Investing

Tips, strategies, failures, success and more in investing.

Personal Development: Are you imprisoned by “Duality Disorder”?

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I was reading a recent posting on John Chow’s Blog that looked at the issue of Getting It Done. I’m not going to rewrite John’s post for him, but I was reading the comments that were attached. I don’t know if it was just me but I saw a lot of posters using Duality Disorder (the sometimes inappropriate habit of putting everything into two categories) to explain away situations without examining the situation further to find out its complexities, intertwinings and range of possible outcomes.

Examples of Duality Disorder

I’ve listed some examples of this: See if you recognize yourself in any of these duality thinking modes.

Good Bad/ success or failure / ugly or beautiful / now or never / Do or Die / to ‘crash and burn’ or succeed / plan or act / nothing ventured, nothing gained / Wisdom vs. planning / Impulse vs. drive.

How many more dualities are we going to trot out here? There are hundreds: is he gay or straight? is she labour or conservative?… the list is endless.

There is surely more than just duality in our world. Yet from the time of “Adam and Eve” (another duality) we’ve sought to divide the world into convenient dualities. This has to be one of the laziest thinking strategies out there. Why?

Complexity in Duality?

Life is far more complex than good or bad. Common sense examples will demonstrate this to you. A husband is a dutiful husband! He provides for his family! Is he good or bad? He does this by robbing a bank? Is he good or bad now? Could it be that he is somewhere between good and bad, depending on the circumstance? Could it be that he is in fact good at the same time as he is bad! He’s providing for his family (good) by robbing a bank (bad).

There are many situations in life where simplifying problems to dualities does NOT work. It can’t. It won’t. No matter how much we strive. AIDS is one of the problems. Starting a business is another. There are countless more.

Intertwinings.

Success or failure? Which is it going to be? Who knows? If you are starting a business, then you’d like to know the answer to that! But, truthfully there are few situations where success or failure is absolute. Most of the time it is shades between the two. We’re planning a promotional activity for our business tomorrow. Who knows if it will work well or not? It could be a disaster.

But we have success built-in, as we all agreed, that at the very least we’d have fun, a story to tell, and some good pictures for our business blog, whatever happened! So failure isn’t going to happen tomorrow. It’s just we may not be as successful as we would like! There are so many grades or shades of possibility, that simple duality cannot encompass. Moreover, in some cases, the things we get done will be intertwined with the things we did before. And the activity tomorrow will be intertwined with what happens in the future! So, who could say it is a failure in absolute terms?

A Range of Possible Outcomes.

Could it possibly be that we are using these to cover our own excuses? Could it be that there are a myriad of outcomes that are between success and failure or any of the other dualities we’ve written about? Could it be that we may not be a complete failure on day #1, and that is JUST enough for us to go out and build next $1Billion business. Could it be? The results we get from business activities may not be what we expected, true. In fact, they could vary vastly from what we set out to achieve. We may not achieve anything at all that we wanted. Did we fail then? Well, only if we don’t think about what went differently from our expectations? That experience of vastly varying results could lay the solid foundations for success the next time round.

So the next time you are given to duality disorder, catch your thinking for a moment, and just wonder a little at what other outcomes there might be. You might surprise yourself.

Rookie: About to get rooked?

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I am a rookie investor who doesn’t know much about stocks, etc. I want to invest a small amount, maybe 3000 USD (100,000 NT) or so. I am willing to take medium risk, but don’t have much time to research or deal with this investment everyday. I just want to put it somewhere for like half a year or a year, forget about it, and come back and hopefully it’ll make some money for me.
So now the questions are:
1) Are mutual funds the best choice in this scenario? If not, what do you suggest?
2) What are the chances of losing money with a fund?
3) I realize that there are many types of funds. Which type is suitable for me? I don’t want to be super conservative, I am willing to take some risk. But of course I don’t want to lose money. Is there a fund that generates over 30% in one year, that’s got acceptable risk levels? I understand you can never know…but what about your past experiences? What’s the most you’ve made or lost in a 1 year period with funds?

I wrote

Truthfully, Tycoon’s advice is pretty good. 

Don’t waste your time in MFs… The expense ratios will KILL your investment over the short-term. The medium term isn’t much better due to a tendency to average performance. So, only in the longer term, there’s a chance that your MF will be okay. But remember about 80% of MF underperform the market…! Hah!

Upfront charges will likely eat into your funds, leaving you underwater almost immediately. Anyway, many MFs have minimum amounts to invest, typically $2500-5000.

#1 Why not just simply open a broker account with $7 to $10 trades, choose a few ‘safe’ ETFs (maximum three, to keep your costs under control), your expense ratio would be about 1% for purchase, and hopefully less than 1% for sale.

#2 Then do some basic research here http://finance.yahoo.com/etf

#3 Then purchase a couple of broader market funds, like DIA or QQQQ or Spiders, then one with the exposure you want.

Do NOT trade this account. Only add money regularly to make sure that the balance is appropriate. Ignore it otherwise.

#4 Then start reading. It is really boring, there are no guarantees, but it will limit your cost structure.

Lastly, beware the risk of currency exchange, you may not want to exchange all your money at one time, but trickle feed it into the fund, so that any improvement in the exchange rate will be reflected in your exchange at least partly!

Good luck, don’t forget the reading!

Kenneth

JoelMaxwell: The Fall and Rise of Success?

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I recently found this incredible story of how a regular guy got $556,000 (archived only) in debt. I was intrigued that this was so easy for him to do. The original blog is now missing, and the story is now unavailable at JoelMaxwell.com

It intrigues me that our societies now treat debt so lightly and make it so easy to get for personal use, for business use, for investment use, and FOR SPECULATION. I do sympathize with a number of the problems he had as they are very easy for eager business owners to fall prey to: overexuberance in the first months, unexpected expense, unforeseen cash flow issues, high leverage of debt, but mostly lack of a Plan B, if things didn’t work out. In fact, having a Plan C and a Plan D to fall back on is always a good idea so that if you can’t get your Plan B, then there are still other options that don’t include borrowing even more money.

Our business nearly got put out by the unexpected advent of SARS, and we didn’t have much time to prepare for it, as we were forced to close for 2 weeks. We were fortunate: no debt, malleable costs, and a willingness to sacrifice. But it could have been much worse than it was. Guess what, we haven’t learned yet either.We’re only now planning to set up emergency funds, and create a wall of financial security for the business… It’s going to take a lot of time and a lot of learning for me, I’m not particularly savvy at this kind of things, so the learning comes at some cost to myself. But it must be done.

I do admire Joel’s resilience to bounce back in a desperate situation. And so I am supporting him with positive thought waves and wishing him well.

Kenneth