The 1st of January 2012 started with a bang for me as I was woken to the sound of a car crashing into the road divider/barrier along PIE around 7 something in the morning.

Based on what I could see, there were no serious injuries though the car was severly damaged as it had hit the barrier whilst likely travelling on the extreme right lane. Fortunately, both occupants of the car could walk out of the car without help although the ambulance and police arrived not long after the accident.

What does an early morning traffic accident have to do with financial freedom?

Black Swans and Risk Taking

As a driver myself who does use the extreme right lane on expressways when I’m in a hurry, I can identify with the risks of driving fast (even within the speed limit of 80 or 90 km per hour) on expressways.

However, it really is a risk lane as vehicles are typically travelling at a very fast speed and if you make a mistake, you could careen over to the opposite direction of the traffic if the road barrier/divider was not able to prevent your vehicle from going into a head-on collision.

After reading Nicholas Nassim Taleb’s “Black Swan” and whilst reading Daniel Kahnemann’s “Thinking Fast and Slow”, I realised that people in general overestimate our abilities to make judgements or decisions under uncertainty and thus take more risk than we deem necessary without realising it.

Thus one of my 2012 themes is to understand my own limitations in judgement under uncertainty and use more real statistics and figures on decisions in life.

When it comes to financial freedom, the risk of capital losses from stocks are very much evident during 2011 and I’ve also become slightly more disciplined in not exceeding my equities to cash ratios (currently 60:40 or 70:30 after repayment of another lump sum for outstanding mortgage loan).

Thus, I limit my exposure to equities at maximum of 70% of my investible savings with 30% in cash and cash equivalents as a buffer.

Analysing Investing Decisions

A quick review of my 2011 trading patterns also reveal that although net punting profits exceeded losses, the net profits is really not commensurate with the capital at risk. Hence, I will do even less punting for 2012 and focus my efforts and energy in revamping my “Panzer’s Guide to Financial Freedom” which was written a few years back with my current thoughts and experience gained since the book was written.

I will also devote more efforts in developing the capability to produce more content going forward. This has seen me exploring animation production using online tools such as Xtranormal as well as trying out video editing.

2012 promises to be an exciting year. One where I have to be on the alert for black swans and opportunities to grow my means.

How is 2012 looking to shape up for you?

Share with Panzer in the comments section.

Be well and prosper.

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