Day 190: Reflections on the Madoff Tragedy

I just watched, “Madoff: The Monster of Wall Street,” a documentary on Netflix. Many times I had heard the basics of Bernie Madoff’s Ponzi scheme, which robbed innocent people of billions of dollars for decades. It was nice to learn the details of the what happened. I found the documentary series fascinating and well-made, though it was quite long and heavy, at over four hours. I binged it this afternoon. The tragedy was quite sad, but I appreciated* learning about what happened. I am reminded of movies like “The Big…

Day 188: Malkiel’s Introduction to Treacherous Derivatives

So I finished “A Random Walk Down Wall Street.” I am quite appreciative of this book. Yet I admit it surprises me a little bit that the father of the index fund has a forty-page appendix devoted to derivatives. Especially after reading Malkiel’s explanation, derivatives strike me as excessively risky to the point of being dangerous, or at the very least, highly problematic for the average investor. I wonder if working with derivatives is even consistent with the philosophy of buy-and-hold, long-term index fund investing. Admittedly I have no actual…

Day 181: Back to Investing Basics

In re-reading “A Random Walk Down Wall Street,” I am reminded of the basics of how to succeed as a long-term, buy-and-hold index fund investor. These basics could be summarized as follows: It’s not a flashy formula, but it has worked for millions of people. Let’s take each item one at a time: Save a good portion of your income. Like much of the financial literature, Malkiel makes the all-too-important point that if you don’t save, you don’t have anything to invest: Without a regular savings program, it doesn’t matter…

Day 179: Re-Reading “Random Walk Down Wall Street”

I am re-reading (again) “A Random Walk Down Wall Street,” by Burton Malkiel (2012 edition), the investing classic that champions buying and holding index funds for investors rather than trying to beat the market. The last time* I read “Random Walk” was late 2019, before the Pandemic, before inflation reared its ugly head, before interest rates rose, and before the current Bear Market that started last year. 2019 feels like a whole other world. Having gone through the past three years, I now have more understanding as I read the…

Day 169: Dividends, You Are Pretty Cool.

Over the past week or so, I’ve been like a kid waiting for Santa. The cause of my anticipation? No, not Christmas. Instead, it’s the arrival of year-end dividends from our investments. Ironically, when I started investing, I didn’t know what dividends were. I basically thought of investing as buying and hoping that the price will rise. Like a lot of people, I focused on price appreciation. This is the glamorous poster-child of investing that gets all the attention. You read stories of people who bought Tesla at $13, for…

Day 163: Reflections on 2022 Market Volatility

I heard a podcast, Ben Carlson’s “Portfolio Rescue,” discussing the frequency of high-volatility days in the market this year. I don’t remember the exact stats, but basically, there have been a lot of days this year–a lot more than usual– where the market gained or lost 2% or more. This squares with my experience: since I started investing in 2015, the only other time I remember so many swings was during the beginning of the Pandemic in early 2020. Anyway, I found it helpful hearing about this aspect of the…

Day 159: 2022 Investing Mash Up

It’s been awhile since I’ve written about investing, and we’re about to wrap up 2022, so I figured it was a good time. Tonight I don’t have a cohesive essay as much as a mash up of investing-related thoughts. Here goes: The “Good Times” Trade Off In my seven and a half years as an investor, I’ve noticed an interesting thing: there’s a trade off for the good times. The trade off is that when everything is going “well,” that means the funds you are buying are probably expensive. While…

Day 103: The 2022 Market Volatility Bummer

I have written about how investing* is really about growing your share ownership; that is, growing the number of shares you own of any given fund over time. Writing about this has helped me shift my own perspective from mostly focusing on the current balance of the fund (or portfolio). My first five years of investing were 2015 through 2019. These were easy years to watch the balance grow. It was basically like watching your favorite sports team keep winning. There was very little drama (despite a few exceptions), and…

Day 88: The Top 7 Purposes of Your Money

Whether we realize it or not, we are all money managers. That is because on a daily basis every adult makes decisions about where each dollar they receive will go. If someone is focused solely on paying rent and buying groceries, they are nonetheless directing their money to a specific purpose: getting their basic needs met. If they are maxing out their credit cards constantly, they are making a choice to forfeit part of future earnings (and perhaps a substantial part) to service debt. Whether or not our financial decisions…

Day 81: A True Test of Risk Tolerance

If you follow investing topics, or read up on personal finance, you will often hear about risk tolerance, which is the concept that as an investor you want to choose investments within a level of risk you can tolerate. You want to take enough risk that there is reward potential, but not so much that you are tempted to bail on your investments when the going gets tough (ie sell in a panic), or that you suffer inordinately in times of volatility. In a perfect world, your investments let you…