#25 A 600% Gap in One Investment Taught Me Three Rules of Investing

【What I've been up to】

Hi, Reader,

how was your week?

The day before writing this, I got back to Taiwan from Vietnam.
The trip started with camping in Miaoli, then gatherings and recording in Taipei,
then a flight to Vietnam, and finally home.

All in all, I was away from home for twenty days.

In Vietnam I didn't visit a single tourist sight.
I kept getting up a little after 5 a.m.
to meditate, do yoga and exercise,
then showered and went out.

I'd find a café, order a cold brew,
take a seat by the window, open my laptop
and start reading or creating.

So when people asked whether I was there for travel or work,
at first I didn't know what to say.
Travel? I didn't look like a tourist.
Work? It didn't feel like working.

I felt my sense of identity wobbling:
was I “traveling” or “working”?

After some thought,
I reached a conclusion: I was “living.”
Yes — this is simply my life.

Enjoying the Vietnamese sunshine,
breathing in the smell of coffee,
eating pho at street stalls,
soaking up the atmosphere of Vietnam.

I really enjoy traveling like this — very chill.

Of course, the trip wasn't all upside. There was a downside too:
I've fallen behind on writing my book!!

The constantly changing surroundings unsettled me.
I need to keep training my mind!

I really admire digital nomads
who can switch states so quickly.

And this weekend I'm off to Taipei for four days again —
such a busy April.

OK, that's my update —
now on to the topic.

【A 600% gap in one investment taught me three rules of investing】

Imagine an investment decision
that didn't just cost you 80% in missed gains,
but also lost you 70%.
Between the two, a sixfold (600%) difference in outcome!

How would you feel about that investment?

Today I'll share
one of my many investing failures.

How it started: “I've got a batch of cheap beef”

On August 20, 2018, a friend told me
about a stock riding the 5G hype — very hot!
It was about to go public and was doing a private placement.

He said making 20% in six months would be no problem,
and asked if I was interested;
his company managed stock investments for clients.

He was just like Ng Man-tat in the film The God of Cookery,
hitting my weak spot — wanting to make quick money —
and saying, “I've got a batch of beef here, real cheap.”

So, bewitched,
with NT$200,000 of spare cash on hand,
I signed a managed-account contract and put the money in.

The whole thing dragged on for about five years.
By October 12, 2023,
I got back only NT$60,000.

The investment ended with a 70% loss.

If I'd put that money into the ETF 0050 instead,
by October 12, 2023
it would have returned 80% — worth NT$360,000!

NT$60,000 versus NT$360,000: a sixfold difference!

0050 backtest with dividends reinvested

0050 backtest (dividends reinvested). Source: Yuanta Investment Trust

Not only did this investment make no money,
it also cost me the opportunity of those years.

That experience
taught me three important rules of investing.

Three rules of investing

One: don't touch what you don't understand

Charlie Munger said: “The key to investing
isn't how much you know,
but how honestly you recognize the limits of what you don't know.”

I had done no research at all on the 5G industry.
I don't work in telecom,
and my phone was still on 4G at the time.

I'd just seen media reports
saying 5G was booming,
and trusted my gut.

Putting my hard-earned money
into a field I knew nothing about
was deeply irrational.

If your investing is based on tips or following the crowd,
even if you get lucky once,
you'll lose it back later.

As the blunt saying goes:
“What you win by luck, you lose by skill.”

You don't have to get every investment right;
you have to avoid doing stupid things.
Blindly investing in what you don't understand
is one of the stupidest.

Two: take full responsibility for your decisions

This investment was managed through my friend's company,
so I had no control over the decisions.

Along the way,
my friend and I had some friction.

I felt that since I'd handed him my money,
he should keep me regularly updated
on how the stock was doing,
should bear responsibility for the losses,
should do this and that...

Later, looking back,
who was most responsible for this investment?
Me, of course.

When he came to me, he didn't hold a knife to my throat
and make me hand over the money.
I went to the bank and made the transfer myself.

It was all the result of decisions I made at the time
and carried out.
Blaming someone else
is always the easiest thing to do.

When I do that, it means I'm not the problem,
I don't need to change — everyone else is wrong.

And if it isn't my fault, I don't need to reflect,
and I lose the chance to grow.
Next time the same thing happens,
I'll get the same result.

That victim mindset only holds me back.
I should take full responsibility for my own decisions!

Three: hold for the long term

Amazon's Jeff Bezos once asked Warren Buffett:
“Your investment thesis is so simple —
why doesn't everyone just copy you?”
Buffett said: “Because nobody wants to get rich slowly.”

My friend told me I could make 20% in six months,
while 0050 returns only 8–9% a year.
I was too eager to get rich, and I paid for it.

“You can't produce a baby in one month by getting nine women pregnant.”
— Warren Buffett

However talented or hardworking you are,
some things simply take time.

The three ingredients of investing: principal, rate of return and time.

Without long-term thinking, you give up “time.”
We should make time our friend
and let it work for us.

Long-term thinking is a key to investing successfully.

These three rules
are what I've distilled from years in the market
and countless pitfalls
I've fallen into.

If you can stick to them,
you'll avoid most losses.

I hope you can avoid some detours:
take my lessons, without going through my experiences.

Wishing you good investing.

This week's episode

#70 | Financial freedom is about choice, not money: the real meaning of FIRE (Infinite Possibilities Sofa #3)

What FIRE (financial independence, retire early) really is, why rich people can still be unhappy, why I started this podcast, and how to use money to design the life you want.

Read the full show notes in English › (the episode is in Mandarin Chinese)

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