5 Years of Investing

I can still remember the very first stock I invested in. It was the Vanguard S&P 500 Accumulating index fund (VUAG), led by some other random and very bad stock picks. In fact, it has been 5 years to the day. How time flies!

If I could tell my novice investor self to do just one thing, that would be to start my investment journey by sticking to a single index fund and not act foolhardy in the quest to try and make a load of money by picking individual stocks.

It's quite easy to have a false sense of confidence investing in a passive fund, like the S&P 500 (where you aren't doing anything complicated), when you see you're in the green making a profit. The human condition is wired to always want more. We're never happy with what we have and convince ourselves that we could accelerate growth by picking overhyped assets just because everyone else seems to be getting rich quickly. The moment we step outside the safety of a simple fund to chase bigger returns, we end up fighting our own psychology.

Instead of trying to figure out how to get rich quickly, focus on how to avoid losing money. Warren Buffett's two famous rules of investing are: 1) Don't lose money, and 2) Don't forget rule number one.

Trying to pick individual winning companies is incredibly difficult, and the odds are stacked against the average investor unless you really do your due diligence and ask the right questions.

The Bessembinder Study looked at 26,000 companies between 1926 and 2016, where researcher Hendrik Bessembinder found that just over 4% (about 1,000 companies) delivered all of the stock market's returns. It is much simpler to own the racetrack, like an index fund, instead of trying to pick the winning horse.

Even though I started out investing in the S&P 500 that solely tracks top American companies, you might want to consider a global index that embraces both developing and emerging markets. Thanks to rising US tariffs and protectionist trade policies, the rest of the world is actively reducing its reliance on America, making global investing incredibly timely. Today, around 85% of global trade flows through alternative channels, and the US's share of world trade has hit its lowest point since 2014.

You may think having a single index is quite boring. A boring portfolio can end up being the most fruitful one! If I take my wife's investment portfolio, which I manage, it simply consists of three funds, and year-to-date she has already made around a 4% return. This might not sound like much, but when you consider the S&P 500 returns 8-10% annually, she is already hitting half those returns and we're only 2 months into this year.

Interestingly, a Fidelity study from 2013 looked at which investors had the best-performing portfolios over a decade. The top performers had one thing in common: they were dead. They couldn't tinker, panic, or second-guess themselves. A "nice" morbid fact to put your investment mindset into perspective.

Even though my portfolio is bigger in monetary and position terms, it hasn't reached the heights my wife's has this year so far, as I am more bullish on specific sectors and companies from looking at the financials. I may not be making much of a return at this moment in time, but if everything goes to plan, the returns should outpace my wife's. I enjoy the investing process and looking for potential. In whatever decisions I make, in the back of my mind I always remember what Eugene Fama famously said:

Money is like soap. The more you handle it, the less you'll have.

So, I am always treading carefully by doing my due diligence and investing with conviction!

The overarching lesson I've learnt is that complexity is not a prerequisite for success. If you are just starting out, do yourself a massive favour and begin with the absolute basics. Investing regularly into a single, globally diversified index fund, regardless of whether the market is up or down, is more than enough to get the compounding snowball rolling while you learn the ropes.

You can always expand your horizons later, branching into individual stocks or specific sectors only once you have built a solid foundation of knowledge and genuinely enjoy the process of analysing the financials. Until then, there is absolutely no shame in keeping things boring. In fact, for the vast majority of people, a simple, hands-off approach isn't just fine—it is the optimal strategy for building long-term wealth. Start simple, stay consistent, and let the market do the heavy lifting.