2022 The Shape of Net Worth Growth

Net Worth Growth Chart since 2008 till end of 2022

Net worth grows 12.66% this year. This is the second lowest growth rate since 2018 where it grew at 12.31%.

I work harder this year even though the return is lower. This is fine as the outcome rarely correlates perfectly to the effort we put in. The world is more random than we thought.

I gained new investment insight this year which is that ensuring portfolio longevity is more important than getting high return in any particular year since most of the gains in the market are driven by tail events that are unpredictable. We will benefit from these events eventually if we survive long enough in the market regardless of our investment skill.

In other words, large margin of safety eliminates the need of investment edge.

In investment world, as well as in life, behaving well is very rewarding as it increases our chance of survival. It is especially critical during crisis. When we survive longer, we are automatically exposed to the unlimited upsides from the market. We become the inevitable beneficiaries of whatever the market produces in the future.

There is no need to chase returns.

We think linearly and the world does not work in a linear fashion. By the time we see good returns from other people investing in certain assets, it is too late. Also we will not be able to recognise that particular investment as a good investment in the first place. It is just an illusion caused by our own bias and incompatibility between linear thinking and non-linear reality.

The more I think about it, the more I realise that impatience is greed in disguise: the urge to want everything and to want them now. And we are greedy by nature. Impatience causes us to misbehave. We can’t have everything from economic perspective and not to mention everything at once. Knowing this fact is a huge investment edge.

Good behaviour is knowing what is good and is actually doing it.

Be patience is a timeless investment principle. When we are doing something that is timeless, it is as if we are already living in the future. We bring the future forward since there is no difference between now and the future when the time is not a factor. Speed is pointless in a timeless world. Chasing returns is pointless and exposes us to risk of ruin.

In a nutshell, slow is faster. It is more enjoyable too as I have plenty of time and peace of mind. Peace of mind is priceless in a noisy world.

Contrarian is by default unpopular and misunderstood by the majority. Sometimes it even looks dumb. Contrarians are those who choose the road less traveled which makes all the differences in investing and in life.

2021 The Shape of Net Worth Growth

Net Worth Growth Chart since 2008 till end of 2021
Year Growth (%)
2008 19.62
2009 37.46
2010 59.38
2011 26.47
2012 28.38
2013 27.55
2014 35.23
2015 47.25
2016 24.29
2017 44.62
2018 12.31
2019 38.29
2020 25.86
2021 47.36

The net worth is growing at roughly 35.58% per annum since 2008.

In another words, the net worth grew roughly 56-fold over the last 13.22 years since I started tracking my finance.

To put things into perspective, here are the performances of legendary investors:

Investor Return per annum (%) Multiplier Period
Warren Buffett 31.6 17.2 (in less than 11 years) 1957 – 1968
Peter Lynch 29.2 28 (over 13 years) 31 May 1977 – 31 May 1990
Nick Sleep 20.4 9.21 (in less than 13 years) 2001 – 2014
Charlie Munger 19.8 10.5 (over 13 years) 1962 – 1975

It is very challenging to find investments with that kind of returns that last for more than a decade.

As Warren Buffett said, “The best investment you can make is in yourself.”

It is true. It works!

Invest in myself gives me the best returns so far.

I need to learn more to earn more. This is an unbreakable financial law.

There’s no limit to what I can learn with an open mind. This means there’s no limit to what I can earn which I don’t mind. 🙂

2020 The Shape of Net Worth Growth

Today is the last day of the year 2020. It is time for reflection.

Life threw us a curve ball. Covid-19 made a big dent to the chart. 9 March 2020 marked the darkest day of my investing life. Market was in free fall. Two weeks later, on 23 March, the market bottomed. It almost set me back one year of growth back to the beginning of 2019.

Crisis accelerates wealth transfer. The sun will continue to shine after the storm. Stay strong!

The net worth is growing at roughly 33% year-over-year since 2012.

This growth is driven by:

  • human capital via working and
  • financial capital via investing.

Here, the human capital played a bigger role in the growth.

Your ability to work is the safest and highest returning asset.

Carolyn McClanahan

An average person’s lifetime earnings are around $ 2 millions assuming $ 50 k earning per year for 40 years. In another words, human capital is worth millions of dollars. Everyone should take advantage of it while contributing to the society to improve human living condition. You win and the society wins too.

Human capital converts time and effort into financial capital via saving.

The power of saving:

  • 1% increase in saving rate has more impact than the same increase in investment return when the net worth is small.
  • Saving is within my control whereas investment return is not. Strive for higher saving rate rather than higher investment return.

As the net worth reaches a certain level in the future, the financial capital will take over the human capital as the main contributor to the growth.

That is the point where financial independence is achieved. After this point, the money will grow faster than you can spend it. This is a common problem faced by most billionaires, but it is a nice problem to have I imagine.

Thinking vs Sitting

Which skill is more important when it comes to investing? Thinking or Sitting?

It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight!

Jesse Lauriston Livermore, 1877-1940

Reality and my thinking sometimes don’t overlap. This happens when my ego clouds my thinking causing me to overthink my investment.

Delusion is created by the gap between perception and reality. I called it mind bubble that will pop anytime just like market bubble when hit by the reality.

My thinking makes no big difference to the return. The market does not know I am investing in it. What I think does not impact nor influence the market. The market does not care about what I think. I can’t bluff the market.

It is better to let data guides my thinking rather than thinking in vacuum when making investment decisions.

The world is fundamentally unpredictable. Remove predictions to improve decisions.

All of humanity’s problems stem from man’s inability to sit quietly in a room alone.

Blaise Pascal, 1623-1662

The biggest risk of investing does not come from the market. It comes from the investors themselves who can’t sit tight during market crisis.

Market is here to serve us rather than the other way around. If we are being controlled by the market, then we are doing ourselves a disservice.

Sitting skill matters. It is the time in the market that makes most of the difference. Missing a few best days in the stock market can derail and damage any investment plan.

The longer the money stays in the market, the better and harder the compounding effect works for us.

Compounding effect works best when it is uninterrupted.

In order to have a really good investment result, all you need is patience.

John Templeton, 1912-2008

Sitting skill wins by a mile.

There is little correlation between investment effort and investment results because the world is driven by a few tail events.

Morgan Housel

Tail events create big gains that cannot be predicted after all. Buy the whole world for maximum exposure.

Within a portfolio of stocks, some will do badly, most will do fine and a few will do extremely well. The problem is I don’t know which is which in advance.

Any stock could have its days.

Invest for dividend

I am investing for dividend. Dividend stocks are income-producing assets.

Dividend investing is boring by nature, unfashionable and takes time to get results (that is the hard part for most people). It is like watching the grass grow or watching the paint dry… in a dark room. It is not for everyone. It is designed for those who have good sitting skill.

A key factor to get wealthy is to buy assets and let them work for us 24/7. It is a slow and steady way to get wealthy. The counterintuitive law of compounding effect tells us that we need to slow down in order to get ahead. After all, tortoise always wins over the long run.

If it is the right thing to do, there is no need to rush. If it is the wrong thing to do, there is no point to rush. Go slow to go fast.

If the direction is wrong, moving fast doesn’t help.

The paradox here is that the slower road almost always proves to be faster in the end.

William Green

If we can survive the boredom of dividend investing, we will be hugely rewarded financially.

Good investors think like a businessman. I am growing my investment business by:

  • reinvesting all dividends for future growth.
  • expanding into new markets to capture new opportunities.

Started with Malaysian stocks in 2013. Then moved to Singaporean stocks since 2017. Next year, I will be exploring Hong Kong stocks for dividend. One small step at a time to build multiple streams of incomes.

Below are some statistics about stock markets in Malaysia, Singapore and Hong Kong as of 2019:

Country Number of Listed Companies Market Capitalisation (USD)
Malaysia 919 $403.96B
Singapore 470 $697.27B
Hong Kong 2272 $4899.23B
Stock Markets in Malaysia, Singapore and Hong Kong

Hong Kong stock market is larger than stock markets in Malaysia and Singapore combined in term of number of companies and market capitalisation.

Also, Hong Kong does not impose withholding tax on dividends, interests or rents.

Go fishing where the fish are.

Mohnish Pabrai

Go to where the money is to grow the net worth.

Life is a blank check, waiting for you to fill in the numbers.