Investing Principles: Lessons Learned from 20 Years of Wins, Losses, and Strikeouts

I’ve said before that nothing on this site is meant to be “investment advice.”

That said, my annual investment/market updates always get a lot of traffic, so I thought it might be interesting to follow up on this year’s update with more of an advice article.

If you’re reading this right now, you’re probably much younger than me.

I’ve now been working and investing for ~20 years and have made dozens of mistakes along the way.

I’ve covered some of my business/career learnings in the past, but I haven’t written much about investing outside of these annual updates.

You can think of this article as “What I would tell my 22-year-old self if I could do it all over again.”

I’ll start with the short version and then move into the details:

The TL;DR Version of My Investing Principles

Let’s go:

• Investing Goals: I believe the main goal of any investment should be to increase your optionality and improve your life. “Retiring early” is an unrealistic and unhealthy goal for most people (yeah, go ahead and hate-post this on the FIRE subreddits).
• Income: Earning a higher income matters more than anything else, especially when you are young. Being in your country’s top ~5% of earners will make a FAR bigger difference than fancy strategies, day trading, or finding the occasional meme coin that goes up by 100x. If your country has no high-paying jobs or makes it difficult to start a business, leave!
• Contributions: Yes, contribute to your investment accounts regularly out of your paychecks or profits, but build a 1-year cash reserve first (you could shorten this if it’s unrealistically high).
• Allocations: If you’re young, you should invest mostly in equities, but I believe gold and silver are often good replacements for fixed income in the traditional 80 / 20 or 60 / 40 portfolios. Also, I recommend putting a small percentage into more speculative bets, such as crypto or tech-heavy indices like the NASDAQ.
• Active Trading: I do not recommend day trading unless it is your full-time job. It’s too difficult to monitor even a few companies, let alone dozens, if you also work full-time.
• Noise and Existential Threats: Ignore all such threats unless they are actionable within the next 12 months. Will AI kill everyone and destroy all jobs? Maybe, but if it does, your investment performance will be the least of your worries because robots will be shooting children with rocket launchers.
• Main Quests and Side Quests: Always focus on your “main story quest,” i.e., your portfolio of liquid, publicly traded assets, and ignore or deprioritize the “side quests,” such as becoming a mini-VC or investing in real estate.
• Market Timing: Almost every expert will tell you it’s impossible to time the market, but I partially disagree. It’s a bad idea to time the market for “big picture” reasons, but it can make sense when done selectively due to very specific catalysts.

So, now for the details.

I will skip a few of these points because I don’t have much to say or add:

Investing Principles: Goals and Why I Don’t Like the “FIRE” Movement

Many people online seem to be obsessed with the “FIRE” (Financial Independence, Retire Early) movement and believe that if they can save up $1, $2, or $5 million, they can go to Exotic Location X, live a great life, and never work again.

I don’t think this is a healthy strategy because I don’t believe your life goal should be “early retirement,” and I don’t think most people will ever save this much at a young age – and even if they do, hitting one single number will not instantly change anything for them.

Your goal should be to do something useful and engaging with your life, and your investments should give you more options to accomplish that.

For example, maybe you can afford to take a lower-paying-but-more-interesting job, switch industries, or work part-time because you earn $X from your portfolio.

If you do save up millions by age 35 or 40, it means you probably started a business, worked exceptionally hard, and sold it.

If that’s your personality, could you see yourself retiring? You’ll get bored in about a week.

Investing Principles: Why a High Income Trumps Everything Else

Between 2009 and 2014, I did not have a traditional portfolio via a brokerage firm.

I made a few angel investments, traded crypto, and invested via crowdfunding, but I was paranoid about a market crash + my entire business collapsing at the same time, so I sat on a large cash balance.

Clearly, that was a mistake because the S&P 500 roughly doubled over that period.

But it didn’t matter much because my income increased by more than 6x over that period.

Sure, I should have put some of my excess cash into the stock market, but re-investing a portion into the business paid off because of this 6x increase in income.

Just think about how much you can invest each year if you earn $100K vs. $600K.

Yes, you will spend more money on rent, food, vacations, etc., at $600K, but you’ll also have far more to invest.

This is why I still recommend fields like investment banking and private equity to ambitious students: You want the optionality to earn a high income when you’re young.

If you hate “high finance” and leave, fine – but why rule it out before even trying?

Reaching a high income early in your career is also important because of how compounding works.

If you only reach a level where you can save and invest a lot when you’re 55, it doesn’t matter much since you’ll be close to retirement age anyway.

Investing Principles: Regular Contributions and Reserves

Contributing regularly is very important because markets are unpredictable, so no one ever really knows if they’re buying low or high.

But if you spread your contributions over many decades, you’ll probably be fine even if markets stagnate or return much less than they have historically.

At the very least, you’ll keep earning and re-investing dividends, which adds a small percentage each year.

Regular contributions are also important if you put money into extremely volatile assets, such as Bitcoin:

Yes, I did well with targeted trades, but if I had simply contributed $X per month on autopilot, the results would have been similar with far less stress.

I can’t tell you the exact percentage to contribute each month because this depends on your living expenses, taxes, and other factors, but I would lean toward being more aggressive if you are under the age of 30 and have a 1-year cash reserve built up (i.e., aim to contribute 50%+ of your post-expense-and-tax earnings).

If a 1-year cash reserve is unrealistically high or would take years to reach at your income level, maybe reduce it to 3 – 6 months.

I always needed a higher reserve because I have no family support if things go sideways, but it may be less important if you have plenty of backup plans.

Investing Principles: Why the Macro Environment Must Factor into Your Allocations

Many providers, such as Vanguard and Blackrock, offer “target date funds” that shift their allocations to higher percentages of bonds as you approach retirement.

Meanwhile, famous investors like Ray Dalio have suggested “permanent portfolios” or “all-weather portfolios.”

I think all of these are bad ideas because you should use your brain when picking an allocation, and you can and should change it over time.

Yes, age factors in, but the macro environment is also critical.

As a specific example, I made the unconventional choice to put the “safe” part of my portfolio in gold and silver rather than bonds in 2020.

They have completely trounced corporate and government bonds since then:

This was an obvious and expected result:

• Central banks set interest rates to 0% once COVID hit, so bond yields fell, and prices could only fall.
• Fiscal deficits were exploding, leading to more inflation, which is terrible for bonds.
• And money printing and debt levels took off and never looked back.

I didn’t necessarily think that gold and silver would outperform bonds by nearly ~80%, but I expected some type of premium.

Recommending a specific allocation is tricky because it depends on your income, age, risk tolerance, and the macro environment.

But let’s say that you just finished university and are about to start a job that pays $100K – $150K per year so that you can save a modest amount but not a fortune.

If you have “moderate to high” risk tolerance, I might recommend something like this:

• Equities: 80% (mostly U.S. with a small percentage of international)
• “Safe Portion” (Gold/Silver or Bonds): 10%
• Speculative Bets (Crypto, NASDAQ, Individual Stocks, etc.): 10%

You could argue for adding real estate, REITs, or other commodities to this mix, but I would keep things simple initially.

Investing Principles: Main Quests vs. Side Quests

In video games, there is usually a “main story quest” (e.g., kill the bad guy or defeat the evil empire) and a series of “side quests” with optional content.

Some games do side quests quite well, but many are boring/repetitive and exist to inflate the game’s run time.

In investing, your portfolio of publicly traded assets should be your “main quest,” and everything else should be a mediocre side quest you can ignore.

This includes activities like angel investing, peer-to-peer lending, real estate, becoming a mini-VC, or creating your own meme coins.

Although I never pulled a “Hawk Tuah,” I wasted time and money on these activities long ago.

I recommend ignoring everything here unless it is your full-time job.

At most, put a small percentage into one of these for your “speculative bets” category.

Investing Principles: Why Market Timing Used Sparingly Can Work

I’ll explain this point with a few examples.

“Timing the market” works best when there is a specific hard catalyst with a known time frame.

The perfect example is COVID in the first quarter of 2020.

Anyone paying attention to online news in early 2020 would have known about the impact of this virus in China and how it was set to spread worldwide within a few months.

Based on this, it would have been 100% reasonable to sell a significant percentage of your “risk assets” (i.e., everything but gold and government bonds) in January or February of 2020.

If you got it wrong because nothing happened, you could have bought back in after a few months and taken a modest loss.

But if you were right, you could have bought back in at a 50%+ discount as central banks were starting to intervene.

You wouldn’t have gotten the timing exactly right, but selling everything in February and buying back gradually over the rest of 2020 would have beaten a “hold everything from the start of the year” strategy.

On the other hand, timing the market would not have worked well during 2022 because that was a gradual decline rather than a crash triggered by one specific catalyst.

I made the mistake of attempting to “time it” by buying S&P put options in mid-2020, expecting an eventual 20% market correction.

The S&P fell close to 20% in 2022, but my options had much lower exercise prices based on mid-2020 levels, so they expired worthless in Dec 2022.

So, I agree with the advice to avoid timing the market based on gut feelings or “vibes,” but it can provide a solid boost if very specific conditions are met and you’re willing to take the risk.

The Punchline: Why Investing Principles Matter

If you’re much younger than me, I hope you’ll learn from my mistakes and start on the right track as you begin working.

Real-life friends often ask why I’m still working or why I don’t quit to trade full-time.

There are a few explanations, including some rather personal ones that get into family issues and a slew of “potential unfunded liabilities.”

But the biggest factor is that I was not aggressive or consistent enough with investing.

I’d be in a much stronger position today if I had simply contributed X% each month consistently to my brokerage accounts since 2010.

I don’t think I would “retire” for the reasons outlined above, but I would feel more comfortable switching to part-time work rather than sitting in front of a computer for 18 hours per day.

In other words, I would have more options and a better life – which should be the main reasons to invest in anything.