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I’m terribly sorry, but I need to interrupt this regularly scheduled blog post to remind you that you need to vote.
(This post is centered on a U.S. audience because Election Day is the day after this post goes live. But it equally applies to everyone.)
Click here to see if you’re registered to vote.
Click here to see if your state allows same day registration.
Click here to find your polling location.
I was a little hard on people who have a low investment risk tolerance. But that’s not because I’m a mean person. I have very good reasons.
I get that the idea generally is that we want to protect against people who end up taking on more risk than they can “handle” and then “panic sell” (or “panic buy”).
But that seems backwards. The solution here isn’t to cater to the low risk tolerance, the solution here is to become more comfortable with the risk tolerance you need. Because I’ve already shown that it is impossible to save enough money for retirement with just an income and no investment vehicle.
Frankly, I think we’re talking about risk tolerance all wrong. We’re focusing on the wrong kind of risk.
[Read more…] about Here’s the risk tolerance we ought to be talking about
When investing, whether for retirement or for any longer term goals, there is often a discussion of “risk tolerance”. Risk tolerance in this context means how much variability in the investment return process that an investor is willing to withstand.
As Investopedia puts it: “if you take on too much risk, you might panic and sell at the wrong time.”
Panic selling is a real problem. Because no one, not even professionals, can time the market, we often react during the most inopportune times, like selling when the market has hit bottom, or buying when the market has hit its peak. It happens, and it happens a lot.
But risk tolerance runs in the other direction too. There are those who stay entirely out of certain markets because of fear of loss. These are the proverbial “money under the mattress” people or “cookie jar” investors.
I think that’s just as dangerous.
When financial advisors and other people of influence discuss investments, they often say that the best options are all dependent on the client’s risk tolerance.
But I’m here to say that your level of risk tolerance doesn’t matter. It can’t matter. You don’t have that luxury.
[Read more…] about Why it doesn’t matter what your risk tolerance is
On a Tuesday morning in September, a little over 15 years ago, I was waking up for work.
At the time, my alarm was set to play classic rock radio (I believe it was 94.1 WYSP). While I usually woke up to something by Led Zeppelin, Aerosmith, and the like, this morning, the DJ was talking, and with a very odd tone to his voice.
I’m not great in the mornings, but I do distinctly recall something like the following:
“…so, I don’t really know what else to do here, so I guess the only thing we can do in the meantime while we wait for updates is to keep playing your favorite classic rock hits…”
What was going on?
Of course, you’ve anticipated the punchline. The day was September 11, 2001, and I was waking up to the first real-world crisis of my adult life.
That day, everything around me seemed different. People who normally walk past each other and avoid eye contact would look, nod, and grimace in understanding. Strangers would hug. People would spontaneously be crying in the street.
There was a sense that things were different now, and that they would never be the same again.
I don’t know when you’re reading this post, but whether you’re reading this on the day it was posted or many years in the future, I want to take some time to talk about how to respond when you feel like the world has changed for the worse.
[Read more…] about How to move forward when you feel like the world is going to end
It’s not hard to find bad economic news that applies to you. If you’re a millennial, chances are the job market is terrible for you. If you’re a baby boomer, chances are that you’re either underwater in your house or you have not enough saved for retirement. If you’re a woman, the gender pay gap is still rearing its ugly head (though being spoken about more). And no matter who you are, chances are that your income is not nearly keeping up with your perceived needs.
Forget the 1% versus the 99%. It runs out that 20 people have as much money as half of America.
You may conclude from this that the system is rigged against you. And in this, you’re basically right.
But you may also think, as the saying goes, that “the little guy can’t get ahead“. As in, that you can’t win.
And that’s not true at all.
[Read more…] about This might be why you don’t believe you’ll be financially successful
Finances and emotions. They go together like one explosively codependent couple.
Don’t be fooled by my focus in the numbers side of the situation; I’m not immune to fear and anxiety either.
I’m going through the process of becoming a first-time homebuyer. And because of this, I’m going back into debt for the first time in years, and to an amount that dwarfs the total amount of debt I’ve ever had.
So you can imagine I’ve been a little on the anxious side.
I’ve had to make large-scale, will-affect-my-life-for-years decisions effectively on a dime. And while I’ve been prepared for all of them in the abstract, being confronted with these decisions in the moment really tests you.
So far I think I’ve done okay. But there’s one place where I question if I went back on my principles a bit. Or, to put it another way, I think I chickened out.
[Read more…] about My mortgage principle that I broke (sort of)
For the past few years, I’ve flown over 25,000 miles each year, a respectable distance. With such a experience, you would think that I would have no problems with anxiety while flying.
You would be wrong. But I consider the anxiety a kind of blessing, or at least useful.
If you’ve spent any time with this site—or even if you haven’t—I want to ask you a small favor.
I’d like you to trust me enough that you won’t skip this post. It’s pretty short. You can skip the first section if you want. This one even has a soundtrack. Thanks.
[Read more…] about Shame, or why you don’t do what you know you must
A parable about change and what it takes to be able to make it happen, from the perspective of the ledge of a building.
Have you ever wondered how someone could jump off the ledge of a building that’s on fire? Picture the scene, the flames roaring out of the windows of a multi-story building. The top floors are totally engulfed, thick black smoke filling the air. The person stands on a ledge way up toward the roof. The fire department and dozens of onlookers are craning their necks to see. Floodlights light up the night. There is no air inside the building, so there is nowhere to go. And the building is too high for a ladder. So the person stands there, waiting, deciding, frozen.
No one ever jumps off the edge of a building in normal circumstances. Well, except for daredevils and others who don’t concern us here. You wouldn’t do this. Not even if there were one of those trampoline-looking contraptions at the bottom, the ones that (they claim) will ensure your safe landing. From this vantage point up here (and sorry, but I’ve had to bring you up here) that trampoline down there looks like a hula hoop. There’s no way that it would hold you if you jumped. You imagine that you would go straight through it like a cartoon character. And anyway, your feet have become rooted to the spot. Jumping off the ledge seems like a daydream, nothing that would happen in real life. You’re staying right here.
[Read more…] about Lessons from a burning building
I may not know much. Actually, I’m sure of that. But here are a few things that I am pretty sure of.
