Enlarged Wealth
It’s a short week here in Singapore as the country (and much of the region) shuts down for the Chinese New Year celebrations. Chinese New Year is a wonderful time in Singapore as we see lots of red decorations around the city, a time for families to get back together and a small chance to rest/recuperate 12 months after the coronavirus hit our shores. As part of the festivities, locals will will wish each other with the typical holiday greeting of “gong xi fa cai.” We’ve always understood this to be a general wish for prosperity, but after 22 years of living in Singapore on/off we’ve never really looked into the literal translation.
There are several definitions that all seem to imply wishing the other wealth and prosperity, but according to some exact translations, the term literally means “wishing you enlarge your wealth.” We don’t know if this is intentional, but we don’t think we’ve heard a better definition for why people should invest their money other than to “enlarge their wealth.” The more we think about this, the more apt we think it is as a central ethos for investing.
Now it might sound like we are trying to make a cheap holiday pun, but we assure you, this concept has real-life ramifications. Often, when we speak to clients or general market participants, they tend to get caught up in what stocks/assets they’ve missed out on, rather than focusing on what they own. They obsess about what their neighbors/friends are investing in, and more specifically, how well they’re doing. They lose focus on their own portfolio, goals, and at times get caught up in manias, which can lead to disastrous consequences. Instead, we believe all their goal should be is to generally “enlarge their wealth.”
Enlarging your wealth means growing your net worth over time; enlarging your wealth means achieving financial freedom; enlarging your wealth means steadily increasing your dollar returns without taking so much risk as to get taken out of the game. It does not mean outperforming every year, owning every top-performing asset, or making a quick buck. A recent lunch we had with a very seasoned investor reminded us of this, when he told us that even after 25 years of investing he sometimes still finds himself comparing his short-term returns to that of others and to that of the market, and when he finds himself doing that he takes a step back to look at his rolling 3 to 5 year returns and that those returns always put his goals back into perspective for him. It’s like we told a client once when we found them getting a bit worked up about missing out on a few high-flyers, “all you need to do is look at your net worth from a few years ago, and then look at it now, and if it's up by a nice amount, you’re doing just fine.”
Don’t get us wrong, if you’re actively managing your portfolio, outperforming indices is important because if you’re not, you really need to think hard about whether you're spending your time and energy well. But unless you’re a professional manager, even this doesn’t matter too much. An example from Jason Zweig’s commentary on Graham’s The Intelligent Investor (Zweig writes commentary on the later editions of the book) wraps this point up nicely. In it, Zweig was talking to retirees in one of Florida’s wealthiest communities on whether they outperformed the S&P 500 when investing their savings. While some said yes, and some said no, one looked straight at Zweig and said “Who cares? All I know is, my investments earned enough for me to end up in Boca.”
So to all of you reading this, we wish you good fortune in the year of the ox, we wish your portfolios the best, but most importantly, we wish, that for all reading this that, this year, you enlarge your wealth. Gong xi fa cai!
Thanks for reading and happy CNY to all who are celebrating. Happy investing!