Psychological Demons – Your Biggest Enemy

Now that you’ve created your Singapore Bogleheads retirement portfolio, the important thing would be to stay the course. Once you’ve reached your portfolio target, you can aim to withdraw 3.5% to 4% yearly from it.

It sounds simple, but untold demons will haunt you and try to keep you away from the path to wealth. As a Boglehead, your objective is to stay consistent and believe in the process.

No doubt, you will have many temptations along the way. I will list the more popular ones.

Trying to ‘Improve’ or ‘Tweak’ the Portfolio Allocations Repeatedly

Please don’t foil a perfect plan.

The beauty of asset allocation in Bogleheads portfolios is that it forces you to buy when things are cheap, and sell when things are expensive.

During the accumulation stage, this effectively makes you ‘buy low and sell high’ without you consciously doing it.

Problems happen when people overthink the process, and start having doubts including variations of (but not limited to):

  1. ‘Oh man, bonds are giving me such poor returns! I should sell all my bonds and have more allocations to equity ETFs!’
  2. ‘That other shiny ETF seems to be soaring lately. I should replace my IWDA or STI with that instead!’
  3. ‘STI seems to be pretty stagnant for years. I should dump all my STI and replace with 100% IWDA!’

The only thing you need to do is to touch your portfolio once a month, and go do ‘non-financial things’. Go for run, catch up with friends, have a drink. Just don’t meddle with your portfolio allocations.

I will talk more about these temptations to ‘improve’ your Bogleheads allocations in later posts. Meanwhile, read a Bogleheads forum post on how to resist the urge to do something.

Temptation to Stock-Pick

Please don’t buy individual stocks.

Investing & trading are different things. Short-term trading, or random stock-picking based on trends (instead of investing) almost certainly leads to ruin. These are purely dependent on speculative luck (or gambling in layman’s terms).

Luck runs out sooner or later over an extended period. Therefore, it is almost guaranteed to be an unwise retirement plan. I have briefly explained in why a BogleHeads portfolio works on the perils of stock-picking.

If You Cannot Resist Buying a Stock You Really Like

OK, you just moved on from stock-picking but you need your drug fix. Allocate and restrict that stock to 10% of your equity ETF weightage.

Example: You are 37 years old. Your equity ETF weightage is 110 – 37 = 73%. You have an overwhelming itch to buy Tesla. Allocate 10% of 73% or 7.3% of your entire Bogleheads portfolio to Tesla. Note that IWDA already contains Tesla (so you are actually increasing exposure if you do so).

Note: I have personally adopted this method so I have some flexibility to ‘experiment’ with 10% of my equity portfolio.

Get-Rich-Quick Schemes

There is no path but the Bogleheads path (or winning 4m in TOTO).

Get-rich-quick schemes ruin you by promising high returns in quick time. YouTube ads are full of these promises. If you are weak, you will find yourself channeling precious money away to these activities, instead of pumping them into your Bogleheads portfolio.

Forex Trading

Check out this video proving that Forex candlestick patterns are self-fulfilling prophecies.

It is impossible to make consistent money from Forex trading, unless you are extremely lucky. People think they can read charts using ‘technical analysis’ or ‘fundamentals’ and make passive income via Forex trading. Guess what? The best way to make money in Forex is to sell Forex courses (i.e. scams).

Affiliate Marketing, Amazon FBA or Dropshipping

An explainer from Coffeezilla on Amazon FBC get-rich-quick scam courses.

Again, the best way to make money via these methods? Selling courses on these topics, of course!

Think about it – if these are so profitable, why are there so many ‘gurus’ teaching people how to do them, instead of just doing it themselves? I’m not saying that one can’t make money doing these, but the profits simply do not justify the low reward-to-effort ratio.

I have personally tried affiliate marketing and variants of dropshipping (and made some money). However, note that there are volatile advertising costs involved. Meaning, you have to spend lots of money (on testing, advertisements and optimisations), before you make your first dollar.

Add that to search engines like Google/Yahoo constantly changing their algorithms, increasing advertisement costs, and time spent on testing products, and you end up with something that is a complete waste of time.

To put it simply, it is possible to make money with affiliate marketing, but the money (and risks) just isn’t worth the effort. For the time spent (and comparison dollar for dollar), you are better off working at Mcdonalds.

‘Gurus’ that sell courses and affiliate marketing or dropshipping know this! This is why they have pivoted their business model to sell courses as a last-ditch attempt to ‘milk the cow before it dies’. Don’t do it.

Demons Come in Different Forms

The list above is not exhaustive. Stay the course!

There are people who have:

  1. Gone ‘all in’ into cryptocurrencies with zero fall back. This means that if cryptocurrencies tank, they lose everything. Why risk it? I’m a fan of Bitcoin myself (I have some Bitcoin), but I just hold without trading.
  2. Spent tens of thousands on some stocks trading masterclass. 10 years on, they are still losing money in the stock market because they are so emotionally-attached to the ineffective/scam strategies taught in such courses. They just spend years trying to tweak short to mid-term stock-trading strategies, that will almost certainly result in ruin over time.

I will talk about more demons in future posts. For now, I hope you have learnt how effective Bogleheads portfolios are. Do feel free to leave a comment or contact me to encourage discussion. Also explore the rest of the site for related posts. Good luck!

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