Hey {{first_name}},
This is the second note in a series on wealth management, you can check out the first note from last week’s issue here
It’s much easier to handle (or rather, avoid) stress in investing than it is in business.
There are certain things in business we’d rather not do, but are unavoidable. Usually it’s some admin job, employee headache or replacing equipment…
But with investing you don’t have to have those issues because you simply don’t have to buy. The best investing involves saying no more often than yes.
Today I’ll offer a counterpoint to last week’s note that emphasized having liquidity, an example of a trade I could sell at any time that caused more stress than it was worth
I’ll be honest with a recent ‘stress free’ investment that I’ve turned into a massive headache.
I had the idea of a simple currency arbitrage from pounds and euros into dollars due to pressures on inter-bank lending rates. The thesis doesn’t matter much now, just that I thought there would be an international dollar shortage and this would cause the currency to go up.
I converted other currencies into a $150k dollar savings account and waited.
Sure enough, the dollar has been appreciating and I was sitting pretty.
But I started getting impatient and looked for higher yields. I felt just having a savings account wasn’t investing, even though I was getting income and capital appreciation. With greedy fingers I clicked the button to buy a basket of dollar denominated index funds and almost immediately after, the market started tanking. It will probably pick back up soon, but while I nurse the losses it revealed two things for me:
I didn’t need to take risks when running a normal business contains risk and stress already
The time taken watching a volatile market subtracks from adding value to your main business, and sucks out all your energy from that.
In the military, it’s called mission creep. For entrepreneurs it’s shiny object syndrome. Formulate a clear plan then see it through until completion. Probably, upping your skillset is the best return on time you can have so watching stressful investment is a compounded waste of time
How to avoid problems like these?
Choose low volatility
Don’t use leverage
My rule now is:
If it adds stress without adding skill, don’t do it.
If it earns while I sleep, keep it.
If it distracts from my main mission, cut it.
Compare investment strategies with us whenever you’d like here
Here’s to your success,
Unlocking Wealth Weekly