Hey Friend, 

 

Last week, 

 

 

I bought it back in December 2015.

 

The company was ‘Australian Foundation Investment Company’ (AFI).

 

Why did I buy it?

 

Because ‘The Barefoot Investor’ recommended it as a great first investment.

 

My plan was simple:

 

Buy it.
Hold it forever.
Reinvest the dividends.

 

And let compounding do its thing.

 

But over the past couple months, as we’ve been restructuring our finances,

 

I’ve put everything under the microscope.

 

 

I use a platform called ‘Sharesight’ to track performance.

 

When I reviewed the returns of AFI over the past 10 years,

 

Here’s what stood out.

 

AFI returned 4.58% per year.

 

Terrible…

 

But then I compared it to my benchmark.

 

Vanguard Australian Shares Index ETF (VAS) – returned 13.95% per year over the same period.

 

That’s a massive difference!

 

It just goes to show that low-cost index funds outperform managed funds over the long-term.

 

If our capital had been invested with VAS,

 

I would have made roughly $49,000 instead of $16,000.

 

And here’s what put the final nail in the coffin.

 

The savings account we just opened with Commonwealth Bank is currently paying 4.75%–4.95%.

 

Which is more than my long-term returns on AFI…

 

Ouch. 

 

But to be clear.

 

Over the long term, I still expect AFI to outperform cash.

 

But I realised,

 

It’s emotion.

 

I had to ask myself the same question I did when we sold our investment property:

 

Would I buy this investment today?

 

The answer was no.

 

So I expressed my gratitude for what it had given me, and then hit the “sell” button.

 

After selling this investment,

 

And the investment property…

 

We’re now sitting on the largest amount of cash we’ve ever had.

 

We have a war chest.

 

And my mind has been busy pondering this question:

I’ve been revisiting some of the investment books that shaped my early thinking:

 

 

After 10 years of investing experience.

And almost 7 years in business.

 

I’ve realised how much my knowledge has deepened as I revisit these ideas. 

 

I can see:

 

Where I agree.

 

Where I disagree.

 

And how my own investing philosophy has evolved.

Right now, 

 

I’m not rushing to deploy our cash.

 

I’m taking the time to think clearly.

 

To assess opportunities.

 

And to align every decision we make with our long-term goals and our current season of life.

 

Until next week,