Have you ever asked yourself when you will actually change your view on something after getting new information that conflicts with your current view?
This article is my way to work through this question.
I have just received some great news. I’m going to be a dad, to twins! It’s still early news but I’m really excited. It has been a long and tough time trying for over 4 years. I’ll be 35 when they are born and I’ve been thinking a lot about how my portfolio will have to change. My business is part of me so if my circumstances change, so will my business.
I knew this day would come eventually. I’d thought about it quite a bit over the last few years, but when the news landed, I thought a lot harder about how my life will change. My focus for this post are the changes in my portfolio.
Currently, I’m heavy in commodities, mainly gold and silver, including holdings in various companies in the mining space including royalty companies, producers, developers and exploration in yet a different variety of locations and jurisdictions around the world. This is where I see the most value over the next few years based on how I view things. It seems inevitable to me, but not necessarily imminent. But I go where the value is.
My portfolio is currently split:
20% Money – This consists of physical gold and silver, cash, and insurance. This is my downside protection.
40% Investments – Businesses that make money. They may pay dividends and buy back their own shares when cheap. This includes profitable royalty companies.
40% Speculation – This is the where I like to hang out. Volatile. Massive upside potential and, generally, are losing money. I look for huge differences between price and value and distortions caused, usually, by governments.
Next, I asked myself how my life will be different looking after two little ones. How much time can I devote to my portfolio and reading? Can I truly risk the same amount of capital to speculate with when I have more responsibility? Can I afford to lose that much?
I spent the next few weeks pondering these kinds of questions which lead me to writing this article. I decided to put a plan in place to slowly revise my portfolio to reflect the changes coming in my circumstances. It would be physically impossible for me to track and do the same amount of reading to warrant the extra risk speculating.
However, another thought came across my mind; maybe I could lose all that reading time and research and there be no difference in my investing and speculating performance. Luck plays a bigger part than we imagine.
I’m thinking perhaps I need an overview using the Pareto rule and look for the 20% that produces 80% of the value in my current allocation. That means reducing the amount of companies I own in my portfolio. This will be a challenging task itself. This may help however, as I’ll have higher amounts in each company I own, but I will increase insurance holdings to offset some of the risks. Volatility does not concern me as risk and volatility are not the same thing.
My new revised portfolio:
40% Money
40% Investments
20% Speculation
I’m increasing the amount of Money while decreasing the amount of Speculation.
I have convinced myself of this since my priorities and focus will shift. I currently spend practically every day, all day, reading, learning, sometimes writing and watching around the subjects to help me become a superior investor and speculator. I believe I have found my passion. I’m still figuring out if I’m any good at it mind you! My timing hasn’t been great and I’ve made quite a few errors over the years. Things didn’t go as I thought they would. I realised then that I was a poor predictor of the future. I paid my tuition fees. In fact, what I really did, was understand myself better. I observed how I reacted and felt about something. And then explored the reasons why I thought that way.
This has led me to accept the fact that I will have less time to put into investing and speculating. But, what it will do is help me find who the best of the best are in my portfolio and partners. I’ll be trimming the fat from my email list, and unnecessary actions that are not enriching and helping me and the family progress.
Certain things will crop up in life that will force you eventually to change how you live, having twins is one of them for me. It could be something like a death in the family or retirement which would require changes.
It’s more important that I spend the time and have influence on my children during the essential 0-5 years of their development rather than spending all day researching companies. You never know, it may help me just become more efficient at allocating my time and things don’t change as much as I think.
In fact, my kids will have one important advantage over me, time. I didn’t get started in understanding investing until I was in my late 20’s. They will know much sooner and have the benefit of compound interest.
In that case, the best investment and speculation I can make is to focus my time and attention on the kids.
It is important to reflect on your life as it will all be over eventually. No one can reverse that. And as a non-believer in fairy tales, what matters most is what you do right now. For me that will be to set a good example and live a wise and comfortable life while instilling the wisdom I have gained over these last 8 years.
However, once they’re more dependent, I’ll be back.
