I didn't get it until now...

I couldn't quite understand what Adam Khoo meant by imagining our portfolio to drop 50% and how this mental model is useful for investors, until I read Vitaliy's book Soul In The Game, on the chapter about Negative Visualization.

In the chapter, Vitaliy advises us to imagine what could potentially be worse so we can learn to appreciate what we have. This helps us focus on what's important rather than fussing over trivialities.

Meanwhile, Adam's way of negative visualization (imagining his portfolio down 50%) helps him not only appreciate what he already has, but also become more emotionally stable should the market really decide to turn.

Adam also said something interesting during our insightful hour-long interview: he doesn't regard the profits as his. This emotional detachment towards ups and downs makes him one of the greatest investors in Singapore.

Inspired by Adam and Vitaliy, I decided to start practicing negative visualization in my investing as well.

I ask myself, how can I be really emotionally stable if my portfolio is down 50%?

Here are my 3-step processes:

1. Knowing that I have enough spare cash to fire even more to take advantage of the opportunity, so it's great to keep more cash on hand.

2. Knowing that the stock market goes up in the long run, so I need to think long-term. Never bet against America, just like what Warren Buffett advised.

3. Knowing that volatility gives opportunity. I should be happy to be able to buy great companies cheaper at half of their valuation.

Just like Warren Buffett said: "The most important quality for an investor is temperament, not intellect."

If you want to learn from these two amazing investors, make sure to grab a copy of Vitaliy's latest book Soul In The Game and watch the hour-long insightful sharing by Adam Khoo on my YouTube channel.

I learnt so much by watching this video again and again! I hope you will learn as much as I do!

Chloe Lin
Arigato Investor