Each morning, I write a 420-word memo because writing is one of the best way to focus your thinking & effect some change you desire. It is a physicalized version of what is going on inside your mental environment.
Today’s memo discusses portfolio theory, instant feedback, and outlines my forward-looking task plan.
“It was the change in my own attitude toward the game that was of supreme importance to me. It taught me, little by little, the essential difference between betting on fluctuations and anticipating inevitable advances and declines, between gambling and speculating.”
I discovered recently that I was gambling rather than speculating, and I made some basic changes to my daily operations to reflect that awareness.
The Almighty Allocation Mechanism
I am fascinated by the process of allocation, and I’m looking forward to studying portfolio theory in more depth. Whether we are talking about allocation assets in an investment portfolio to diversity risk, allocating our time to achieve efficiency at work and relaxation with loved ones, or even allocating a list of exercises across a week’s worth of daily workouts.
I just started a book called “The Intelligent Asset Allocator,” and I think it’s going to be a good book to transition my thinking to better see the forest from the trees. Author Willie J. Bernstein forwards the argument that asset allocation, historically, has been “10 times as important as stock picking and market timing combined” (viii).
With every investment you make, no matter how big or small, I think that when you make the right decision, you receive immediate feedback. If you execute a buy and the next day the price moves up 1%, your call has been verified. If the market immediately moves against you, get out. Use that immediate feedback. You can make sure you’re never waiting on a loser to become a winner.
I found this to be true when I halted, postponed indefinitely all my Bitcoin trading accounts and consented to let it sit while I focus more on building my portfolio and allocating my top 4 assets within it. The price moved immediately up, made a higher high. I did not feel any FOMO, which was a big step in the right direction.
I also found this to be true in a personal affair. I made a decision to act on an ongoing problem, and I was able to sleep deeply for the first time in weeks.
I will be taking a full CAIA practice exam tomorrow, Wednesday. Based on my score, I will determine if & when & what trips & vacations I can pursue in the near future. If I don’t score >60% , there won’t be any trips (until I take another full exam again 2 weeks & reassess).