Investing

Do It Yourself or Visit the Barber?

Feed your kids when they are hungry.  Clean your kids when they are dirty.  That’s all that should be written in stone when it comes to parenting and even that cleaning them thing is not necessarily correct 100% of the time (I was the kid that would go straight back to the creek after getting hosed off for lunch).  There are tons of books about child-rearing, many of which conflict with each other.  They are not necessarily written to help parents make decisions so much as to make them feel a sense of control.  “Do this, don’t do that” – it all goes out the window under live action.  Kids do not understand where the boundaries of life sit.  They don’t “think outside the box” because they haven’t registered the existence of the box yet.  Any action is a viable option at any given time. My wife and I got…


ONE TRILLION DOLLARS *pinky*

The Trade War™ wiped over ONE TRILLION DOLLARS from the stock market on Monday.  Will the market ever recover from this disaster?  It turns out that a trillion bucks ain’t what it used to be.  Financial reporters showed Monday’s market movement as -2.41%.  Financial entertainers breathlessly echoed the ONE TRILLION DOLLARS talking point.  Being down over 2% in one day isn’t good, but it was a useful tool to separate news sources that are serious about their reporting from the click-bait farms.  Oh and will we ever recover?  The S&P 500 was down 0.11% on the week, as of Thursday’s close, but oddly we haven’t heard any stories of the market gaining ONE TRILLION DOLLARS over the last couple of days.  Weird. Trade War™ There is a lot of hand-wringing over the consequences of the very public negotiation with China.  Bad financial news of all sorts is inevitably traced back…


Don’t Let the Kentucky Derby Pick Your Advisor

Horse racing can be a lucrative business.  This year’s Kentucky Derby winner will bring home $1.86 million.  The first Saturday in May is the only time America (outside of Kentucky) pays attention to horse racing.  This might be stretched out to several weeks if the same horse wins the Preakness Stakes, setting the table for a possible Triple Crown at the Belmont Stakes.  “The most exciting two minutes in sports” garners intense buzz, but is quickly forgotten.  Too many investors adopt the same strategy for choosing financial advisors. The Horse Race The investor allocates a little money across three or four potential advisors.  Whoever has the highest returns at the end of 6 months or a year gets to manage all of the investor’s assets.  In the biz, we call this a horse race.  The investor thinks they are choosing a financial advisor, but is this really the way to…


Where Are We in the Current Cycle?

Glad you asked!  This is such a great question.  It makes you look smart for asking it.  You recognize that the market is cyclical and your question implies that you’re so savvy that you can sync your investing to take advantage of the market’s ebbs and flows.  You’re a force of nature and I commend you for it, especially since you preceded the question with several minutes critiquing the Federal Reserve and expressing concern about today’s geopolitical situation. I love that you asked me because now it’s a chance for me to cite a bunch of bullshit statistics that prop up my world-view and make us all feel better about ourselves.  Best of all, no answer I give is going to suggest taking any real action on your part.  It’s a win-win. So Where Are We in the Current Cycle? Definitely the late innings, but it may only be the…


Golden Paw of Fairness

My older son’s school celebrates a positive trait each month (respect, courtesy, etc) and recognizes students that embody the month’s trait at an assembly.  For February, William earned a golden paw award for fairness.  I keep thinking about this because while William may display fairness to his fellow students, life has not been fair to him.  The kid was dealt a tough hand of cards from the beginning.  He has ARPKD.  He deals with it and tries his best to show fairness and compassion to others, though, which is mind-blowing because he could use his diagnosis as a crutch instead.  Will could whine about all the things he can’t do like play contact sports or ride roller coasters.  Instead, he plays the hand he was dealt.  To see him do this day after day is inspiring and humbling. Kidney Month March is National Kidney Month.  The Wall Street Journal has…


The Classic Bear Bottom

As I toasted a bagel in the kitchen at Fairway this morning, I heard a talking head on TV describe the Christmas Eve market drop as a “classic bear bottom”.  A couple of the show’s co-hosts nodded sagely in agreement, but one pressed him.  You recognized this as the bottom?  Seriously?  And of course he did.  Market breadth, IPOs, and the Federal Reserve all pointed to a “typical” bear bottom. Don’t Believe It The idea that you (or anyone else) can recognize turning points in the market is poison.  The conversation’s casual tone is noxious.  If this guy has figured out how to time the market, why is everyone yawning?  Financial professionals recognize this guy is just bullshitting for the cameras, but civilians might think he’s serious.  They might be tempted to ask their “money guy” why he doesn’t invest based on market breadth, IPOs, and Federal Reserve pauses.  The truth…


Tidbits and the Hardest Thing About Investing

2019 has been great for investors as the S&P 500 gained 8.86% so far (through 2/4/2019) in reaction to the release of my investment philosophy.  Ok, maybe there were other factors at play.  If you missed the posts, portfolios should be Risk-Aware, Focused, Elegant, and Realistic.  There were also some investing concepts that just didn’t fit in this framework, but deserve mention.  Each of these could be a post of their own, especially the hardest thing about investing. Time as a Factor Factor investing tries to identify characteristics of stocks that move up to gain an edge over market-cap based indexes.  Factor investing has gained traction over the past few years, beginning with dividend and low volatility funds.  Now most investment firms have agreed on four factors – value, size, dividends, volatility, quality, momentum, revenues, profitability, and liquidity.  Yes, that’s nine factors, but most product sellers use a maximum of…


Realistic

This is the fourth in a series of posts about my investing philosophy – Realistic.  Investors should be realistic about their expectations and the nature of the markets. No one can predict the future. After hearing 10 years of “The easy money has already been made”, it’s clear that most can’t even predict the present. It sure didn’t feel easy at the time. While no one knows the returns or risks in advance, investors with a reality-based approach to investing can craft a long-lived investment process. Realistic Market Expectations Expect markets to go up over the long term. This is not optimism or a leap of faith. It’s realism. Humans will continue to innovate and seek to put their capital to work. Not every asset class will go up at the same time forever, but that’s what diversification is for – to eliminate the need to predict what asset classes will go…


Elegant

This is the third in a series of posts about my investing philosophy – Elegant.  The investment process should be elegant, efficient, and low-friction. Before diving into what that means, Tadas at Abnormal Returns has collected posts that remember investing legend Jack Bogle, founder of Vanguard, who recently passed away.  If you’ve invested money in the last 40 years, you have more money in your pocket than past investors because of Jack Bogle.  Skim the headlines and pick a couple to read.  It will be worth the time. Elegant If you were to build your portfolio from scratch today, would it look like what you own right now? Are the investments in your portfolio pieces of a larger financial plan or accumulated trinkets of an investment collection? When tempted to overthink a portfolio, I remember an urban legend from the space race. While NASA spent $1 million developing zero-g pen. the Soviets…


Focused

This is the second in a series of posts about my investing philosophy – Focused.  It can be difficult to keep an eye to the big picture without getting distracted by all the different ways to invest.  Focus is about maintaining perspective, understanding why we invest and measuring the success of those investments. Think Left of the Decimal Spend more time/energy on the things that have a true impact and less time/energy on low-impact items. It’s worthwhile to examine whether your portfolio should have a 60% or 70% allocation to Equities, but if you’re torn over adding a 0.5% exposure to a single country ETF, you’re overthinking things. This goes for all things investing. Get the big things right. Avoid errors caused by forgetting what you are really trying to do. You don’t have to be a great investor, just don’t be a bad one. Marginal Utility Understand when you’ve won the…