EP 081: Investing – Biggest Lessons of 2022

Something not often spoken about when it comes to investing is “sleep at night factor.”

We often get caught up in the juicy returns.
Or, how much money we might lose.

Rarely do we ask ourselves, “will this keep me up at night?”

What’s worse…

Once we are in an investment, if we start losing sleep over it.

Heck knowing you should sell an investment to regain sleep can be even more difficult.

Yet that’s exactly where I found myself this year.

Going back to 2021, the Reserve Bank of Australia (RBA) announced that they would not raise interest rates until 2024.

A full three years of a low-interest rate environment.

They even encouraged Australians to go out and borrow money.

Now, this is a government institution, not some speculator betting on stocks.

I and many others took the announcement as fact and borrowed money thinking rates wouldn’t go up.

I used the current interest rate in my own forecasts.

However, things changed in 2022.

The RBA wasn’t able to keep its promise and started lifting interest rates 12 months in.

The first-rate rise didn’t affect me too much.
I rubbed it off as a one off thing and nothing to worry about.

But after the second and especially the third, it started to keep me awake at night.

I would lie in bed wide awake, thinking:

• What if rates get to ‘X’?
• If the RBA can’t be trusted to forecast, then who can?
• Maybe I shouldn’t use debt with my investments?
• Do I need to change my strategy now this has changed?
• Maybe we should sell everything and wait for this to pass?

It stirred up a heap of uncertainty and fear that I had made a huge mistake.

The uncertainty was emotionally draining.

Spending so much time going back and forth on what to do next.

Plotting out moves and scenarios while my head was on the pillow.

After a month of poor sleep, I couldn’t take it anymore.

The lack of sleep was showing up in the other areas of my life.

I was becoming weaker in the gym.
I was developing a short fuse when dealing with people.

But what to do?

In the end, I came to the conclusion that the RBA and other institutions can’t be trusted to make predictions.

They are OPINIONS, not FACTS.

I need to change my risk level to match this.

This means slowing down the rate at which I acquire property and lowering my debt level.

I adjusted my plan and used business profits across the following months to reduce some debt.
(I did not sell any assets)

As soon as I started taking action on the new plan, my sleep returned.

Back to 8 solid hours.

The big lesson:

No investment is worth losing sleep over.

If it costs me sleep, the risk is too high. 

A filter that might be worth adding to your own investment plan.

Anyhow, on this week’s episode of the podcast, Grant and I talk about our biggest investing lessons of 2022.

You might have picked up on one of my lessons from this email.

You can check it out at this link here: https://youtu.be/C9di0pf7RiA