Sins of Investing – Sloth (Part 3)

sloth-cartoon

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Having covered Sin 2: Pride in the previous article, I will be covering on Sloth in today’s article.

Sin 3: Sloth – Taking the easy way

Ever felt that moment of laziness, that time when you wanted to take the easy way out. Well, in investing, there are few short cuts. Understanding what you are investing in means doing the hard work even though it is rarely the quickest way. Only when we have done our due diligence can we truly rest in peace. Imagine if a company you invested in dived 50% because you decided to skim through the footnotes of the company.

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Perhaps you heard of the latest investment idea from a broker. Would you just blindly follow their advice or check the company’s fundamentals to ensure that the company is financially sound and that what you are being sold is not just some latest trend or story?

Overlooking Costs

Perhaps we decide to just invest in mutual funds, allowing a fund manager to manage our money instead of doing the grunt work of researching into companies, which I admit is a much more tedious task. Does that mean we truly need not do any homework? Investors often do not pay attention to details and in this context, I am referring to a fund’s expense ratio.

To quote James Choi, an Associate Professor of Finance at Yale School of Management, investors are wooed by a fund manager’s name or recent performance, and fails to look at the fund’s expense ratio before buying in. Rather than buy a cheap index fund that mimics a broad market index such as the S&P 500 with an expense ratio of approximately 0.05%, investors will buy one managed by a professional that charges a much higher fee. However, numerous studies have shown that buying more expensive funds tend to underperform less expensive ones.

While there is nothing wrong opting for a easier route – allowing a fund manager to manage our money for us, we cannot slacken one bit. Ultimately, we are the owners of our own money and we have that responsibility to pay attention to our own money because if we don’t – no one else will either.

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I developed my passion for investment management especially equity research at a relatively young age. My investment journey began when I was 20, at a point in time where markets were still recovering from the Global Financial Crisis. My portfolio started from money I saved over the past years and through working during the holidays. I was fortunate to have a good friend with common investing mentality to began my journey towards value investing. To date, we still research and invest in companies together, discussing valuations and potential risks of a company. To date, I manage a fund with a value investing style. Positions are decided upon via a bottom-up approach or smart speculation (a term I came up with when buying a stock for quick profit due to a mismatch in prices in the market due to takeovers/selling of a subsidiary or associate). Apart from managing my own portfolio, I enjoy sharing my research with family and friends, seeking their opinions and views towards the stock. Reading Economics in London, I constantly keep up with the financial news in Singapore & Hong Kong. Despite my busy schedule, it has not stopped me from enjoying other aspects of life. I enjoy a variety of activities in whatever free time I may have – endurance running, marathons, traveling, fine dining, whiskey appreciation, fashion. Lastly, I enjoy meeting new people, discussing ideas and gaining new perspectives towards issues in the world.