Lessons from the worst investor on the planet

Addled Aksel

Meet Addled Aksel.

The world’s worst “investor”. After graduating summa cum laude from university, he thinks he’s the smartest guy in the room. He starts his investing research by looking at the Straits Times Index’s historical data. “It’s so simple!”, he exclaims. You just need to buy when the chart starts sliding, I don’t know what’s so difficult about this investing stuff. (Forgetting that you can’t tell when the bottom is in real time).

So he insists on saving up his money and buying when the “time is right”. But like most people who believe they can time the markets, he only buys at the peak of bull run.

Thankfully, Addled Aksel had a very simple savings plan, He decided to save 200 a month and double his savings every 10 years. So, 200 in the 1990s, 400 a month in the 2000s and 800 from 2010 on. He’s easily swayed by “expert” opinions or what I like to call advertising. So he only invested at the peaks of the stock market.

To start off, he saved 2,400 and bought into ES3.SI, the Straits Time index fund, in 1990 (I know it didn’t exist in 1990, but work with me here). So he put the money in when the index was at its peak, 1557 points, it subsequently crashed to 1106, a loss of 28%. He panicked but ultimately decided not to sell because he’s afraid he’ll make two mistakes in a row by selling too early.

He never sold his shares when the market crashed. That may be his one redeeming factor.

Addled Aksel didn’t feel comfortable investing for two years after such a massive hit. In this time, he had saved $16,800. He decided that April 1996 was a good time to involved. And the Asian financial crisis hit. Markets went down 67% in the next 2 years and bottomed out at 856. It scarred him psychologically but he’s still super confident in his market timing skills.

Someone who has gone through that much would normally swear never to touch stocks ever again. But Addled Aksel is as stubborn as he is stupid. He decided to invest again when the tech bubble ramped up in the 2000s and everyone was getting into tech stocks. Because he only knew one way to invest, he ignored technology stocks and invested in the index fund once again. He had saved $4,800 by January 2000 and invested all of it. Of course, the tech bubble burst and markets went down 45%. This guy must be one of the best investors ever by now.

After 3 huge losses, he’s somehow still back for more punishment. He’s saved up $38,400 and invested it on August 2008. That’s just before the sub-prime crisis which means it’s another 45% down.

Not quite believing his luck, he makes one last punt with $36,000 in 2013 when the markets was at its peak and cashed out in 2015. I don’t think they’ve quite decided what to call this new market downturn. (It’s going to be called the oil sheikhs conspiracy crisis, you heard it here first.)

This is a table summary of his investments.

Year Investment Bought At Index Crashed By
1990 $2,400 1,557 -28% (1557 -1106)
1996 $16,800 2,406 -67% (2415-856)
2000 $4,800 2,502 -45%(2502-1370)
2008 $38,400 2,929 -45%(2929-1594)
2013 $36,000 3,402 -15%(3402-2882)
2015 Sold 2,888

Keep in mind he never sold when the markets went down. In total, he invested a total of $122,400. There wasn’t a bull-run from 2013-2015 so I’m going to assume he kept the $24,000 he saved in from 2013 to 2015 in cash. Addled Aksel only invests when them markets are green after all!

This picture doesn’t look too good. After cashing out in December 2015, he only has $122,500. Addled Aksel only made $100 after 25 years of harrowing investments, so much for his retirement plan.

Wait, the dumb guy forgot to account for dividends! ES3.SI pays out dividends and you can see it here. Let’s say he gets dividends from 2002 (because that’s how far back the data goes) and he never reinvests it. He still gets around $16,800 from 2002 to 2015. This brings his total retirement funds to $139,250.

It’s not too shabby for the world’s worst investor.

But if he had simply dollar cost averaged on a monthly basis and re-invested the dividends into the market, he would have ended up with much more money: $186,000.

But he wouldn’t be Addled Aksel, the world’s worst investor.

Obviously, this story was for just for fun. A portfolio consisting of 100% in stocks of a single market like the STI Index would require you to have risk tolerance the height of Mt Everest.

Lessons from Addled Aksel’s Journey:

  • Be optimistic about your chances in the long term. Unless the world is consumed in a zombie apocalypse, the markets will rebound.
  • How you react to losses has a bigger impact on your investments than anything else! Addled Aksel would be in far worst shape if he had withdrew his money at each of the market crashes
  • Saving more money and letting dividends pick up the slack really revs up your wealth accumulation.
  • This has nothing to do with picking stocks or buying complex investment products like the ones the insurance agents and friendly customer service personnel at the banks keep trying to sell you.

Get the big things right: save money and invest early for the long term!

PS: Some people have asked me to compare it timed fixed deposits. It’s apparently a favorite among the conservatives. I’m going to be super generous here and use a rate of 1.7 which is the highest 12 month timed deposit. (Even thought it’s impossible practically as it requires a $100,000 minimum sum) and rolled over the interest every year, he would end up with $137,600. Still less than the strategy of investing all your money at the peak.

PPS: For more tales about Addled Aksel, The World’s Worst Investor:

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Comments

  1. Hi there,

    Haha, I think I may have risk tolerance the height of Mt Everest then!

    I started into the STI first, DCA with $100 per month, 3 months in.

    • Hey K, that’s great! I invest in the STI ETF too, all I’m saying is that we should balance things out by not having all our invest-able money in stocks as we age. We should change our risk-taking depending on our age group. Hmm.. I’m guessing you’re pretty young so 100% in stocks is actually pretty awesome if you’re doing that.

  2. SPDR STI ETF is a good basket of shares to buy for a beginner investor and not really high risk. SGX will help manage the portfolio and make sure over the long term, only the winners stay on the STI – so the risk is managed if buy and hold. Very much less risk than individual company share which can totally be wiped out if the company dies.
    Good article is saying that shares can be a good investment.
    But beware of FINTECH which may disrupt traditional finance but giving companies other ways to get capital rather than by IPO and bank loans. In future, may not have new good companies to list their shares and take over from the old companies in the STI.

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