Capital Allocation Decision II

For investor with a shoestring budget, our early net worth creation growth is coming from our day job. We have to put in 100% of our energy and attention to do a good job. Yup, we got the point, we don’t have much time. All we have is probably 26 hours a week if we spend 2 hours a day on weekday and 8 hours a day on weekend, for a person who is really passionate about investing. For less serious investor, 6 to 8 hours probably will be a very big achievement.

We need to stay very focus to maximize limited time available. Personally, I am avoiding as many distractions as possible. I am trying to cut down watching business news (CNBC or Bloomberg), we probably won’t realize that one-hour is gone per sitting. The second place to avoid is traders’ chat room, I find it amusing, entertaining but probably won’t help me much. Thirdly, going after quantity over quality by hopping websites after websites in search of hottest stock tips. Forth, in my opinion, one should spend less time on brokerage reports, even though there are few really good ones occasionally. Lastly, don’t spend too much time on technical charting; investing by looking at rear mirror will not help much.

Some of the professionals and senior managers really amuse me, they put in so much efforts in their professional life but a lot more careless when come to personal investing.

To manage time effectively, my research is normally pull driven and not push driven, I will goggle a subject that I am interested rather than wondering around aimlessly. I will subscribe to top magazines/newspapers like Economist, Wall Street Journal, Reuters, The Standard Finance, China Daily. When I read newspaper, I will pay attention to industry statistics, watching stock price reactions on the news or arguments of money flow, etc. The most importantly is to spend more time on company annual reports.

I spend a bit of time monitoring the worldwide macro economy developments to have a feel whether a major correction is coming. I am not trying to seek Alpha returns or looking for lowest Beta. I just want to avoid major weakness of value investor of buying or selling too early. Those who play long enough in the stock market will understand how difficult it is to catch top and bottom. I should be OK as long as I am approximately right than totally wrong.

I will typically aim to read at least one book a month, whether it is finance or investment related or outside finance/investment subject. Knowing broader subjects will help to sharpen the art of seeing big picture.

Capturing thoughts on diary is important to me. I will review on monthly basis of my thoughts, observations, commitments to validate and compare reality and result to theory and target.

Looks like I need another session to write about capital allocation.