How Toby Invests
Hi everyone, today I would like to share with you how I personally invest.
Before I begin, I hope you will take my sharing with caution and understand that everyone is at their own stage of life with different circumstances, financial means, and lifestyle. My way of investing may not be the best way nor is it the only way. What I can say is that this is the accumulation of my own learning and what I deem to be most suitable for me. I hope this writeup will be beneficial for your own investing journey.
I think it is poised for me to begin with by going back to the meaning of the word investing. Investopedia has the following definition.
Investing is the act of allocating resources – such as capital (aka money), time, energy – with the expectation of generating positive returns.
Now let’s look at my current life context. I previously worked as a software engineer in Singapore for a couple of years before starting to build Recompound late last year. So the investments that I make are based on my savings as a young working professional. My intention in investing is therefore to ensure that these savings can generate positive returns for me while I continue to accumulate wealth through my job.
With the current financial means that I have, my investments are distributed across 3 main assets: precious metal, cryptocurrency, and Indonesian equity.
1. Precious metal
The first asset that I invest in is precious metal. Yes, precious metals like gold and silver bars. The reason why I invest in precious metal is because it is the origin of money and an asset that is very real.
People often forgot the origin and the true function of money. Money, at its origin, serves 3 functions: a store of value, medium of exchange, and unit of account. Before we have paper currency, people in ancient times use commodities such as salt, minerals such as stones and gems, as well as precious metals. I am very much interested in precious metal because of its integrity in terms of real value. Unlike paper money which has been subjected to easy printing, sometimes questionable fiscal/monetary policy from central banks, there is no way of creating precious metals out of thin air.
A note of caution I would add here is that people have tried and to a certain extent successfully manipulate the supply of precious metals by creating paper gold or silver.
But going back to precious metals as an investment asset, I see it as a hedge on our current monetary system. Therefore, in periods of high inflation, hyperinflation, or a monetary crisis, fiat currency will lose its value and people will go back to believing in real assets such as precious metals.
Cryptocurrency is a controversial topic. There are many cryptocurrency projects out there. Depending on when you jumped into the cryptocurrency bandwagon, some of you may have made a lot of returns while others may be left traumatised.
I invest in cryptocurrency because I see problems with the way fiat currency is governed today. While central banks have noble intentions in their monetary efforts to maintain acceptable levels of inflation and unemployment, I happen to believe that there might be some value to have a monetary policy that is not as easily tampered by humans.
I would also add that I am extremely selective in choosing a cryptocurrency project to invest in. Top criteria that I look for:
World class development team with a proper long term incentive alignment as we know that cryptocurrency is probably going to be a generational project. What is the long term incentive for the key builders of the cryptocurrency project? Are they going to stay for the long term during the bull and bear markets?
Strong project community governance with skin in the game. Governance of the project needs to be directed by people who has most skin in the game as that creates a system of accountability by design. Imagine if you have a company, but they are governed by an entity that does not own any shares. Sooner or later, that company will make questionable decisions that might be detrimental to its long term survival.
Privacy assurance. A very important component for cryptocurrency is to be fungible. If they are not private, 3rd party institutions can easily censor your payment (ask miners to refuse to mine a block with transaction from your address) because your coins might have a few hops with other dubious entities although you are not at all involved with them.
Scalability and use cases. What is the real world use case that this cryptocurrency might have? Right now cross border payment is a real use case, but besides that it is still difficult for me to grasp other use cases that are not too speculative in nature.
In a nutshell, these are the points that I look for in a cryptocurrency project. I am very well aware that I might be too naive when having these criteria. But what I know is that it is quite likely that cryptocurrency is here to stay and the onus is on us to find hidden gems in the sea of uncertainty.
3. Indonesian equity - Recompound
Finally, Indonesian equity, of course. I see investing in equity as investing in good businesses that create value. I treat my investments in equity as such: I imagine my own relatives wanting to start a business or are already running it. They then come to me, asking me to invest in them because they have plans to further expand. If these relatives are people with proven track record – who are serious in running their business and are able to demonstrate financial prudence – of course I will want to invest in such businesses.
That is why I don’t have that much appetite for trading, scalping, FOMO investing, or speculative investing. You may make money from such practices, but chances are you might require a lot of luck if you were to do it long-term.
I am currently only exposed to the Indonesian equity, although I have invested in US and Chinese equities in the past. The reason being that I see a huge potential for growth in the Indonesian equity market. Which huge domestic market and growing middle class, the Indonesian economy is poised for growth at least for the next 20 years. This is simply too big of an opportunity to miss. This is coupled with the fact that there are a lot of great companies in Indonesia that is still very undervalued. Companies with excellent management serving a huge population but not known – these are companies that I am personally very attracted to.
How do I invest in the Indonesian equity market? Of course the answer is through Recompound. Recompound is built to serve busy professionals and entrepreneurs who do not have the time to learn nor monitor the market all the time. Bulk of my investments in the Indonesian equity market is made through Recompound and therefore you can think of me as Recompound’s client as well.
When talking to potential clients, many have trust issues. They do not know if they can trust us, if they will be harmed in any way, if we will recommend them junk stocks (or saham gorengan). Despite the built-in mechanism of Recompound to ensure the security and transparency of our clients (the payment structure, funds at your own hands), I think another way I can reassure them is by showing that I myself am Recompound’s client.
At the end of the day, investing is about identifying opportunity. If I were to be very pedantic, I would not classify my exposure to precious metals and cryptocurrency as investments, but rather as a means to diversify wealth. My investments are also not strictly limited to investing in stocks with money, but also investing my time and energy in building Recompound and harnessing new skills and hobbies.
Thank you very much for tuning in thus far. I hope you manage to learn something from this writeup and I also hope to learn something from you. If you have things to share, new perspective, or even your own investing experience, do share them in the comment section below.