Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche

Market Wisdom

How Much Time Should Managing Your Wealth Require (in China and Elsewhere)?

I’ve ran quite a few projects over the years, perhaps even too many. Development businesses, an escrow service, an auction platform, a brokerage service, hosting businesses and nowadays, the website, one I hope will represent the #1 resource for those interested in investing in China.

As time passes, I understood that my main goal should be making each business I’m involved with as passive as possible. Being a workaholic (I plead guilty) is hardly sustainable and therefore, one of the core principles I adhere to is this: the less personal involvement a business required, the more proud I should feel as an entrepreneur… or investor (to make a ChinaFund reference).

But what about managing the money you earn online?

Aside from being an entrepreneur, I’m also an investor and an economist (with the latter two credentials ultimately persuading my to launch ChinaFund). This combined skillset puts me in a relatively good position to offer advice to people like me, people who earn a living on the Internet.

You know what they say about money: making it is the easy part, keeping your wealth tends to be the tricky dimension. Whether you are a one trick pony who knows his jurisdiction inside-out or someone who believes in smart diversification (including jurisdictions such as China, of course!)

This much is certain, you cannot afford not to take wealth management seriously. However, this doesn’t mean it should take over your life. On the contrary, it can and should complement whatever it is you’re currently doing.

I like to think of it as a hobby

An extremely lucrative one and possibly the most important hobby ever (in the case of investing in China, a hobby which exposes you to generational mega-trends that are hard to come across elsewhere) but a hobby nonetheless.

 If wealth management ends up overwhelming you and requiring too much of an investment of time on your part, you’re doing it wrong. It shouldn’t, not even if you are investing in China or other let’s call them exotic jurisdictions. Wealth management does not and should not revolve around you obsessively checking the status of each asset (stocks, bonds, you name it…

Chinese ones or anything else) you have exposure to. That’s just plain wrong and pointless. Instead, being good at managing your wealth is ultimately all about putting together the best strategy for your needs… and your schedule.

Four common sense principles to adhere to would be:

1) The day-to-day performance of your portfolio is not crucial.

Don’t check things like stock valuations multiple times per day, don’t even do it once a day. Be reasonable, understand what volatility means (especially when investing in Chinese assets and assets associated with more volatile jurisdictions!) and accept the fact that every now and then, your portfolio will perform poorly over a period of a few days, weeks or months… that’s perfectly normal, c’est la vie

2) Principle #1 shouldn’t however make you think wealth management is a “set it and forget it” endeavor, it’s definitely not.

While you shouldn’t go overboard by hawkishly checking the status of your portfolio each day or multiple times per day, reviewing it every once in a while and implementing changes whenever necessary (for example, when tides are turning legislatively speaking when it comes to one of the Chinese assets you have exposure to) is a must. I’d recommend doing two things.

On the one hand, have “set in stone” intervals at which you analyze your portfolio no matter what. Maybe once per month, it’s all up to you.

Secondly, should something important and unpredictable occur (a financial crisis, some shocking news regarding one of the assets you have exposure to and so on), then once again analyze your portfolio from this new paradigm and make some choices.

3) Stay on top of financial news… within reason.

Pick a few information sources you like (hopefully ChinaFund qualifies for your news that pertain to all things China) and follow them on a regular basis (but again, not obsessively).

There are definitely various developments which can and will have an impact on your portfolio (things like quantitative easing, sovereign debt and what no), keep your eyes wide open. Just replace a few of the funny videos you waste time on with information-rich content consumption, nothing overly dramatic is required

4) Be thorough and organized, keep track of absolutely everything and don’t be afraid to take notes.

The more organized you are, the easier it will be not to get lost (once again, especially when blazing trails by investing in Chinese assets) and the less time you’ll ultimately end up spending on wealth management-related tasks.

That’s pretty much it, no quantum physics involved… not even for volatile Chinese assets. As long as you adhere to these principles, you’ll be in far better shape than most investors.

This article is definitely not a magic potion which solves all of your problems in a heartbeat, nor is it a quick fix, it’s just the foundation of what I hope will end up becoming your wealth management framework.