There shall be a total of 8 notes, including this, coming from me (Dr. Peter Lorange) regarding my experience in building a robust investment portfolio. There shall be one note posted per month. These shall include the five areas where I have concentrated my investments:
Stocks, bonds and currencies
Real estate
Shipping
Ventures
Educational
There shall then be a note on how to assess one’s investment portfolio, and a final note on organizational issues. In a separate note, I shall discuss some failures that I retrospectively consider to have been particularly serious. Perhaps others might avoid similar mistakes! I was the sole owner of S. Ugelstads Rederi A/S, a Norwegian Shipping Company, specializing in offshore supply ships (so-called platform ships), with a fleet totaling 7 ships at the time of the sale of company in end 2006. This sale and liquidity event was the main basis for my current investment portfolio.
The circumstances around the decision to sell are worth noting. I had for a long time worked with one specific broker at one of the leading Norwegian ship brokerage firms. He pointed out that the business cycle was on the high. In parallel, I was monitoring the number of newbuilding orders relative to ships actually sailing, and this ratio shot up. My decision to sell was not well perceived at the time. I was even characterized as rather backward, by some competitors and fund managers. In retrospect this decision turned out to be a good one, however. A general lesson is that to sell typically requires a robust mind. One shall be more-or-less “alone” when it comes to such sales decisions! To vastly outperform the market one must be willing to think independently, with all it entails.
Two companies were then formed: S.Ugelstad Invest A/S, which undertook the majority of my liquid investments, and S.Ugelstad A/S, which undertook what I considered to be relatively more risky illiquid investments. In addition, several investments were held directly by me. Thus, the “portfolio” in my case would be the combination of all of the three above. Four considerations were paramount when it came to the decision that eventually led to the present portfolio structure:
A desire to spread the risk, and “not to put all eggs in one basket”. Together with the family, we decided to keep half the assets as “Generation Money”, e.g. low risk so this part of the assets would be conserved for generations to come.
A desire to secure a positive cash flow, to support my personal needs, and, more importantly, in order to capitalize on investment opportunities, when others were stretched for cash.
A decision not to borrow on the assets in the portfolio, i.e. to limit the risk.
A desire to build on my own competences and network.
A desire to immerse myself in the latest thinking in investment theory and to implement it in praxis.
A desire to use scenario planning as an investment strategy.
A desire to think through my own investment process and investor psychology to continuously improve as investor, to learn a new craft, a new art.
My journey from theory to praxis had become a reality!
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