Weekend Reading – the power of compounding, dissing FIRE, great utility stocks now and more #moneystuff
Welcome to my latest Weekend Reading edition – where I share some of my favourite articles from the week that was across the personal finance and investing blogosphere.
This was my lone article from this past week:
I answered a few questions associated with this theme – what are you saving for?
I’m not sure I should discuss politics too much on this site. It can be rather polarizing. In any event, I will summarize how I feel about our recent Ontario election here:
Enjoy the rest of these articles and see you here next week when I will provide an update about our dividend income journey to semi-retirement/part-time work (hopefully in another 5 or so years).
This was an outstanding read – the psychology of money. If you don’t want to read a few thousand words, here are some excerpts from this article:
- When comparing Grace Groner’s wealth to that of a Harvard educated vice-chairman at Merrill Lynch: “In what other field does someone with no education, no relevant experience, no resources, and no connections vastly outperform someone with the best education, the most relevant experiences, the best resources and the best connections? There will never be a story of a Grace Groner performing heart surgery better than a Harvard-trained cardiologist. Or building a faster chip than Apple’s engineers. Unthinkable. But these stories happen in investing.”
- On the power of compounding: “This gets back to the first rule of compounding: Never interrupt it unnecessarily.”
- On people’s good or bad behaviour with money: “A team of economists once crunched the data on a century’s worth of people’s investing habits and concluded: “Current [investment] beliefs depend on the realizations experienced in the past.” Keep that quote in mind when debating people’s investing views. Or when you’re confused about their desire to hoard or blow money, their fear or greed in certain situations, or whenever else you can’t understand why people do what they do with money. Things will make more sense.”
- On the subject of wealth or perceived wealth: “If you see someone driving a $200,000 car, the only data point you have about their wealth is that they have $200,000 less than they did before they bought the car. Or they’re leasing the car, which truly offers no indication of wealth. We tend to judge wealth by what we see. We can’t see people’s bank accounts or brokerage statements. So we rely on outward appearances to gauge financial success. Cars. Homes. Vacations. Instagram photos.”
I enjoyed reading MDJ’s take on compounding here.
Barbara Friedberg joined the retirement police is this post: FIRE – Financial Independence, Retire Early is a bad idea.
Sure Dividend highlighted five great utility stocks to own now (and going-forward).
Tawcan earned some healthy dividend income. I intend to release my May report next week! You can revisit my April report where we revealed we are 54% towards achieving our long-term (and semi-retirement) goal.
In context of learning from stock market history, Ben Carlson believes experience is overrated.
This is what a YOLO trip looks like – enjoying the Stanley Cup playoffs in….you guessed it, Vegas.
What does wealthy mean to you? It probably means something very different to me than this article. First of all, health is wealth. Second of all, a loving family is wealth. Third, strong friends and good relationships is absolutely more wealth. Fourth and not to be forgotten, following your passions, dreams and aspirations is yet another form of wealth. Maybe then, only then, does some money stuff really matter. What’s your take?
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re: the Ontario election
A prime example of the psychology of money. As previously mentioned, money is the brain’s apex predator, exhibiting a more powerful effect on the brain than either sex or death (or anything else). The winning candidate’s populist campaign was based heavily on money matters (that in itself is a highly interesting, and highly scary, psychological phenomena; a basic tenet of fascism). People didn’t vote for true wealth, or long-term wealth, or societal prosperity, they voted for the hope of short-term personal gain (lottery anyone?). We now have Trump North.
re: On people’s good or bad behaviour with money: “Current [investment] beliefs depend on the realizations experienced in the past.”
And now you know why the cycle of poverty is nearly impossible to break. And why only 1% of Canadians have a million dollar portfolio.
re: Barbara Friedberg
Spot on…but only because I agree with her! Especially her last line: “They’re contributing to society.” Let’s just say, hypothetically, everyone with a job retired at the age of 30 (a bit Logan’s Run-ish). Almost everyone in the job market, in every field, would have less than 10 years of experience. Yes, I know there are studies out there which show greater experience doesn’t always trump newbie-ism, but it would apply a tremendous damper on many metrics of society (not just economics/finance but fields across the board). Applying the fallible ‘10,000 Hour Rule’ would see everyone quitting to travel the world just as they hit their pinnacle of expertise/professionalism/creativeness. This would leave us with industries of people constantly in a state of learning their trade…being taught by people still learning theirs!
Most people desperately seek FIRE because they hate their jobs and/or don’t want a boss (autonomy is the major driver behind workplace satisfaction)…and then they stop. It’s like FIRE was their crowning goal (and much easier to fill the bank account than to know thy self). Kind of a waste, for many reasons, but hopefully they will be replaced by people with a passion for their vacated position.
Alternatively, FIRE would eliminate the Ford’s and Trump’s from the public arena….so it’s not all bad!
“The winning candidate’s populist campaign was based heavily on money matters (that in itself is a highly interesting, and highly scary, psychological phenomena; a basic tenet of fascism).”
It’s crazy how so many people can vote for someone so egotistical without any money-related campaign platform. Then again, it’s Ontario. We’re becoming a have-not province – like the entire country of USA now (mostly a have-not country) where the distribution of wealth is very extreme – so I shouldn’t be surprised at the election results I guess. Frustrating all the same.
I really liked the Psychology of Money article, it was a long read though! Thanks for the mention Mark, hope you are YOLO-ing it up on the weekend! 🙂
Enjoy the weekend!
Here’s another viewpoint on Grace Groner:http://financialuproar.com/2015/02/04/problem-grace-groner-stories-like/ I found this story about a secretary who left millions of dollar interesting as well: https://www.nytimes.com/2018/05/06/nyregion/secretary-fortune-donates.html
Thanks for sharing Christina.
When it comes to priorities and what wealth is, there likely will never be consensus. We’re all individuals with our own personal issues, drives, passions, etc etc. As an aside, I am often pleasantly surprised when I speak to people and discover what their passions are. It’s kinda fun to try to guess what these passions may be based on the little I know about them and be completely wrong. People surprise me (in a good way) some of the time. Next time you’re having a coffee or beer (or whatever) with someone you sort of know, ask them if there is something that they are interested in that you don’t already know about them. It may surprise you.
When it comes to equating money to “wealth” I have changed my position from when I was but a lad. When I was first starting out, the thought of having a million bucks was Utopia and would be the Holy Grail of a financial picture . Now, I don’t really care all that much. Sorta like the dog that caught the car….now what do I do?
I’m also in complete agreement with RB, Canadians (not necessarily having to be born here) have a LOT to be thankful for. We won the lottery for sure. And in my case, it’s time to pay that back (or forward depending on how one looks at it).
Well written and insightful comment Lloyd. Thanks for sharing. “And in my case, it’s time to pay that back (or forward depending on how one looks at it).” You sound fulfilled. Good on you.
Ditto here on the change in position on money as wealth since being younger. It was a driving force for 25-30 years for me, especially always working in a pay for performance role.
Now, its just about having “enough” to live a reasonable life, and “stuff” is much less important. Other people, our own health, and different experiences that create memories are more important.
FIRE- to each their own. Seems lot of these folks change their minds and work again if they ever were truly “retired” to begin with. Several decades from now will be the most interesting to see how things pan out.
Groner and Fuscone- proof human behaviour can be the defining difference with investing. One lives frugally and has no experience or advanced knowledge of investing (but understands compounding) and amasses a fortune. The one with all the education and businees financial experience/success lives way above their means and goes bust.
Re wealth: You’ve got a pretty good list Mark. Mine’s very similar with those things before money wealth. But I would add – being born and raised in a beautiful, safe, free, prosperous country that abounds in opportunity and cares for its citizens.
A good addition. All things considered, we won the lottery being born and able to live in Canada. Unless Ford does something to take down our province.
Well, I hope that all works out. Seemed like a list of stinkers to me, but I’m not in Ontario. Also seemed Ontario was on an unsustainable path of destruction already, so hopefully there will be some course correcting. We’ve got plenty of issues here in NS too. Apologies for the political tangent.
I don’t think you have as many issues as Ontario. We’re a mess politically and largely broke.
You might be right, but there are certainly challenges with our finances, an aging population, employment and health care.
It will be interesting times to watch the outcomes in Ontario.
Thanks for the mention Mark. Have a great weekend.
All the best!
Hey, we are in a democratic country, everybody has the freedom to decide what they want for their life. Personally, I don’t mind to work a few years longer without sacrificing enjoyment in life. I also always think the best way to escape a job you don’t like is to find a better job. It’s a free country, you are not chained to your job and you are free to go to colleges, universities to get new working skill. But it’s totally a personal choice what kind of life one wants to live. So as long as a FIRE person is honest and do not advertise with false information that does not make sense mathematically, I have no problem.
The psychology of money: Comparison of Grace Groner and Richard Fuscone “I have been devastated by the financial crisis”
Was one generating a growing income while the other dependent upon market value?