Merry Christmas to all FH Readers!
It’s Christmas day today, so I figured let’s do something more light hearted.
I’ll share my 3 Biggest Investment Mistakes in 2021.
If you want something more substantive, do check out the midweek post where I share my in-depth Macro views for 2022, and why I think it will be a volatile year dominated by inflation and rising interest rates.
FH wins SGX Orb Awards 2021!
But before that, a big shoutout to SGX for awarding Financial Horse the SGX Orb Awards 2021!
Huge thanks to all readers of Financial Horse.
None of what I do on Financial Horse would be possible without all of your support.
And special thanks to everyone who leaves a comment on my articles, you really help me to refine my investing thoughts. Waking up on a Sunday morning to ponder and reply to your insightful comments is one of those small pleasures in life (for me at least).
So yeah… this win is for all of you, the loyal readers of Financial Horse.
And I look forward to sharing more investment content and analysis in 2022 (which is shaping up to be another big year).
My 3 Biggest Investment Mistakes in 2021
Success has many fathers, but Failure only has one.
So I like to talk more about my failures than my success.
2021 was a good year for investing, and anyone running a broadly diversified portfolio should be up 20% or so, closely tracking the S&P500 returns.
For me, my standout mistakes in 2021 were:
- Going too early into China Tech
- Not building a more concentrated portfolio
- Not buying more Altcoins
Going too early into China Tech
I went into 2021 in the green on my China portfolio.
But in hindsight, the big mistake I made was underestimating (1) the severity, and (2) how long the China crackdown would take to play out.
Logically, I always knew that Xi wanted to do something big, and that regulatory crackdowns take time to play out – rule of thumb is to average in over a 6 – 12 month period.
But when it came to execution, I still averaged in too early, even though logically I knew I needed to wait.
Because of that, I wiped out most of my original China gains, and I’m sitting underwater on my China portfolio now.
From an asset allocation perspective, China stocks make up less than 10% of my stock portfolio (full asset allocation available on Patreon), so the loss wasn’t that bad.
But the fact still stands that this was a big mistake, and if I had more allocated to China to begin with, I would have lost a lot more.
I do plan to increase my China allocation going forward though, so this will be a big lesson to learn from.
Not building a more concentrated portfolio
I split my portfolio into different themes, like REITs, Cyclicals, Oil, Semiconductors etc.
In 2021, Semiconductors and Cloud was the standout performer for me. Both portfolios were up 100% or more in 2021.
If there was a mistake, it would be not allocating more heavily into my winners.
In fact I remember selling a third of my NVIDIA position in mid-2021 at $200, when it sits at $294 today.
Which makes me look like a complete dumbass in hindsight.
The lesson here – is that in a rampant bull market fuelled by liquidity, don’t underestimate how high prices can go. Don’t overthink, and just let your runners run.
I’ve made this mistake in the past too, where in the later stages of a bull cycle I tend to get a bit sloppy in my investing. I start taking profit from winners, and allocating to stocks I am less familiar with – and my portfolio becomes less concentrated.
This always starts to hit my performance when the cycle turns, because these being stocks I know less about, I don’t know how to respond when markets turn.
In hindsight, I should have just stuck with my winners – the cloud/semiconductor names like AMD, Micron, NVIDIA, Cloudflare etc.
And not dabbled so much with the small caps like Oatly or Bumble.
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Not buying more Altcoins
If there’s a photo to sum up the absurdity of this bull cycle, it would be the above.
Elon, and Dogecoin.
You can argue that Dogecoin is a memecoins with no fundamentals, and I don’t disagree.
But the market doesn’t really care how you make money, just that you make money.
Whether you flip Dogecoin and make a billion dollars, or build a gaming chair company to make a billion dollars, it’s still the same result.
I shared in May 2021 that I bought the Crypto dip, and in hindsight the mistake was not buying more heavily into the altcoins.
I stuck mainly with the blue chip L1s like Bitcoin, Ethereum, Solana, Avalanche, Luna etc.
I still made off handsomely, but it wasn’t a 10x – 100x.
Had I gone into the more speculative altcoins, I could have made a lot more money here.
I fact I remember looking at Shiba before it did a 10x, but never pulled the trigger.
Lesson here – If you know you are in a speculative bull market, the biggest returns comes from the most toxic junk. Just don’t forget to sell.
What went well in 2021?
I don’t like to dwell too much on my successes, because sometimes you can’t tell the difference between getting lucky and having a good process.
What I felt went well for me this year, was:
- Letting my cyclicals run
- Not buying REITs
Letting my cyclicals run
I loaded up on cyclicals in 2020 – things like DBS, UOB, Exxon Mobil, JP Morgan etc.
And 2021 was the year I reaped the rewards from them.
I’m up about 50% from this part of the portfolio, which really isn’t too shabby for a 1 year holding period.
I’ve been prone to sell too early in previous cycles, and I didn’t (haven’t) made that mistake so far yet.
I will probably need to start taking profit in some of this next year – for example selling DBS/UOB into the rate hiking cycle.
So it’s probably too early to call victory on this one, I might just sell too early and miss out on a 20% rally.
Not buying REITs
For how much I love REITs, I actually bought very little REITs this year.
That turned out well, because REITs have traded sideways all year.
Most of the blue chip REITs are trading back at their March 2021 prices now, so any money invested in REITs in 2021 has basically gone sideways all year.
That said I plan to add heavily to REITs in 2022 into the rate hiking cycle, so I still have time to screw this one up.
Would love to hear what you think though!
What was your biggest investment mistake in 2021?
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As always, this article is written on 23 Dec 2021 and will not be updated going forward. Latest thoughts (and my stock watch and personal portfolio) are available on Patron.
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Merry Christmas and congrats on winning the SGX Orb! You really deserve the award with your great articles! Look forward to more of your sharing in 2022!
Thanks Gerald! Appreciate the kind words, and Merry Christmas to you!
How do we know we’re in a speculative bull market?
Haha.. are we not in one?
Buy reit is bad idea, my experience is that i end up paying them dividend through rights issue,
Haha if not comfortable just skip it! Your money, your rules. 😉
Would like to understand your thought process of selling DBS/UOB into the rate hiking cycle. Isn’t the increase of I/R beneficial for the banks?
Yes but after the rate hikes comes the rate cuts. Ideally one would sell at the peak of the rate hike craze, just before the market starts pricing in rate cuts. Of course, that is much easier said than done.
Hi FH, Merry Christmas, Happy New Year and Congratulations!
I’m just not sure this is a ‘lesson’ for the general public or less experienced investor:
“Lesson here – If you know you are in a speculative bull market, the biggest returns comes from the most toxic junk. Just don’t forget to sell.”
It sounds more like a lesson on ‘How to lose your trousers trying to chase the biggest returns.’
Thanks and Merry Xmas to you too!
Haha it really depends on individual risk appetite. I agree you can get burnt chasing returns, but if you are early and careful with risk management you can still make money. But in any case if not comfortable just skip it, we are getting close to the later stage of this bull cycle. No point chasing returns at this point anymore.