When I first started investing, I never imagined that I would one day feel like investing is expensive. Well, most people would agree that investing is risky and sometimes stressful but never expensive. The reason is that as investors, we are more focused on gains and losses. However, have anyone ever considered the opportunity cost of investing, and yes it sounds always counter-intuitive even as I type it out. But the truth is, investing is expensive, and in this week’s post, I will be sharing my experience with you and explain those thoughts as clearly and candidly as possible.
Liquid assets but still locked up
Although most of my holdings are liquid as I can sell them off, I know for a fact that I will not be doing that any time soon. The reason is simple: if I did, those funds will be back into cash form, which can no longer yield positive returns. Even though many people might not see that as an issue, I sometimes feel that it is an unspoken phenomenon, especially when a huge amount of capital is invested. This obsession that capital must be put into good use really puts investors in a spot because it is in fact the right thing to do. This realization came about when I hit a new milestone in my investment portfolio and then I realized that there is an implicit requirement for all investors and that is to have our capital locked up “indefinitely.”
Those positive yields cost a lot
Putting all emotional torment aside, I will gladly share that the gains from the market are often “hard-earned.” Not in the traditional back-breaking labor kind of difficulties but the sacrifices required to earn and accumulate the capital required to start investing is not an easy feat. Speaking as an investor from a non-privileged family, I can vouch that for us to reach a state where we can live off our investment earnings is not easy. I am not referring to crypto investing or even 10 bagger stocks but slow and boring stocks like Singapore counters. So the next time you hear that investing is lucrative and easy to live off without working for the rest of your life, be sure to ask if those people are investing or gambling.
Realised gains are hard to come by
It sounds easy to get 1% returns in 20-22 days of trading but it is not, let me tell you why. For example, if you had a total portfolio value of 1 million dollars, you will have some incapacitated stocks that are in the red, thereby posing a higher risk if you use them for trading. As for the rest of your holdings, they might have a high potential for growth in the near to medium term. Hence, it will also be hard to sell them off and take profit consistently to unlock your paper gains. At the end of each month, you will probably be left with around 0.5%, equivalent to $5000 while managing a portfolio value of 1 million. Consequently, this amount will drop significantly if you are managing a smaller fund.
Closing Thoughts
As usual, my main intent is to debunk all these myths about investing that I hear so frequently on social media and online videos. Investing is not as rewarding as most imagine it to be. In general, investing is only for people who aren’t eager to get rich fast, otherwise, sadly, for the rich. For those who have a misconception of investing, I am sorry to burst your bubble, but there is no way you can live off investing that easily and get double or triple-digit percentage returns sustainably. Even if you have accumulated a million dollars in your lifetime (which might take 10-20 years), you will probably only afford a simple life (and yes, without employment).
