k_babysit4exit

My friend Kun.H is the first one to remind me this vague yet powerful factor (See my Feb 2021 mail below). Warren Buffett also mentioned some variation of it. He wants to buy-n-hold for decades. IFF you choose wisely, then the assistance of Time can be effective and quick. I think ValueInvesting often shows powerful examples but not everyone is able to follow ValueInvesting principles.

— BnH: time is on your side if you buy and hold. If you try to time the market to exit, then time is probably not on your side.

Assuming BnH is a good thing, BNH proves to be much easier with real assets due to higher tx cost ?!

For both BGC and khm investments, I need many more years than initially planned (10Y). Luckily, I invested at age 41 and later, so I have a long runway.

— swans and price stability
With speculative assets, I don’t feel time is on your side. See https://tanbinvest.dreamhosters.com/1786/durability-asset-appreciation/

— ChineseBambooTreeParable .. is more relevant in pff than in other domains, because:

• buy-n-forget .. you need due diligence to pick the seed. After that, you don’t need to babysit.
• there’s an effective “system” at work, with the power to grow the asset. No such “system” outside the pff domain.
• in pff, from Year 1 you can see the current value:) In the classic CBTP, the current value is $0 for four long years, i.e. no immediate result 🙁

Q: which asset classes are economically no-growth ?
* gold and oil … supposed to be scarce commodities with increasing demand, but the market may take decades to reflect that.
* bccy
— is time on your side in these asset classes? It depends on your horizon and other factors.

• Time is usually on the side of productive assets, unless the payout rate is not growing enough.
• U.S. stocks in general yes, but non-US tend to have long trough, so during your lifetime, Time may not be on your side.
• U.S. index ETF .. long-term trend exceeds expRatio, so yes Time is on your side.
• (see also mail below)
• zero-coupon bond? Its value approaches par, but it is dubious to say Time is on your side. I guess in a volatile market, you can just hold the bond to maturity and therefore Time is on your side.
• rEstate in developing countries — yes (but probably not in most parts of U.S. See blogposts on Brian.)
• .. For rEstate, Time can be a lifetime 😉
• REITs .. yes the rental payout gives hope that Time is on your side.
• small amount of physical gold (so that I can keep at home at very small negative DYOC)? Time may not be on your side as gold long trough can last decades.
• mufu? with expense ratio time is on fund manager’s side
• FX? No
• annuity like CpfLife? probably yes. The longer you live, the more payout you receive.
• endowment and other insurance products? questionable
• .. Note there’s a high expense ratio in all insurance products, worse than mufu.

—– Letter to Kun.H
I like your comment about “have time on our side”. Mutual funds have an erosive expense ratio, so time is on the fund manager’s side 😉

To have Time on my side, one of my habits is buy-n-hold. (A related habit is buy-n-forget, as explained in the earlier mail below. If I must babysit my positions, then Time is not really on my side.)

Q: Do stock markets show long-term growth more than inflation?
A: Not sure. Depends on the region and the timeframe. Most authors use U.S. equities history over the past 100 years. What if they only look at the last 20Y? What if they look at another region beside the U.S.?
A: Beware of survival bias. There are thousands of growth stocks (including fake and failed growth stocks) in the last 50 years, but if we include all stocks across all equity markets, the long-term trend would look less convincing, less foolproof.

In contrast to growth stocks, look at T:US. Not much of a long-term trend,  but it delivers a consistent dividend, following a sustainable DPR (dividend payout ratio). Looking at my dividend stocks like T:US, I feel “Growth is overrated and based on flawed analysis but dividends seldom lie.”

Our friend, Time, is a big help in dividend stocks — If the business has healthy profit, cash flow and DPR, then time will prove that the stock is worth buying. Its valuation will tend to grow with the overall market, perhaps at a low beta.

With growth stocks, Time is even more helpful. Beware
* we must pick the real growth stocks not fake ones (with dividend stocks I mostly look at track record only)
* we may need to baby-sit them after we buy (less baby-sitting for dividend stocks… buy-n-forget)

It’s easier to be patient with an investment when it generates periodic cash incomes.

You raised the excellent question about bonds. High coupons are usually on long bonds… where inflation (Time) is NOT on our side. In contrast, about half of my dividend stocks could hopefully grow with the stock market. Both dividend amount and stock price would grow. Nevertheless, there is indeed a chance that my dividend stocks underperform bonds.

With both growth stocks and dividend stocks, we need to have Time on our side and we need patience.

My objective is not windfall appreciation. My objective is a dependable income, like retirees. For my objective dividend stocks are safer. I believe Time is on my side. Time will tell.