worldviews to draw upon - my parents have always encouraged me to maintain a growth mindset.

A number of people referenced a lack of innovation in UK listed business.

Twitter avatar for @adventuresinfi
Adventures in Financial Independence @adventuresinfi
A question for UK based investors on Twitter... Do you invest in FTSE companies over US markets? Why or why not?
Twitter avatar for @simonnread
simon read @simonnread
The FTSE 100 had its worst year since the financial crisis. But investors shouldn't worry too much, it's up a third since March! My report for the BBC https://t.co/3TAslioYdd
3:10 PM ∙ Jan 3, 2021
Twitter avatar for @karenbforster
Karen B. Forster @karenbforster
@adventuresinfi No cos I have a bias for capital efficient, high cash flow companies, which you see a lot of in technology. FTSE is full of old economy companies. The UK capital markets needs an overhaul IMO.
4:02 PM ∙ Jan 3, 2021
Twitter avatar for @BudFoxNQ20K
Bud Fox @BudFoxNQ20K
@adventuresinfi Just no comparison. Very slow, less analyst coverage, tiny Fintwit community Investing in anything in the FTSE is like watching paint drying Judging by the companies listed in the UK, The lack of innovation in the is sadly glaring obvious.
3:15 PM ∙ Jan 3, 2021
Twitter avatar for @FlosserInvest
Flosser Invest @FlosserInvest
@adventuresinfi Unfortunately not. Only for some dividend plays and pension funds. At the end of the day, businesses in the US are the ones setting the modernisation agenda for so many aspects of our everyday lives: communication, e-commerce, advertising, entertainment, technology etc etc
6:06 PM ∙ Jan 3, 2021
Twitter avatar for @InvestmentTalkk
Investment Talk @InvestmentTalkk
@adventuresinfi Could be, the FTSE 100 is full of mature or declining companies mostly in financials, gas, or ugly industries like the supermarkets. I find the smaller cap scene a lot more interesting. I wish there were more attractive opportunities, as the currency conversion hurts.
3:23 PM ∙ Jan 3, 2021

Is there a correlation between the old-school businesses listed on the LSE and the population’s mindset when it comes to bold ideas?

Maybe. I don’t know.

My investing journey is an exploration. I’m willing to try, iterate, improve, learn, share, connect with other people, fail, get back up and figure our how to get better. There are no guaranteed outcomes, but I have no doubt that my life has been improved by starting this journey. I’m optimistic about the long term, even if the short term is messy and unpredictable.

It comes down to simple things. Wage stagnation is real, and the age at which I’ll be able to access my NHS pension is only going to go up. I want my kids to have a great education. I want to pay off our mortgage early and be able to work on my own terms. I don’t care much about money per se, but I do care about freedom. I’m less likely to be able to achieve it without investing.

Could it all blow up? Absolutely. But that scenario isn’t actually all that bad for me, all things considered. What I'm looking for is an abnormal outcome. To get it, I’ve accepted that I have to play a different game.

So what does qualify as stupid decisions in investing? I’m glad you asked…

Twitter avatar for @adventuresinfi
Adventures in Financial Independence @adventuresinfi
Why you might be a terrible investor -You have no systematic process -You don't do any DD -You don't scale in/out -You don't journal your thinking -You don't track your performance -You don't model downside risk -You don't learn from mistakes -You have no patience
10:33 AM ∙ Feb 11, 2020
76Likes13Retweets


A lot of sniping from the sidelines comes from those who are afraid to lose or be criticised. Negativity is easy, often sounds smart, and requires less work than optimism. I don’t begrudge that - any risk/reward assessment will depend on where you are in life. At this point I’m comfortable doing things that might look stupid to others.

What I’m doing isn’t stupid to me. It doesn’t mean I think it’s a good idea for anyone else!

10
Share this post

Be willing to look stupid but don't do stupid things

adventuresinfi.substack.com
10 Comments
Luke
Feb 13, 2021Liked by Adventuresinfi

I don't think your approach was a terrible idea tbh. The risk/reward added up for your situation in a way it may not have done for others.

I had the fortunate situation of finding a job in financial services in my late twenties, which allowed me to contribute maximum ISA amounts during my thirties.

I've followed a growth investing path for nearly two decades, and over that long period of compounding gains (cagr 27% over 17 years) my salary is dwarfed by my investment returns.

If an investor has the right mindset, approach and discipline, it _could_ make sense to prime the engine by taking a loan to fast track the first few years and get compounding really working.

Expand full comment
Reply
2 replies by Adventuresinfi and others
Growthstocksroc
Writes Growth Stocks Rock
Jan 22, 2021Liked by Adventuresinfi

Great article. Yep I think most have been conditioned to only invest in index funds, but its fear that’s holds people from seeking better opportunities. There is a perception of a big activation barrier to the DIY investing route. For the brave few that persist rewards will come, but I suspect most dabble with share tips and lose. Index funds are safe and simple for people to do and many of heard of scare stories of under performing funds and how hard it is to beat the market thanks to Buffet.

Funnily enough, I did the exact same thing on a couple of FIRE Facebook groups. To suggest anything other than index funds was blasphemy. Returns of greater than 20%, you must be taking massive risk. Nope it’s just volitility nothing to be scared of, only to be surfed!

Expand full comment
Reply
1 reply by Adventuresinfi
8 more comments…
TopNewCommunity

No posts

Ready for more?

© 2023 NHS Dreamer
Privacy ∙ Terms ∙ Collection notice
Start WritingGet the app
Substack is the home for great writing