Readers would know I place transparency to thoughts, plans, and lessons the top priority of this blog. I have no interest in hiding anything, even my own stupidity, for it usually attracting criticisms upon which I find beneficial to my own well-being as an investor and as a learner of this discipline.
I follow and look up to certain individuals whose transparency and integrity are of the highest quality. They have a gigantic impact on my personal development.
This post features:
- A plan for a (tiny) partnership fund based in Vietnam
- A letter to mentor
The (tiny) fund
I have been nurturing the dream of running my own wealth on a full-time basis ever since I started the investment journey. While the end goal of many similarly minded and driven investors is to run a sufficiently large fund that earns them the respect, money, wealth and title, it is surprisingly not my end goal. I have never aspired to accomplish such great ambition.
But what I aspire to do is to be able to afford 10-15 hours a day “free” to read.
This dream can materialise much faster if I open my (tiny) fund in Vietnam due to the low living expenses there and to being close to the people I love and treasure – my family.
Here is the details of the dream:
In the next 3-5 years, depending on which point I call it enough to this corporate world, I will come back to Vietnam to set up a small fund starting off with ~6 bn VND.
A third to a half of this 6bn VND will be funded by my own saving and the remaining comes from my most-trusted partners – my parents and my brother. My own saving as at today is 700 mn VND which can be expectedly 1.5 – 2bn VND 2 years from now if I can still save and invest at this current rate and my employer is kind enough to keep me around.
If I’m lucky to be able to convince my other close relatives to join this venture, then the 6bn VND can be boosted to 10 bn VND, with 1 bn VND each contributed from 4 additional partners, a number I think is reasonably attainable.
With ~6bn VND, I will “charge” an annual fee of 2% and an “outperforming” fee of 10%. I will explain these 2 types of fees shortly but the reason for these fees is to allow me to have an annual income.
An annual fee of 2% would be 120mn VND a year, or 10mn salary a month, more than enough for me to eat, drink, have a bit of entertainment and have a roof to live under.
The outperforming fee of 10% is to compensate for my ability to generate more return than the VN-INDEX in any given year. I will however be most likely to plough all of my income from this 10% fee back into the fund. This is because this laying-around-income doesn’t give me any utility other than more firepower to reinvest and to further increase my wealth.
Example: Let’s say in year 1 the fund goes up 10% from 6bn VND to 6.6bn VND whereas an equivalent 6bn vnd investment into VN-INDEX only goes up 6.3bn VND, or a 5% appreciation, I therefore outperform by 5%. The excess outperformance in VND terms, of 300m VND (6.6-6.3) will then give me an additional income of 30mn VND a year (300m x 10%), or an extra 2.5mn VND a month.
My total income from this “outperforming” scenario would be 12.5 mn VND a month. A salary that is much below average if someone is to quit working in the UK after 3-5 years and to seek alternative employment in Vietnam. By estimation, such individual would make somewhere around 30 – 80 mn VND a month working in a corporation in Vietnam having had the same level of qualification and experience.
So you may ask, what is it that persuades me to dream about this venture given my annual salary will be so low? Well the upsides are:
- I still compound my wealth. My wealth will be compounded at a higher rate than VNINDEX (if I can outperform). With a rate of 10%-15% return a year, after 10 years of running the fund, my networth would hit 5bn -8bn VND or around £172k – £242k. At the age of 35, a 5bn – 8bn networth in VND (not yet accounting for inflation or VND depreciating against the £) or a £172k-£242k would be somewhere from good to average in Vietnam and average to below average in the UK. You then may ask “why risk it then?”
- The big upside to this story is that, if I get to outperform the market in a 10-year period, it won’t be just my money, my parents and my family’ money that I manage, but it will also be other people money that I will be managing on behalf of. A good track record would nearly guarantee this unless I screw up my reputation in an unimaginably ridiculous manner.
- I get to do what I love. And love for sth you do will mean unlimited upside. Period.
The downside of this story would be me compounding 6bn VND at an equivalent rate seen in a normal bank-saving account. As at today such rate is 7% for a 3-year saving term. I don’t see myself making any permanent loss of capital, to the extent of 30% loss on all capital or 100% of all of it.
A recent letter to mentor
For those of you who don’t know Mr. L, he is a great hedge-fund manager and private investor whom I recently met and feel very inspired from. In short, he’s a medical-professionals-turned investor. He fell in love with the idea of long-term wealth compounding via the teaching of the superinvestors of Berkshire Hathaway. He co-run one of the top long-only equity fund and now manages his own fund.
The below is a recent email I sent to him after having met once, exchanged emails a dozen time and reading all of his letters to his investors:
“Hi Mr. L,
As I’m sitting here doing my evening investing reading, I thought about some of your lessons. I feel that the dream to manage my own wealth on a full-time basis looms closer every day. It doesn’t have to be running a fund or anything of the sort, I’m clear in my mind and my heart that my dream would always be running my own wealth by investing in long-term appreciating assets that I can judge its value, as such a job gives me so much joy.
1/ a big lesson I learned from reading your letters, other hedge-fund and Berkshire letters is how much in-depth one must conduct their research into what they own. I feel what I have learned in the past 2 months are more than all the things that I have learned in the past 2 years. It is true when Eric Schmidt says “what matters is what you learn after you know it all”.
I learned what needs to be done to find the “edge”, both time-horizon edge and informational edge. The former comes from having the right temperament and investment policy which will be reinforced by “random reading”. The latter comes from a combination of “focused reading” and competency in basic maths and odds. I define random reading as the kind that improves my own well-being and focused reading is the kind that directly relates to investment (company reports, industry reports, etc).
2/ In the past 2 months I have done intensive research into what I’m owning and starting to eliminate several companies, starting with my parents’ portfolio focusing on Vietnamese companies, and then my global portfolio is up next which I aim to finish by late December 17 – January 18. This was when I found out that too much opportunity costs and even realised losses have been wasted on companies that I only knew the moat but I was blind on its tailwind and management. I placed too much focus on moat and not so much on widening moat.
3/ I very very enjoy the process of investing, to the point I don’t aspire to run a big fund one day, I only aspire to have 10-15 hours a day “free” to read! I enjoy compounding my knowledge so much that in the past year I often (or more like every day) toyed with the idea of quitting my full-time job to go back to Vietnam and run my own money and a portion of my parent’s wealth. I know I can do it. I have been doing “ok” enough with 2-3 hours a day reading, I can only imagine what I could accomplish if I have 10-15 hours. The dream feels closer to me every day.
4/ you know they say financial crisis has been guaranteed by the time financialisation took over in the 1970s, we just didn’t forecast what would trigger the 08 bust until mortgage-backed securities and all that came to the scene. It’s the same thing with my investing journey. I know from the get-go I would run my wealth on a full-time basis one day I just don’t know when. But bumping into you has been a key trigger. I’m not saying I’m quitting my job anytime soon but this event has been pretty impactful to say the least.
5/ I have devoted nearly all of my free time to investing ever since I started this journey and I just realised how little it was. But following my completion of the ACA exams, I now am boosting this up, 2-3 hours on Monday, Tuesday and Thursday evening and 7 hours a day on Saturday and Sunday. I figure this is the least I can do to even have any chance of becoming a great investor in the future. I feel not tired, only motivated and driven. Even if I feel tired, I’m actually “comfortable being uncomfortable” most of the times.
I may end up sending you couple more emails regarding topics in this email. Please let me know if this is too frank/direct and I will alter it accordingly. But this is only to show how big of an impact you and the superinvestors have on me. Intelligent investing seems to be the only (the best) way for me to be out of the corporate world and to live doing what I love.