95% of My Net Worth is in Recompound Portfolio
You can be assured that if your Recompound portfolio is screwed, I am doubly screwed
The past year has been challenging for those investing in the Indonesian stock market (IDX). The composite index (IHSG) yielded a return of only 6.8%.
Meanwhile, other asset classes have significantly outperformed IHSG during the same period:
S&P500: 23.33%
Nasdaq: 28.55%
BTC: 113.72%
The reality is even harsher: you cannot directly buy official mutual funds that perfectly mimic the IHSG because it is a composite index of over 900 different stocks, many of which are illiquid. Some illiquid large-capitalisation stocks can move the index as a whole. For example, BYAN, a large coal stock that has a market capitalisation of over Rp 500T (5% of the index), yet the daily trading value is small at below Rp 10B on average. With very little, price of this stock can move which affects the index as a whole in a notable way.
So the closest alternative to “buying the Indonesian index” is investing in mutual funds that mimic the movement of officially recognised indices such as LQ45, SRI-KEHATI, or IDX30—not IHSG itself.
Here’s how these indices performed over the past year:
LQ45: -4.22%
SRI-KEHATI: -7.5%
IDX30: -7.62%
Those are dismal numbers.
As for actively managed equity mutual funds (non-index tracking ones).
Their aggregated return over the past year is -8.2% . (Source: https://www.bareksa.com/id/data/reksadana/index/detail/3/indeks-reksa-dana-saham)
That is even worse than just tracking the index 🤦
Let's examine how Recompound performed over the past year (18 Jul 2023 - 18 Jul 2024):
This is the performance chart of Toby’s aunt’s portfolio, our first client who joined us in August 2022. Since inception, her portfolio yielded 47.41%.
However, in the past year, her portfolio only yielded 4.7%, which is worse than IHSG at 6.8%!
As such:
If you joined us after July 2023 (during a sideways or bear market), your portfolio would likely yield meager or negative returns.
If you joined us before July 2023 (during a bull market), your portfolio would likely yield higher returns.
Due to this underperformance over the past year, some people have been questioning or even reprimanding us:
"Look! My friends and I have been investing in [insert_other_sexy_asset_classes_here], and it has performed much better than your lousy Indonesian stocks!
Why don’t you guys reduce your opportunity cost by abandoning IDX?”
Well, it doesn't work that way. Here’s why 👇🏼
How Big Are You Willing to “Bet” ?
Your success in long-term investments boils down to these two factors:
Your investment CAGR (Compound Annual Growth Rate) over long period (bare minimum >3 years)
The percentage of your net worth invested
Sure, maybe you have a friend who gained 200% over the past year investing in "sexy" asset classes (e.g. NVDA or BTC). But the question is:
Can they maintain this performance over the next 3 years? Can they consistently find the next NVDA or BTC?
How much of their net worth are they putting into these asset classes?
Large percentage gains are useful for:
Luring people to buy expensive premium investment groups/classes
Satisfying your ego by showing off to friends and social media
Other than that, large percentage gains (without a sizeable commitment of your net worth) are useless because they:
Cannot pay your monthly bills
Cannot put food on the table for your family
Cannot prepare you for early retirement
Recompound is a Serious Business
At Recompound, our revenue is tied to the long-term performance of our clients' portfolios.
Thus, our investment framework is our lifeline.
Using an imprudent investment framework would jeopardise our ability to generate long-term, sustainable revenue, ultimately affecting our livelihoods (no food on the table!).
Our investment framework should:
Generate long-term portfolio CAGR.
Survive market crashes and bear markets without the need to do market timing
Be reliable enough for us to comfortably invest a significant portion of our net worth (90% or more).
Give us (and our customers) peace of mind.
This mindset also influences how we evaluate an investment thesis.
Many people might think:
"Which investment thesis will make me get rich quickly and impress my friends?”
”How many % returns can you make within a year?”
In contrast, we think:
"Which investment thesis is the most prudent and low-risk? So that even if the external environment (e.g. macro) is extremely challenging, we can still sleep soundly at night, knowing that our wealth will eventually grow in the long run.”
By prioritising survivability and avoiding reckless decisions, we are confident that we will prevail in the long run.
What’s our investment framework? We discussed our investment framework extensively on another blog post:
https://blog.recompound.id/p/investing-with-recompound-starter
95% of My Net Worth is in Recompound’s Stock Portfolio
As the co-founder of Recompound, I am fully committed to our investment framework. In fact, 95% of my personal net worth is invested in Recompound’s stock portfolio. This isn’t just a professional commitment; it’s a personal one. I am putting my money where my mouth is and riding the same wave as our clients.
This level of commitment underscores our belief in the robustness and prudence of our investment framework. We understand that journey might be challenging, especially during periods of market volatility (like now). However, our focus remains on long-term growth and sustainability.
But you might ask:
Hey Budi, aren’t you interested in allocating 3% of your net worth into “Coin Abakadabra”? If things work out, you could gain over 100% in just a few months, boosting your overall net worth!
Sorry, but spending a lot of time researching an asset class for just 3% of my net worth is not worth it 🙏.
I would rather spend my precious time on:
Enjoying quality time with my family and loved ones.
If I want to gamble, I'd prefer visiting Marina Bay Sands in Singapore or Casino Grand Lisboa in Macau. Those sound more exciting to me.
The Long-Term Vision
At Recompound, we believe in the power of long-term investments. Short-term market fluctuations are inevitable (volatility are actually the price you need to pay to have better long term returns), but our goal is to weather these storms and emerge stronger. By focusing on a prudent investment framework, we want our clients' portfolios—and our own—to be well-positioned to grow over time.
Our Commitment
Our interests are directly aligned with those of our clients. When our clients succeed, we succeed. This alignment drives us to continuously refine our investment strategies and stay committed to our core principles of prudence, lower risk, and long-term growth.
Transparency and Trust
Transparency is at the heart of everything we do at Recompound. We are open about our performance, our strategies, and our results. We believe that trust is built through honesty and consistency, and we are dedicated to maintaining this trust with our clients.
Looking Ahead
We firmly believe that the recent underperformance of the Indonesian market is not forever.
Asset classes move in cycles, and a bull market will eventually emerge. We experienced this in our portfolio during the second half of 2022 (2H2022) through the first half of 2023 (1H2023).
While the past year has been challenging, we remain confident in our approach and in the future of Recompound. Our commitment to prudent, low-risk investing, coupled with our alignment with clients' interests, positions us for long-term success.
Together, we will navigate the complexities of the market and achieve our financial goals. Thank you for your trust and partnership.