The following article by Panzer, a 30-something accountant, was recently posted on Five Cents Ten Cents blog and is reproduced here with permission
AS MORE AND MORE little grey hairs develop on my head and as less and less hair are left, I start to see some similarities in my career as an internal auditor and my approach to investments.
In most careers, one starts at the bottom rung of the corporate ladder and slowly works himself or herself up through gaining experience, doing the actual work and learning the ropes of the trade, business or profession. I started out as an audit officer who was the lowest rank for degree holder.
I prepared working papers, drafted audit programs for my audit supervisor to review and carried out the detailed audit procedures myself. There was no-one to delegate to and that was how I learnt my internal controls, auditing and interviewing skills and basic draft management letter observation writing.
After two years of doing the “grunt” or ground audit work, I was assigned as a team leader (audit supervisor or audit senior) in a small team and supervised two staff but also performed some of the audit procedures. Thus I did slightly fewer audit procedures as some time was allocated to manage the audit deliverables, draft audit reports and liaise with the auditee on the conduct and progress of the audit. I also reported upwards to audit manager on the status and progress of the audit.
My career brought me to different work settings but what struck me from my various roles was that either I did the work myself or managed the work. As my experience grew, I realised that doing the actual work while important was less valuable than being able to manage the work and its outcomes and to “run” the operations. Rewards and credit flowed more to managers (who plan and direct) than actual staff who did the work.
In my current role, my team does most of the actual audit procedures and the first draft of the audit program. My value-add is to review the audit program to ensure that it meets the audit objectives and to get the audit plan cleared in the first place by senior management and the Audit Committee.
Thus, I am managing and planning the work more than doing it myself. I still join my staff for client entrance/exit interviews and perform mostly supervisory, review and quality assurance on the work of my team. I also train my staff in building capability for them to deliver on their audits. For example, I personally coach my team a lot in using computer-assisted-audit tools as I had prior experience running those tools in the earlier part of my career.
How does this parallel my own journey towards financial freedom and my investing style?
Manage Your Portfolio by Focussing on Outcomes
The key difference in my investing approach that I learnt from my career development is to focus more on the big picture and get outcomes instead of running the operations. This means that I focus on achieving a good return on investments on my net worth under investment and not engage too much into going in/out of the market.
I realise that to achieve returns that beats twice fixed deposits or at least keeps up with inflation (i.e. 4-5% per annum returns), I should not be trading but should consider taking big positions in 2-3 key stocks and manage them. The managing part is to understand more the underlying businesses of these stocks and to monitor their operating and financial performance. The dividends that accrue from them will come without me having to actively trade in/out throughout the year.
Just like I do not do as much of the detailed audit procedures that I used to do when I first started out in audit, I should manage key entry points where I have decided that a bluechip is worth investing in and at what price would reflect a suitable entry level for a decent yield.
The risk of investing in equities or stocks and shares is the urge to get in/out of the market. That is what some would call a “gambling” or “trading” approach.
The older I get, the more I realise patience and putting in the groundwork to understand the companies and businesses is important. Also cash management to not put oneself under pressure to sell when the market is unfavourable is critical to being able to survive market volatility.
Management is not being hands-off
A common misconception is that managing means taking a hands-off approach. My own approach to managing my teams has been to set clear objectives, to clarify with my team along the way but leave them to do the actual work in accordance to the plan unless there is significant change in scope or risk arising from our audit fieldwork.
I am hands-off in that I don’t repeat my staff’s audit procedures as my staff is experienced. But I do check key inputs and working papers and review and edit thoroughly the audit reports. But sometimes, small things do slip and I need to review even more thoroughly my staff’s work to ensure that quality assurance is there.
Managing is to take a step backwards to look at the overall picture with respect to objectives and outcomes. Aligning the two throughout the audit is key towards achieving what we set out to do.
Are you managing your own investments or financial freedom journey or just doing the day to day things of buying/selling?
Do you have some overall direction and strategy that allows you to manage your portfolio?
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