So I got a young colleague/friend into saving and investing... and he's wiping the floor with me (...but also, maybe, teaching me a lesson?)

Preface: This isn’t really about me but about a former co-worker (now friend) of mine.

After completing his apprenticeship in the company I’ve been working for, he was taken on as a full employee. He was and still is younger than 25, comes from a non-academic background, and won’t (can’t) go into any sort of academics himself. When he asked me for advice on his first tax return we talked about his budget - and he had little a concept of budgeting: it basically was “trying not to be below zero at the end of the month”. Though he was saving something in the 0.1% interest savings account with the cantonal bank, he no concept of investing either.

Though living quite frugal in many respects (though not by conscious choice rather than his hobbies and pastimes, and the fact that he lives with his family), the first thing he did after signing his contract with the company as a full employee was: leasing an expensive luxury car. We calculated that he spent about a quarter (25%) of his monthly take-home salary on the car alone (in leasing rates, registration, insurances, gas etc.) - and then some on enhancements and upgrades for it.

More out of wanting to prevent him from blowing all his money without saving, I convinced to him to open up a securities account a while ago. And then make regular ETF investments, through a savings plan.

He had had no idea about equity investments before and still isn’t much interested in the details of it, though he does keep tabs on his account every now and then. He’s still paying into four regular equity savings plans (three ETFs, one stock savings plan for a particular stock). Which I suggested, to get him into it: “Look, these is/contains companies whose products you like and use. Oh, and let’s also throw in an MSCI World fund to cover everything worldwide a bit” (the latter which I of course assigned the biggest allocation of his investments to).

Subsquently, he came back and asked me for advice a couple of times. Other than some technical advice on order types and setting limits, I gave him only very general advice (not panicking in downturns, taking it as a long-term endeavour, not chasing highs and lows, but that realising gains also doesn’t hurt…), though in the end left the ultimate decisions up to him.

Basically, he’s just starting out to save and invest for, while still being inexperienced and approaching investing pretty naively, without worrying about the details. Other than putting regular “savings” into it, he doesn’t “trade” frequently. Barely at all, in fact. Though he has made (just) a few conscious one-off transactions every couple of months - on his own, which surprised me, to be honest.

Now comes the maddening thing for me: so far, his portfolio performance has been wiping the floor with mine. :rage: Of course it’s no secret I’ve been holding off on making larger lump-sum investments due to the (perceived) high valuations.

But then, he’s also doing it by timing the market. :astonished:

As I said, he’s in no way trading frequently, has just made a handful select few one-off trades. And he hasn’t made them by looking at any ratios or PE growth figures or what not, let alone crunching number. He wouldn’t know how to anyway. He just logs the web banking to his portfolio every few days / weeks (?), and sold or bought when the price seemed “high” or “low” - or heading into the wrong direction - to him. On mere intuition, gut feeling… or luck? He doesn’t even follow economic or financial news and chatter at all, and stays totally unworried throughout.

The few of times he’s done this now, he’s done impressively well.
Taking the cake though…

We had a brief chat today, he showed me his portfolio data. And I noticed his (supposedly) biggest position in his World ETF was missing from his portfolio. I inquired, and he - literally - only vaguely remembered he had sold something earlier this year. I made him check, and he had in fact taken the biggest chunk out of his portfolio, and sold his World ETF on february 19 - at the historical all-time high bascially, give or take a week. For the simple reason that he had seen it had made “good” gains that he wanted to realise.

Needless to say, that is and will be hard to replicate. Yet my own take-away so far might be this: One shouldn’t overcomplicate things, overthink or crunch the numbers too vigorously. And not worry about thing. But still, trusting your intuition sometimes might prevent you from subsequent regret.

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Don’t worry, his strategy won’t work longterm. This was pure beginners luck.

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He’s been lucky so far. Check again in a couple years.

The “problem” now might be that he thinks he is Gordon Gekko reincarnated and might be tempted to become more active, take more risks, and start losing some serious money.

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That’s a cool story, but I’m not sure if I agree with your conclusion. It’ might be just beginner’s luck. Btw when I read the title, I thought he’s wiping the floor with you, because you advised him to buy MSCI World shortly before the crash. That would be nerve-wrecking, to be this kind of advisor. I advised my gf to buy VIAC and she was too afraid, and I’m kind of glad she didn’t, because now I would have to listen that it was a crappy advice.

Ben Felix has a nice video about it. He said that according to research, even 10 years is not enough to say if an active investor has skill or luck, the statistical significance is not big enough. Through sheer luck, you may make more right than wrong decisions and beat the market.

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Same here. When people ask me for advice I sometimes pretend to know nothing about the topic, or start with a little sermon that “thou shalt never buy anything without feeling confident that thou knowest what you are doing” and “the crash will come, thine security account will turn deep red, albeit only temporarily”.

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Yep, that’s what it was.

Intuition is worth little here. :slight_smile:
Might make you feel better when reflecting on the decisions and outcomes; and that might matter to some.

36 years to be precise, with 2% outperformance (because fees).
Few even survive that long in the business, let alone bring that sort of results. :smiley:


On a similar note - one could have panicked and emotionally sold stocks after the first wave (week) of this, when it dropped ca 10%.
Few days after one would feel regret and realize that he acted on emotion rather than reason, as the things started going up; “learning the buy and hold lesson”.
Then fast forward 3 weeks later - one would feel like superman with great gut feeling, and his emotional decision being “right”.
But is it? Anything more than sheer luck?

P.S. Best decision doesn’t always necessarily lead to best outcome. And vice versa - a good outcome is not always a sign of a good decision.

Not what I mean. He says that even if a fund manager has a track record of 10 years of beating the market, it still might be due to luck.

btw @San_Francisco let us know when your friend bought MSCI World again, will be a good time to buy :wink:

Yes. I’m saying that even if it’s 30 (or 35), it is still not statistically significant. (For the one potentially investing with that active manager)

When I started in 2009, I just made a lump sum investment in UBS w/o overthinking it, I was just aware of financial crisis but also only very vaguely as I was doing my military service and had no time to check news etc. I was not thinking about recession or how long it could last etc. Couple of months later I was 30-40% in plus. Since then I had to learn a lot of lessons because I did similar things but was less succesful. I made lump investments in a pharma company and realized the wins a couple of months later thinking oh that was good (years later the share price went from 25 to 170). I made lump investment in another company and lost about 60% and it took me 3-4 years with some other lucky investments to equalize those losses.

Now, I am much more careful, and I don’t do just lump investments. If I had started with this strategy in 2009, I would have ridden this crazy bullish market and would probably still be in plus despite the current market crash.

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Sure. It’s no formal strategy of course.

Not sure if he’s at risk, but it’s a good point. I’ll keep an eye on it every now and then. Though better he makes this experience at a younger age with less money - than later on in life with bigger amounts.

This is basically what I told him. Just …his account didn’t turn deep red, as he managed to avoid the crash somewhat - by heeding the first advice: Only buying what he (by whatever reasoning) feel confident in - and then also letting go of it (selling), when he did not feel that confident anymore.

I think he did this week.

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