Investment Pointers - Evolution and Strategies with Sebastian Rollen
As a seasoned investor, Seb shares some wisdom gained from his personal investing career. We sat down with Seb to discuss his investing evolution and strategies.
We previously sat with Seb to learn about the ESG markets and his job at Betterment (here).
Focus on things you can control
Factors you can control are investing with low cost or diversifying across a wide range of holdings. While diversifying across multiple assets will never let you achieve the maximum return for any one asset, it will often lead to better performance than trying to pick individual investments. His views on diversification is written about separately here.
It’s very hard to have a short-term investment strategy, because the market is so competitive and hard to predict. Taking a strategy where you focus on what you can control and holding over the next 30 years, for example, is better than trying to invest and exit over the next year.
We at finuprise are big believers in learning from other people’s mistakes. We asked Seb what some of his biggest “oh shit” moments were. Luckily, Seb was willing to share.
His greatest “oh shit” memory was his investment in a Swedish biometrics company, Fingerprints Cards. It looked like it was going up for a while. Similar to what happened in the early days of bitcoin, there were several times it returned 100% in a few months. Seb had done his research on the company and confidently bought options on this company too. But, no one can predict actual performance. The company collapsed. He still held onto it. Options expired on a specific date, and his shares rallied on that specific day, so he ended up breaking even.
Sustained increases in the share closing price, before a huge dip and volatility
His learnings from this time
This experience humbled Seb. He realised, even though in our opinion he is a guy who knows a lot about investing, how much he doesn’t know. Quoting Mike Tyson: “everyone has a plan, until they get punched in the face”. If you don’t know more than other people you’re competing against, it’s better to hedge your bets. This goes back to investing with a long-term horizon and focusing on factors within your control. Read up on his diversification post (here) to understand how to hedge by investing in multiple holdings.
Setbacks are a great opportunity to learn from your mistakes and realise that at the end of the day, no one can predict the future. Have a plan but also be ready to adapt quickly.
XIV is another example of “picking up pennies in front of a steamroller”. The fund placed bets on low market volatility through a series of complex financial contracts, providing steady returns to trades through the uncannily low volatility stock markets of 2017. However, when volatility spiked in February 2018, the fund experienced such a rapid decline in value that it was forced to liquidate. Otherwise known as “getting punched in the face”. Over time you are picking up good returns, and then in one day they disappear. You get steamrolled.
The blue line shows XIV going up for a while. Then in one day it disappears.
Investment focus today
Even today, Seb is tempted to try to time the markets. As someone who looks at markets a lot, he has been tempted to make a short term investment into single companies during the past few weeks taking advantage of the market lows. However, he keeps his focus on his long-term strategy. He has diversified his investments over a wide range of funds, which he intends to hold over the next few decades. It’s about being self-knowledgeable and understanding of your individual risk tolerance. Thank you Sebastian for your openness in sharing your knowledge. If you guys have any questions or suggestions on who you’d like us to interview next, get in touch.