Starting from scratch
If I had to do it, this is what I'd do.
What if I were forced to reset?
For whatever reason, I must sell and start from scratch.
I know, it sounds like a fantasy situation.
Yet I find this mental exercise helpful to never forget the basics and zoom out from the every-day noise of equity markets.
Here are steps.
1️⃣Personal Budget Review
Before thinking about stocks, I’d start with a serious look at my personal budget.
How much can I truly deploy into the markets?
How much can I invest without sacrificing my lifestyle and my sleep?
Freezing an Emergency Fund would not be enough.
Many beginners miss the importance of a Sinking Fund!
This additional protection layer involves (un)foreseeable one-off expenses that are likely to occur over the next few years (see the slide above).
Only from there, I’d feel comfortable reinvesting my old portfolio.
At this current level, the resources could be enough to fund themselves over time.
Still, I’d keep an eye on monthly income vs expenses - aiming to save and invest at least 15/20% of my income.
As you can see, I budget my monthly income statement as follows:
35% → Personal Needs
20% → Primary passions (unwavering! For me Wine, and Sports)
15% → Secondary wants (weekend away, dining, concerts…)
5% → unforeseable mishaps (fines, dentists, gifts…)
5% → self-investments (education mainly!)
What’s left → my investable savings
From there, the overall budget simply becomes:
→ (monthly investable savings) * 12 months * (number of years - ideally 2 or 3)
+ any investable lumpsum that I may have on the side as of now.
2️⃣Ambitions Check-Up
Would my overall goals change? Probably not.
That’s simply because compounding has no limits - it’s just math.
And since Quality Equity is the only way I know to unlock the power of compound interest without waiting for 30 years, why setting limits?
The example is a bit extreme, but Buffett built 99% of his net worth after turning 65.
He did it because he simply let compounding work at its full potential without interrupting the process.
If I consider where I’m positioned in the “financial freedom pyramid”, I’m probably an early stage 5 (→ Flexibility).
How far can I go, that’s a complicated question.
For now, I remain obsessed with the process of accelerating wealth.
At the end, what’s Freedom, besides the financial side of it?
As a good old friend of mine would say:
Freedom is simply the privilege to say “stop” whenever you feel like it.
3️⃣A First (straight) Leap
Backed by this foundation, I’d move on to building my 3-4 positions with 15-20% of my total budget.
I’d make sure to stick to a structured, risk-reward optimized method.
Which one? Guess what… mine :)
You heard me right.
I wouldn’t worry about finding the perfect company right away.
What matters most early on is refining your process and testing your emotions on field, even if this implies a few mistakes.
Making mistakes is important.
It’s what separates most who quit from those who take them as the perfect (even if costly) chance to learn how this game works.
It’s your choice!
In addition, I would build dream watchlists knowing that I’d still be far away from the right moment to own my favorite companies.
As already happened when I started, I’d probably need to pick “Tier 3” names.
This is how I categorize any quality company that:
does not fall neither into the dream list
nor in the exceptional one (yet still nicely investable)
No FOMO.
I would prefer action to timing.
That’s one of the healthiest biases I know: bias for action.
4️⃣Valley of Disappointment
As Buffett just said:
The one problem with the investment business is that things don’t come along in an orderly fashion and they never will.
That’s exactly what would happen.
The first 1/2 years would be tough, as they were back then.
And I know how hard it is to mentally hold on.
When index investors stay anchored to the broad market doing nothing, looking at you and saying - from a real story:
Why do you keep trying this?
Don’t you see that I’m all green just by holding the S&P.
Look at you, down in the red.
This is how you can visualize the valley:
The problem with that is, the market will primarily decide how long that phase is.
As such, I’d do everything in my power to stay mentally alive.
Surviving the valley of disappointment is so key.
This time it would feel much easier that the first time: I’d know my process takes 1/2 years of patience before taking off when the least expected.
5️⃣Focus on Quality & KPIs
Regardless of my out- or underperformance (most likely!) vs the market, I’d ensure that the quality pillars and most KPIs of my holdings remain solid.
I’d stress and monitor key concepts:
Asymmetry: I’d be monitoring my 5-year projections to validate/reject risk-reward favorable imbalance.
Blended Portfolio KPIs: I’d use FinChat to monitor blended KPIs such as CROIC, OCF, FCF/NI, Beta, Gross Margin evolution, and other metrics.
Quality check: I’d closely double check on ownership structure, innovation pace, customer centricity metrics, ARR, segment mix. and other fundamentals.
Many times, my indicators and estimates were pointing to different levels than what the market was thinking (→ higher).
Yet seeing the market not agreeing with your view temporarily, might trigger a series of mental mishaps:
→ Am I being too aggressive?
→ Is there any risk I’m not capturing?
→ How long is going to take to recover?
→ Am I even legit to challenge analysts’ opinions?
and so on.
The thing is, having a different time-frame than the average analyst on Wall Street (= 5 years vs 12 months) is so key!
Give your ideas time to play out. Have faith in them.
You don’t need to outperform tomorrow.
6️⃣Journal
You don’t need to write an investing newsletter.
But taking a few notes on a piece of paper is such a powerful habit.
At the end of each month or quarter, note down:
When and where were I hesitant?
Did I feel urgency/anxiety/fomo?
Were my moves planned or impulsive?
What’s the most recurring thought that doesn’t make me feel well?
What has worked?
Did I do anything that I wouldn’t have done before (a sign of improved methodology)?
Behavior still remains in my opinion the most important success factor in this whole game. Full stop.
Unlock your Edge (Waiting List)
I am not special and I’ve got no high IQ.
If I’m just another proof that this stuff works, it’s because of discipline.
And a good dose of wild dreams.
If you need a hand skipping the valley and raise the bar when it comes to new financial goals, quality equities is the only (and most fun) way I’m aware of.
If you’re ready to:
→ Take a first, safe step into the equity markets (insurance approach)
→ While accelerating the process with winning tools
📌 Join the Waiting List of my Accelerator Program. How? Simply let me know here:
How about you?
How would your start from zero once again?
Let me know in the comments!
📈
Thank you again for your valuable time.
Happy Investing,
Francesco - Business Invest