Anticonsumerist's Journal

Where are you and where are you going?
anticonsumerist
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Anticonsumerist's Journal

Post by anticonsumerist »

Hi all!

Long time lurker here, coming out. Got really inspired by @shemp and wanted to start a journal.

Age 34. Living in an emerging market. No wife/kids. Recently lost my job due to the pandemic. I was in financial services.
I have been trying to practice some form of ERE philosophy since 2017. Yearly spending amounts have been:
(all USD)
2015: 38k
2016: 31k
2017: 28k
2018: 25k
2019: 14k
2020: 18k
I wish I was able to say the decline was due to my improved saving habits; however, this has been mainly due to the local currency (in which I spend) declining vs the hard currencies such as USD or EUR.

Currently total net worth is around 25x yearly spending. However, I am aiming to get it up to ~33x or maybe even ~50x levels before I retire.

My target for 2021 will be to move to a developed market to earn more. This could be UK, Canada or US (in the order of difficulty). I might move back to my home country to retire once I build a larger nest egg.
Moving to a developed country could somewhat increase my yearly spending, but I believe my earnings could increase more due to much deeper labor markets for finance professionals there, with a positive net impact on savings.

Re: investments, current split is as follows:
Stocks (S&P 500 index): 16%
Fixed rate bonds (AGG): 19%
Floating rate bonds (FLOT): 11%
Gold: 6%
Real Estate: 7%
Cash:41%

I know I need to put that cash to work, but I believe both stocks and bonds are too expensive. Can't bring myself to invest at these levels.

One question: I believe Jacob is way smarter and much more educated about investments than myself. I am sure there are other successful investors around here as well.
I couldn't find current portfolios of prominent members discussed anywhere around the forum (I mean individual stocks/bonds).
Is there a specific reason not to share that knowledge? Has this been discussed before?

I was hesitant to ask, as this could be considered private information. But I couldn't find any harm in sharing that (of course investing by imitating, for example Jacob, would be each person's own decision, with the risks accepted by each such person).
Actually, if forum members buy a stock after a prominent investor member adds it to their portfolio, this could even help a bit by creating a little more demand, which should cause the stock to rise a little bit...

I am sure someone smarter than me had this idea before, and you guys might have discussed it already.. I'd be curious to hear any previous discussions / existing views on that.

Thank you for reading and commenting!

jacob
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Re: Anticonsumerist's Journal

Post by jacob »

anticonsumerist wrote:
Wed Jan 06, 2021 6:07 am
Actually, if forum members buy a stock after a prominent investor member adds it to their portfolio, this could even help a bit by creating a little more demand, which should cause the stock to rise a little bit...
Yeah, that can even be illegal :-P

The reason I don't share my portfolio (and regret it even when I mention one of the stocks I hold) is that the name of a stock is just one of the many considerations that enter portfolio management. For example, I might say that I own XXX and I know that some will buy it just for that reason. However, what might go unmentioned is that I think XXX is overvalued or alternatively a trap and that I'm looking to sell it, whereas the person buying it think that "buy&hold forever" is the only way to own stocks. I might also hold XXX as a hedge to YYY which I may forget to mention. Alternatively, I might mention YYY as well but some might not realize they come as a pair. Mentioning XXX, YYY, and ZZZ might also create the impression that I've analyzed them deeply and think they're great companies, whereas in reality I might instead have identified them as part of the business pr hype cycle and important to hold at this particular moment. There are always a dozen different reasons for why one might own XXX and the reason is often more important than whether it's XXX or YYY. Never forget that each buyer in a trade gets it from a seller who thinks it's a great idea (at least for them) to sell. To wit, I might buy/sell something simply because my SWR has changed from 4% to 0.75%.

And so on ... (I have an upcoming interview with MadFIentist where some of this was discussed. Dunno when it'll be out.)

I've had tons of experience with ERE-beginners having the attitude that they can just "scan for nuggets of wisdom" or "pick and choose" ideas they like cafeteria style without realizing that ERE is more than individual tips and tricks. Investing is similarly more than individual stock tips. Wheaton levels.

Recall the copy, compare, compile, compute, coordinate, create evolution of adult learning.

Especially when it comes to investing, out-of-context "nuggets" do more harm than good.

Finally there's the practical issue of me simply not enjoying debating or explaining this or that investment decision.

anticonsumerist
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Re: Anticonsumerist's Journal

Post by anticonsumerist »

I understand now, thank you Jacob.
I wish there was a way to give you money to manage, I'm sure you would manage my money better than I can :)

In this case, do you recommend learning how to invest to beginners, and try to invest actively? Or do you recommend indexing? (I remember you being critical about passive indexing in the past) Or do you recommend giving money to a fund / money manager to invest? I am afraid of panicking and making the wrong moves at the wrong times if I try to do it myself.

Are there any funds/fund managers you would use if you were (for some reason) not managing your own money?

Thank you very much!

jacob
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Re: Anticonsumerist's Journal

Post by jacob »

See http://earlyretirementextreme.com/start ... sting.html (start with Bodie)

Meanwhile, don't make any money moves. After reading those, you can make a more informed choice about what to do. FWIW, I appreciate what it feels like to be clueless. I spent the first 4 years of my accumulation phase just using a savings account while reading about economics (not about investing). These days with negative interest rates and a bull market I see people plunging headfirst into positions they had never heard about the month before getting instant 10-20% gains. It's not the best start to get a realistic idea of how these things usually go.

Yes, I do have a plan B in case I become mentally incapacitated. However, that plan is intended to protect principal and deliver a steady stipend for the rest of my days ... not the greatest strategy for the accumulation phase.

And make a note in the calendar for that madfientist interview... it's supposed to be out in January.

Quadalupe
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Re: Anticonsumerist's Journal

Post by Quadalupe »

jacob wrote:
Wed Jan 06, 2021 10:46 am
See http://earlyretirementextreme.com/start ... sting.html (start with Bodie)
I notice you now recommend Bodie first, in lieu of the original order which started with McConnel and then Reilly. Why the change of mind?

jacob
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Re: Anticonsumerist's Journal

Post by jacob »

Because I've realized that most are not going to take the advice to read all of them.

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Re: Anticonsumerist's Journal

Post by unemployable »

jacob wrote:
Wed Jan 06, 2021 10:46 am
See http://earlyretirementextreme.com/start ... sting.html (start with Bodie)
I'm just noticing this now, but several of those books are in the CFA curriculum. Or at least were when I took the exams in the early 2000s; they have at least partially moved to in-house texts in recent years. Point is they have the investing community de facto seal of approval, despite one of them still having the World Trade Center on the cover.

Not much has changed since then regarding reading financial statements. The two big changes have been that the pooling-of-interests method is no longer allowed (all "mergers" have to technically have an acquirer and acquiree) and stock options must be accounted for as an expense at the time they are awarded and be marked to market thereafter using a reasonable pricing model (generally some variation on Black-Scholes).

jacob
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Re: Anticonsumerist's Journal

Post by jacob »

Yes! That's actually where the list came from, the CFA level 1 curriculum. They started the in-house move which was just copying select parts of the same books around 2010ish. Another way to get the "texts" would be to go on craigslist and look for people selling a set of level 1 books. Doesn't matter much which year.

Cheepnis
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Re: Anticonsumerist's Journal

Post by Cheepnis »

Jacob,

(I don't want to hi-jack anticonsumerist's new journal, if you feel it's more appropriate to move this to my journal feel free)

I'm currently 2/3 through McConnell and Bodie is next. I think it's unrealistic for me to get through all 8 of them (at least in one go), but at least half is definitely on my to-do. However, I wanted to get your thoughts (as a mostly, or initially, self-taught investor) on how large the gap is between learning and doing in this field. I'm only a hair's ass above the clueless stage right now, but I get the impression from reading various discussions on this forum (like Lemur's journal) that investing, even of the more passive variety, has a fair bit of learning by doing that I doubt the text-books are going to impart. I'm much more a hands-on learner than a book learner, so that's good if my hunch is correct. My problem is I don't even know what I should be doing! I'm hoping Bodie will start to clear the air in that respect, though I'd guess it focuses on more technical or factual matters than on formulating sound reasoning or rational risk assessment i.e. a "how" not a "what" explanation. This, for me, remains to be seen.

My interest in this topic is twofold. First, I'm accumulating a good chuck of change I don't want to do something stupid. And second, and least based off the tenor of this forum, true passive investing seems unlikely to work well going forward. TL;DR How actionable is Bodie and the other investing specific books? Are my worries that I'll read them and feel no closer to having any clue how to formulate a plan unfounded?

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Re: Anticonsumerist's Journal

Post by jacob »

If I may paraphrase Confucius: Learning (the foundations) without doing (the specifics) is useless. Doing (the specifics) without learning (the foundations) is dangerous.

Confucius had "thinking" instead of "doing" there, but as you note, there's more to managing money than just the rational mind. It's really about "theory" vs "practice". They're not opposing. They're complementary. IOW, theory without practice is useless. Practice without theory is dangerous.

The gap depends on what you do. I haven't met a good investor who didn't read a lot... not just the textbooks but constantly. Traders not so much. Different games, different skills. Chess players spend a lot of time studying old games. I'm not sure this holds for poker players? It's my impression they're more interested in studying the players (including themselves). Everything requires a combination but the balance is not the same for everything.

Not knowing what you should be doing but figuring it out or figuring out how to figure it out is part of the process. I know this is a tall order given how most of us have been trained to expect that the answer to all the problems are found by consulting a book or a boss.

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Re: Anticonsumerist's Journal

Post by Alphaville »

is that particular mcconnell book macro or micro or both? can't "look inside" or find same edition as preview.

thanks in advance.

Crusader
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Re: Anticonsumerist's Journal

Post by Crusader »

Anticonsumerist, I am currently at your stage whereby I am at the level of conscious incompetence, and need to read all this material before I do any kind of active investing. Maybe you want to be my reading/accountability buddy w.r.t. this education. Something like a book club.

In the meantime, I put all my money roughly into: 25% Canadian equity, 25% Canadian fixed income (bonds), 25% US equity, 25% int. equity. I believe Canadian stock has some beneficial tax implications so I hold those in my non tax sheltered or tax free accounts.

anticonsumerist
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Re: Anticonsumerist's Journal

Post by anticonsumerist »

jacob wrote:
Wed Jan 06, 2021 1:28 pm
I know this is a tall order given how most of us have been trained to expect that the answer to all the problems are found by consulting a book or a boss.
Great insight - I feel like this is the cause of most of my (remaining) problems in life.

anticonsumerist
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Re: Anticonsumerist's Journal

Post by anticonsumerist »

Crusader wrote:
Wed Jan 06, 2021 1:49 pm
Maybe you want to be my reading/accountability buddy w.r.t. this education. Something like a book club.
Why not? Let's try. As per Jacob's recommendation, I will try getting Bodie first and start with that. Does that work for you? Maybe others want to join as well?

Hristo Botev
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Re: Anticonsumerist's Journal

Post by Hristo Botev »

I'd be up for it. For Bodie, are you planning on sticking with the 5th edition or planning on doing a more recent one?

biaggio
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Re: Anticonsumerist's Journal

Post by biaggio »

@jacob The books mentioned in the blog post seem a bit outdated, some are as old as 1998. Is there a reason you linked to those particular editions? Why not go for the latest editions?

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Re: Anticonsumerist's Journal

Post by jacob »

It's an old post but as @unemployable noted above very little has changed. Might as well get the cheapest versions instead of partaking in the textbook racket.

Cheepnis
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Re: Anticonsumerist's Journal

Post by Cheepnis »

Thanks Jacob. My interpretation of your post is that my fear is well founded. I'm really only interested in this stuff as a means to and end, otherwise it's pretty boring. I don't see myself retaining much knowledge (or be able to use it well) without the practice, but I feel like 8 (or 4 textbooks) worth of knowledge cannot be maintained without much more time devoted to practice than I am willing (or even able) to provide. At the risk of sounding overly defeatist or self-deprecating: I'm not a very enviable intellect. I always lagged behind all my friends often despite trying harder. My decent grades were only attained via brute force as opposed to any natural talent.

It's funny you bring up a game analogy as I've been thinking about my strengths and weaknesses in those terms for the past few months. I like card/tabletop games, but I'm only good at the strategic ones. Games with very stringent, well defined rules where the prime directive is working within them to maximize the outcome using your limited resources. Pinochle, chess, and a ton of other geeky games like Terra Mystica or Puerto Rico qualify.

Tactical games? It's like I'm thrown into a lake and I don't know how to swim. The rules are often broader in scope with less specificity, and the topography of the game can change from round to round, and I have no idea how to deal with that. The best idea at each moment is often obscured (to me) because that idea in the long-term would be terrible. Things change so frequently I cannot figure out how to balance now vs. then, whereas I can far more heavily focus on then in strategic games. Seems to me the "real world" is far more tactical than strategic. Even if I knew what's going to happen, how can I predict how the public/economy/world/political landscape will react, much less use that knowledge? How can I even use the knowledge I don't know how to use that knowledge?

The deeper I get into this ERE/FI rabbit hole... Given my slow-learning speed, my stated desire to not make investing my entire life, my low level of knowledge starting out, and the potential need to break ingrained ways of thinking that aren't applicable... the more I'm unsure this broader endeavor is attainable. I'm going to continue with the ERE curriculum, but that's just because I'm used to the feeling of the brute force method. I'm hoping I'll get to the end of it and have somewhat of an idea of how to start practicing. And then the trick will be getting mental fortitude to lose money as I actually learn everything I just read.

anticonsumerist
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Re: Anticonsumerist's Journal

Post by anticonsumerist »

Hristo Botev wrote:
Wed Jan 06, 2021 2:10 pm
I'd be up for it. For Bodie, are you planning on sticking with the 5th edition or planning on doing a more recent one?
I found a used one 11th edition, I'll probably get that one.

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Re: Anticonsumerist's Journal

Post by Aspirant »

Good luck with Bodie ;) I have a very old copy of Bodie, Kane & Marcus in the bookshelf. The concepts seem familiar, but I couldn't solve half of the problems. Also the examples and interest rates seem hilarious.

The theory vs. practise argument is valid. My own experience is that strong theoretical foundation (which I don't even claim to have) is necessary. The psycological part and learning your unique risk tolerance profile only comes from practice. I had read about all sorts of investment fallacies and truly learned by making the actual mistakes. Start small and learn on the way...

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