Surviving an economic downturn
Are you worried about the recent economic downturn? I guess many are, including myself. Fortunately, I didn’t buy any of those “mini-bonds” or invest (gamble?) in the stock market at all. There are two reasons I never invest in stocks: First, they are not interesting to me. I realize that if I’m not genuinely interested in something, I would never be good at it. Second, I am convinced that the best investment for me is to invest in my own business. Not only would the return be higher, it is also less risky – I guess I would be the first one to know if my business is having any trouble (touch wood)! 
Flash back to last year (2007), when virtually every one investing in stocks were making money, I did my math when I was almost tempted to jump in. Based on how much money and time a friend of similar knowledge/experience put into such trading, I found that the “per hour” gain wasn’t that attractive to me, which already assumed that I bought the right stocks when the marketing was going up. I don’t know what would have happened if I did jump in, but one thing for sure: my business would be affected. I am glad that I didn’t.
Over the last few years, I noticed that friends who are keen in trading stocks share some common traits:
- They are working for others instead of running a business.
- They are “keeping an eye” on the stock market even during office hours.
- They are keen in exchanging “tips” with others, and would not hesitate in giving me advice.
- They are not passionate about their jobs and plan to quit once they make “enough” money from trading.
There’s nothing right or wrong in these, it’s just a matter of choice, as every one has different goals and definition of success/happiness. No matter what you choose, there will be costs and risks. That’s why I never advocate those who like to “get rich” to start a business, the likelihood of failing that goal is even higher than losing money in the stock market now.
To survive such financial turmoil, I think the best thing to do is to stick with what one does best, and do it exceptionally well. I believe the best investment is always investing in oneself: Work smarter, not longer. Use the saved time to learn something new, something that could help with your job, your life or just make you happier.
Insightful analysis…
But on the other hand, building up a secure passive income is important for establishing financial independence. Unlike you entrepreneurs, for many employees, investment may be the only way they can establish a passive income.
And investment in equity/ bonds doesn’t necessarily mean spending a lot of time during/ after work. I know many professionals who just invest in ETF through dollar cost averaging. Many books are written on putting investment on auto-pilot (eg Automatic Millionaire) with good results.
I think the name of the game is diversification. For any business (whether you run it yourself or other people run it and you invest through equity market), there would be risks. And if you want a stable income over a long period of time, you have to avoid putting all your eggs into the same basket.
What is ETF through dollar cost saving? Am totally igorant on this, maybe it’s something I should learn about. Thanks for your advice.
I agree with you on diversification. But I don’t have many “eggs” now, so I need to work harder before I have enough to diversify.
ETF = exchange traded funds, eg HK Tracker Fund 2800.HK
Dollar Cost Averaging = regular (usually monthly) contributions to the investment account and buying the same stock/ ETF with the same amount of money
If you start with just $1000 per month now… the results would be better than starting with $10000 per month 10 years later.
Many ‘lazy’ investors are buying ETF through DCA with good results… I would suggest you read “The Automatic Millionaire” or “Work Less Live More”. For blogs, Get Rich Slowly is pretty good.