Mar 10, 2019
Vorapon Jim Ponvanit is the founder and CEO of a PeerPower, a Fintech start-up focusing on SME marketplace lending in Thailand. He is also a partner in boutique advisory firm, Khronos, and has 18 years’ experience in M&A, investments, and restructuring. He is an educated investor in stocks, bonds, and has a solid, diversified portfolio. He and his wife are also avid food connoisseurs and shacmd+shift+vre a love of dogs.
Summary: Ups and downs on Jim’s investment path
In this episode, Jim shares the gems he has learned on his investment journey, including how research alone is not enough to guarantee your success. There are “what-if” questions all investors need to ask to substantiate your assumptions. And the exciting part is to identify the common investment mistakes that can be avoided and to “wait for the right pitch”. Since investment is a lifetime exercise, you’ll also learn more about the six-step guidelines Andrew offers to help you to better understand the investment process.
“The whole point of investing is you want to live to fight another day. And you want to make sure that you have fewer mistakes and more successes. That’s all you can hope for because nobody hits home runs every time, right?”
– Vorapon Jim Ponvanit
Skilled investor seeks to diversify gains after post-crisis boom time
Around eight years after the 2008 financial crisis, Jim started to liquidate his US portfolio. He put some money into structured bonds and equities, which made considerable gains in the following run-up of US stocks.
He then took that liquidity in mid-2015 and was looking to diversify and make use of his capital. At this time, his obsession with volatility began alongside a search for ways to trade on such conditions, and took a look at the VIX index.
He found there was no direct way to expose investors to that index, other than buying derivatives or self-building a portfolio but noticed a new product called exchange-traded notes (ETN).
Armed with research noting that the VIX was down around 40% year-to-date and brimming with confidence and cash from successes on the US bull market, he invested 50% of his liquid funds in one such ETN, the iPath S&P 500 VIX Short-Term Futures ETN (VXX), which he thought would track the VIX index well. He had convinced himself that volatility had reached its bottom since the crisis, the side of the research that backed his story.
Four months in and 40% down he again relies on research and invests more
A third of a year into the investment, and with his position was down 40%, does he pull out? No. He did more research and after that, remaining convinced that volatility had this time reached its lowest point, proceeded to put the other 50% of his hard-earned cash in.
Period of VXX ETN volatility product activity
Source: Yahoo Finance
After a year involved in the ETN, Jim lost 70% of his initial investment’s value
Early in 2017, he liquidated from his portfolio the position in VXX and lost close to 70% of what he put in during the course of 14 months. He recently checked the price of VXX and if he had held on to that position, he would have been down now, 87%, which he said was a minor consolation.
Importance of keeping an open mind and cutting losses
That was his worst investment ever, and not because he didn’t know what he wanted to do but because he actually went in with a plan, found research that supported that thesis, and kept on reading. He stuck to his contrarian nature and ignored what the market was saying, thinking ideas that opposed his thesis were just “people selling research”.
On the other hand, people who research often build up a thesis supported by their research, which is no guarantee that they are going to see good performance.
Andrew’s six-step process sets out the best way to build a position into an idea and invest. This is based on 500 stories submitted to him and 35 interviews in this series:
a. Find an idea
b. Research the return
c. Assess the risk
d. Create a plan
e. Execute that plan
f. Monitor the progress
2. Separate research about return from assessment of risk. This is a key clarification inherent in this six-step process above. Often when doing research, investors think that risk management IS research. It’s great to spend time researching the exciting potential one is going to earn from a particular idea. Enjoy that process. Learn as much as you can but then stop that process to say “This looks good”. Finish the research. Then move to the next step, which is assess the risk.
3. Find opposing views of smart people – This gives investors a practical, real-market, beyond-research and theory perspective and helps avoid the one-track mind that can result after being buried in books, news and analysis.
Final Words: Challenge your own assumptions, ask ‘what-if’ questions
These questions can be asked in addition to Andrew’s six steps and could have saved Jim in that he would have lightened his position or avoided throwing good money after bad. He implies fighting the emotional battles to “get a grip on your human nature and start questioning some of these [assumptions and attachments] in an objective light”.
2.To avoid the same fate: Remember Andrew’s six guidelines, take a step back and question assumptions. If all of that reviewing is sound: “Put in your money, but don’t put everything in.”
“Diversify, diversify, diversify.”
Paraphrasing Warren Buffett, Jim likens investing to baseball in that you can stand and bat all day. “You don’t have to swing if you don’t like the pitch.”
“Wait for the right pitch.”
Andrew’s final word: “What have I learned in all these years in finance [is] reduce risk … as we get older, the idea of reducing risk and protecting our exposure is critical.”
You can also check out Andrew’s Books:
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