I write for myself and to sort our my thoughts and own way of thinking. I (try to) write well in case anyone else ever reads this thought-sorting. I guess I am feeling today that I could use a little reminder of some of my own investing principles, even if they are only fledgling at best.
You see, in Canada in particular (because of SEC regulations restricting such investment in The States), there has been a ton of growth in the Marijuana industry since the latest government promised to legalize marijuana products federally when elected in 2015. Currently, legalization is set to occur before July 1st, 2018. And especially in the last couple of months, there has been a lot of growth in the price of stocks of companies related to the industry. And in terms of investing, it’s basically the Wild West. Think Bitcoin for stoners (all kidding aside, there is a lot of potential for growth in the industry and a lot of real investors taking notice and getting involved).
So, having finally gotten a handle on my budget and spending, and eliminated all credit card debt, I was in a position to start investing some of my income as of early this month. I have a bit of money in Wealthsimple already, which builds you simple portfolios consisting of ETFs and offers very low ‘management’ fees (most of the ‘management’ is done algorithmically – by computers). But I also wanted to learn to use a direct investing service, such as Questrade. With this, one can buy stock (among other things like precious metals and bonds), or ETFs just like Wealthsimple does. I’ve written about the folly of assuming you’ve made money on stocks before you sell them, and even mentioned the marijuana industry itself as risky and for short-sighted investors. And then I became one of them. And currently, I am winning. So for the first-time in my young investing ‘career’, I am facing that internal battle that only really be described as ‘greed vs. wisdom’.
So what exactly am I doing wrong? Well, for one, with my entire portfolio in stocks of an emerging and volatile industry, I am not investing well for the long term. However, I have decided that while I am still working and have the option to continue to do so, I will take a little bit of additional short-term risk and use any potential gains to build my portfolio how I want it to look for the long term as it gets larger. Currently, I am basically willing to lose my entire portfolio in order to possibly leave work earlier but as it grows and I am able to invest more and more, that will not be the case.
I have also been investing in companies vs. parts of the market using ETFs. I have, however, recently discovered that there is an ETF for the Marijuana industry available to investors in Canada (HMMJ). I have started to invest here instead of companies and am planning to eventually move all of my ‘weed money’ to this (it will be a small part of my final retirement portfolio).
So, amongst the hype, I wrote this to remind myself (and you out there, whoever you are) that past returns or not indicative of future performance. Personally, I am in a unique position to now build up my portfolio quickly, and also have little to lose right now so am willing to take on the added risk in the short term if it means potentially leaving my job at the end of 2018 instead of sometime in 2019. After all, that is the focus of all of this, remember? Retire early, live well! However, one must keep in mind that the real secret to successful investing over the long term is to avoid the euphoria during bull markets and the hysterical panic during a downturn, so keep some cash on hand to buy when things are down and don’t start counting your chickens before they hatch when things are up. Keep the long-game in mind and stick to your principles. You will take your lumps along the way, but if you have chosen the right principles, it will all work out well in the long run.