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Friday, July 24, 2015

Investment Critics


"The person who says it can't be done should not interrupt the person doing it."
 - Unknown

One of the more enduring criticisms of this blog has concerned the active management of my investments. There has always been no shortage of people telling me I'm a complete idiot for failing to passively index everything. Over the years, I never responded to any of these critiques. In a way, they rather amused me, as I'm nearly certain that I've read far more EMH literature than all my negative commenters combined. I know very well what efficiency is and what it is not. But still, throughout life we always find an unlimited supply of novices that are so eager to shower us with advice.

So as this blog begins to wind down, perhaps I would like to respond just this one time. They say a picture is worth a thousand words. Five year trailing annualized...


Wednesday, July 22, 2015

Asking the Right Questions


"We thought that we had the answers.  It was the questions we had wrong." 
- Bono

More than 8 years ago, the very first sentence of the very first post of this blog began with a warning from Aristotle: "Those who wish to succeed must ask the right preliminary questions."

Nowhere is this failure to ask meaningful questions seemingly more evident than when discussing net worth.  Several of the big personal finance blogs have series where they profile high net worth readers.  Each article in the series features a different person, complete with a little personal background and then a rough breakdown of assets and liabilities.  Readers are then asked to comment.

While there are certainly exceptions, the vast majority of the comments fit into 3 categories:
  1. Acknowledgements.  These are the simple comments like "That's great!"  Now there's nothing wrong with positive reinforcement, but these are understood as courtesies, not information exchange.
  2. Dismissals.  A lot of people seem to take delight in dismissing the success of others by saying it was easy.  "Of course they were able to save money - they didn't have any kids!"  or  "Look.  The wife is a lawyer.  Any idiot can be a millionaire if they are a lawyer!"  or  "He started investing in 1982. Everyone would be rich if they started investing in 1982!" 
  3. Trivia.  These questions are baffling to me.  For example, if mutual funds are listed, they want to know how much is held in taxable and nontaxable accounts.  If that is given, then they want to know the cost basis.  If that is provided, they want to know lot information.  (I'm not making this up!)  People ask all sorts of irrelevant details about stock holdings, loans, and so forth.
The bottom line is that most people don't really seem interested in learning anything practical from these articles.  Instead, they dismiss the big items and ask a lot of meaningless questions about trivial details.

News flash: it doesn't really matter if people balance their portfolios quarterly or annually.  It doesn't really matter if someone's asset allocation is 3% over some benchmark.  It doesn't really matter whether someone includes their furniture or not in their net worth.  Stop focusing on all these trivial details.

Second news flash: People would be wise to stop dismissing major items such as occupation and timing, and instead ask what they can learn from others.  Yes, some fields pay a lot of money, and perhaps people should be asking how to get into those lines of work.  Yes, the beginning of a bull market is a fantastic time to start investing, but maybe people should be asking how that millionaire held on through the entire uptrend, because most people do not.  Ask what market is unusually cheap right now, because there is always a cheap market of some kind.  Every generation receives its own unique opportunities.  You can take advantage of them or discard them.

There is a lot to be learned from successful people in all walks of life.  But you have to ask the right questions.

Saturday, July 11, 2015

The Future of This Blog


In order for me to feel good about keeping this blog around for a little while longer, it needs to undergo a few radical changes.  I've always disliked the fact that since the very beginning of this blog, most people only visit as a "drive-by" to check out my net worth. I've decided to stop enabling that sort of behavior by simply dismantling the net worth, portfolio, and progress parts of this site.  Yes, my net worth is over two million now, and that's the last I intend to ever say about it on this blog.

The other major change is that from here on out, comments are going to be turned off permanently.  (Other feedback avenues will also be cut off shortly.)  I've had the comments off temporarily before, as it can save time not to have to check and respond to things during busy seasons of life.  But this change is more fundamental.  My apologies to many of the fine readers who commented over the past 8 years.  The problem isn't you; it's me.  Like everyone else, I'm influenced by feedback - or lack thereof.  Consciously or not, we all tend to write more about what we know people will read and respond to positively, and less about what we expect will receive a negative reaction, or perhaps worse, no reaction at all. 

I'm not really sure why this blog won't die.  Part of me would like to be done with it, but there is strong cognitive dissonance when I think about shutting it down entirely.  I have literally hundreds of completely written and half written posts in my drafts folder, but I've decided that I'm unlikely to publish any of them.  Apparently there is something I still want to say here, although that something is not to be found in my drafts folder.

A couple of years ago, I started the process of shutting down this blog, but backed out of that.  I don't feel too embarrassed about that, as I'd estimate that about half the blogs I read have undergone a similar experience.  It's actually quite common.  However, I'm well aware that people typically give grace one time for changing your mind.  If I change my mind again, this blog needs to be shut down for good.  I'm hoping the changes I've made will enable me to discover and articulate the things I want to say to bring closure here.