How I Make Investment Decisions

Author: Gagan

🙊 I once lost 99% of an investment when I tried to get too smart about investing. Then I learnt to invest at the intersection of: where I live, what I do, and what I love. ✅

🧠 Investing in a company’s stock means becoming a small partner so you can have a small share of future profits. But how can one know how much future profit a company can bring? Where you live, what you do for a living and what you do for fun can get you pretty far in this quest. Let’s unpack: 🔢

1️⃣ Where I Live 🏡

Where I live influences my investment decisions the most.

🇺🇲 Living in the US for the last 21 years gives me the front row seat to American consumer’s choices. Moreover, living in Silicon Valley, I get to meet a lot of people that work in tech. This gives me a sneak peak into the new innovations coming out of local tech companies.

⚡ In 2012, we bought Facebook stock at IPO based on the reading of how much Americans liked the platform at the time. Selling Facebook stock in 2017 was a direct result of seeing American consumer sentiment change for the worse.

🚘 In 2013, seeing some of our friends drool over Tesla Model S prompted us to buy the stock, a large part of which we still hold. In 2018, we doubled down on Tesla based on our read of how much existing Tesla customers loved their cars.

🔑 This sentiment reading happened through casual conversations with our friends, co-workers, neighbors, acquaintances. That is, the real people we were interacting with every day without putting any extra effort.

🚩 The same people also gave us a clear signal in the heady times of 2020-2021 that Crypto wasn't really useful. Although some of the more famous people on Twitter were posting laser-eyed profile pictures.

🗽 Lastly, I know the American regulatory and economic landscape better than say that of Europe or China.

2️⃣ What I Do (Work)

🏢 What I do for work shapes the upper and lower bounds of my knowledge of the industry I work in.

🧑‍💻 Having worked in tech for over 17 years has helped me understand how software companies build and sell products. This had a profound impact on my investment decisions. Learning that a software product can serve 10x more customers with about the same cost has shaped my thesis on investing.

🕵️‍♀️ I have learnt how to assess the quality of the products by various tech companies. And the caliber of the people that they hire. Also the relative importance of a company's product in the tech industry. All these learnings compound over time.

🙋‍♂️ Influenced from these learnings, our personal portfolio now mostly consists of growth tech stocks.

3️⃣ What I Love (to spend time on)

📚 What I read and learn outside of work is driven by what I'm passionate about.

🔭 I am a science, tech & business nerd. Learning about technology cycles, business, leadership, mergers, macroeconomics, human behavior etc. has always fascinated me. I'm more likely to read The Economist or watch a science documentary than watch an episode of House of Cards or Game of Thrones. I quit each after one episode, because I found them boring!

🧩 I routinely sign up for beta/experimental tech products. When I go to any restaurant, I talk to the owner or manager about which technology they use and how happy they are. I do all this because I love to do it. It’s not a chore or work.

🪝 This helps me identify new technologies and products that are likely to grow fast over the next 5-10 years, which is my investing horizon.

Putting It All Together

I constantly look at the best ideas and companies from United States where I have lived for 20 years. These ideas and companies are informed by my knowledge of the tech industry that I have been part of the last 17 years. My own quest for more knowledge makes some of these companies and ideas stand out more than others. So, building my investment thesis & discovering my investing strengths took:

⚓ 20 years of investing in index funds, gradually moving from target date to low cost index funds.

📊 10 years of investing in individual stocks, ranging from 20x gains to 99% losses.

📚 Lots of reading & research about many different and disparate ideas and themes.

🙅 Ton of discipline, introspection & self-critique as well as fair share of mistakes.

📉 Oh, and about that investment with 99% loss? It was in a Greek shipping company. I knew nothing about shipping or Greece. So I called my friend who has worked as an engineer in the maritime industry and knows the industry really well. He told me to stay away from investing in this company as there was huge risk of fraud from such smaller companies, especially ones based in Greece. I conveniently ignored his advice, and promptly got an egg on my face, losing almost the entire mid 5-figure investment in two weeks!

📢 I'm sharing this to help you find your own investing strengths. One can possibly overcome a deficit in one of these areas through more research, but proxies go only so far. If your journey has been different and you haven't found your investing strengths, low cost index funds might be the best investment for you.

🚀 We are building Xillion to help you find the best investment ideas by taking into account your investing strengths. No shortcuts. No tricks. No gimmicks. 🚀

❓ How did you discover your investing strengths? I would love to hear your story. Please share it in the comments on LinkedIn or email us at hello@xillion[.]co

🚂 Wishing everyone a speedy and safe journey to financial freedom! 🚂

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