Monday, April 4, 2022

Escape Velocity of Wealth

I am not sure how to put it across, but the feeling that no matter how much my income increased over the years, I just don't feel that I got wealthier , or my purchasing power increased. Living in one of the most expensive and economically competitive city states in the world doesnt help either. The sick feeling that you just got a bump in earnings due to promotion, then everything that you wanted to buy seems to go up in prices alongside with your increased earning power. I known for a long term life is about bell-curving and just like investing one would need to beat the bellcurve to "feel rich" or in this case "escape velocity". FIRE is actually just escape velocity in terms of wealth/assets + income/FCF / basket of goods you want to spend on. 
I am just gonna pin my thought in point form and hopefully one day I managed to consolidate it into something more coherent (and with a plan) soon. 

Factors that would affect escape velocity of money .. in no particular order of significance / importance: 
  • Hard Asset: (existing assets, income per annum, current age)
  • Soft Asset: (family knowledge, individual skill / alpha, tenacity)
  • External factors: (workforce competition, foreign capital influx, capitalist environment, upward social mobility, pro-biz regulations) 
Escape Velocity defined as being 1) immune/hedge or even benefit from price fluctuations/inflations of goods & services in your personal basket. 2) yearly networth growth above global growth 3) without active income.

rough sense tells me that for year 2022 one would at least require SGD200,000 - SGD300,000 per annum to feel the compounding effects and still be able to live feeling "rich" or above median. But this is based on my POV as a peasant, it will be an evolving answer. 


Understanding Beta, Std Dev, Sharpe Ratios

Saw an interesting youtube video today on some technical analysis tools and decide to do some further reading.

https://www.youtube.com/watch?v=OCT_XwOi0ME&t=881s

While I knew about beta long ago, I had only used it sparingly. My broker does not provide much technical details and analytical tools so I might consider using a better brokerage soon like Interactive Brokers. 

So far after fiddling for a few hours I have managed to sort out the beta part of my portfolio's data. 

At a Beta of 1.42 and breaking even with the SPY ytd, it seems that I might be having more volatility for little to no difference in return. 

I have not calculated sharpe ratio and std devs (almost impossible to get the accurate figures as I am not using a good brokerage. 

*edit - from March 25 (few days since i drafted this post) the market rallied strongly led by big tech again. My returns in this small rally does beat SPY. So beta does affect somethings, i just need to consciously make better decisions in future with this new knowledge as one of my screening tools.


Merry X'mas and 2023 EOY report

 This is mainly for self accountability. From now until 2030 I will try to keep a yearly EOY summary of what went right or wrong for the yea...