Short ramblings and the August portfolio

July +3.75%, YTD +47,67%

Disclaimer: Nothing what I write here constitutes investment advice. I am not a licensed investment adviser, I am just a random person on the internet hiding behind a meme. Do not buy or sell securities because I mention them. Do your own due diligence and don’t be stupid.

With the backdrop of almost 50% YTD and now 8 positive months in a row it is hard to be dissatisfied with performance. But… just as with my less than optimal IBIT 0.00%↑ trades in June, July saw me making some ill-timed decisions as well…

However, the longer I play this game, the harder it becomes to beat myself up over those. As I mature as an investor I increasingly am internalising that investing is not about playing “a perfect match” (to pull an analogy from tennis). When you constantly have to make decisions, in real time, with imperfect information, you are bound to make some suboptimal decisions eventually. To stay in the analogy: Yes - you may play a perfect game every once in a while, but as this investing journey is a never-ending career with matches every day, play-by-play perfection over a long time is unattainable. Ask the greatest investors in the game or the GOATs of tennis - they make mistakes all the time, too!

If play-by-play perfection is unattainable, then what should one be striving for?

As I see it, first of all (and non-negotiable) should be the focus on survival. One has to make sure one stays in the game (always!), and can play the next point, as that is the only chance for a positive outcome down the line. So whatever I do, I can’t take risks that may end it all. As this is now my only source of income, I need to make sure I do not zero out or lose too much of my stack (which is essentially the same as zeroing out). My goal here is to maximise the probability to achieve very attractive long-term compounding of my asset base. It is explicitly NOT to maximise the asset base. Kelly or Half-Kelly is what creates outlier years. But I want an outlier career, hence sanity must prevail.

Second is a healthy mental state. If one does this full time and one is miserable, then what has one achieved? I must reduce the days where I feel terrible and beat myself up over a mistake to an absolute minimum. How do I do this? I strive to be directionally correct, most of the time. I keep focusing on “directionally correct” like a mantra: It’s impossible to buy the bottom and sell the top regularly so I try not to place too much attention on how much lower something goes after I bought it or how much higher something runs after I sold it. I just focus on buying and selling at opportune moments (where risk-reward skews favourably). Obviously these decisions can still look bad in hindsight, but no one gets paid for “hindsight” in this game. In my view, the sooner one accepts one’s own fallibility, the “easier” investing gets. Embrace yourself, especially when you make “mistakes” and look upon them with kindly eyes, knowing that this game is hard. A good mental state can make the difference between a Borg and a Djokovic or a Hingis and Williams. If you enjoy what you are doing, you’ll have a longer career.

Third, and this may be a very boring point: pre-tax performance is one thing, but post-tax performance is what ultimately matters to me. I know, no investor likes to think or read about taxes (aka “theft”) but I painfully learned this month that I need to care about them. Again, my family and I are now depending on my investment success and we eat depending on my after tax, not pre-tax results. I learned this month that I am effectively getting penalised for receiving dividends: my overall tax burden on dividends is multiples higher than that on price appreciation gains. I wasn’t aware of this (taxes aren’t my favourite topic ;-)) and have now begun taking steps to reorient my portfolio away from names that are paying high dividends. I even began selling a small amount of KSPI 0.00%↑ for that reason :-( Anyhow, the point is: understand your tax regime and be smart about it. Your after tax returns are what ultimately matter. To my tax advisor: thanks for educating me on this topic! :)

Ok enough ramblings. Here is the portfolio as of right now:

I hope you all have a fantastic summer!

Best,

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