DIY Personal & Retirement Financial Planning

Do-It-Yourself financial and investment planning Excel spreadsheet software

Learning about personal finance and investing

Learning about personal finance and investing

The investment strategy that I always suggest is a “completely passive, globally diversified, always invested, never switch to beat the market” investment strategy. This kind of investment strategy is a very low maintenance investment strategy. From many respects, you set it, and you forget it. Except for:

  • the need to pay expenses exceeding current income,
  • rebalancing to maintain the risk exposure of your portfolio, or
  • some gross and unforeseen failure on the part of a fund to track its index properly,

there is no need to move in and out of investment funds or to move in and out of the market in any attempt to do better than the market.

If you have any desire to stay tuned to informative economic and investment information, I understand, appreciate, and share that desire. One of my goals over the past decade has been to understand the sources of available financial and investment information. However, I have reached the conclusion that 99+% of the financial information that is easily available through the media and the Internet is:

  • self-interested and biased,
  • superficial and non-implementable,
  • historical in nature or just current “noise” reporting without any actionable utility, and/or
  • poorly researched, just plain wrong or unmitigated rubbish.

This paucity of genuinely useful information is understandable. The investment research literature provides no assurance that anyone has any real predictive insights to allows them to beat-the-markets or time the markets reliably and consistently over the long term.

However, I do believe that it is a virtue to engage in a lifelong effort to understand economics and investments, because of the significant impact of economics and investment upon our lives. Personally, I believe that this knowledge provides a very long-term economic perspective and allows one to rise above the constant pressure from the industry and the media to change something – change anything – with ones investments, without any rational reason other than to generate more revenue and profit for the industry yet not for you.

On the contrary, I believe that the more one learns the less one is inclined to jump from one currently popular investment strategy to the next. Stability, constancy, passivity, broad diversification, risk control, and very low costs have been the hallmarks of the most successful personal investment programs of the past. I have found nothing that makes me believe that these viewpoints should ever change.

Given these viewpoints, I have also determined that I will not pay additionally for any “special insights” from industry professionals. Paid insights are no better that the abundance of free insights. However, since they cost more, one is likely to end up poorer for having paid.

Therefore, I have decided that I will only use free resources. Everything I do relies upon free public information or at least information that is very, very low cost. One just has to learn how and where to look. Of course using only free or extremely low cost public economic and investment information, means I may have to wade through a lot of rubbish to find things that are useful and valid. However, that is far better than wading through a lot of rubbish for which I have paid very dearly.

Recommended finance and investment journals and books

In addition to materials that I have published, here is a short list of my investment reading recommendations concerning other sources that I consider worthwhile. The online sources are all free. You could buy the books inexpensively on Amazon.

  • Journal of Indexing — http://indexuniverse.com/index.php/publications/journalofindexes.html  Back issues can be read online.
  • Investment research papers via Google Scholar (Go to Google, click “more”, click “Scholar” and enter a search term. Look for most cited papers. Read abstracts, intros, and conclusions.)
  • John Bogle’s book “The Little Book of Common Sense Investing” Go to “John C. Bogel’s Blog.” You can read the first chapter of his book online on his blog.  http://johncbogle.com/wordpress/
  • “Capital Ideas: The Improbable Origins of Modern Wall Street” (1993) or “Capital Ideas Evolving” (2007) by Peter Bernstein. These books chronicle of the intellectual development of modern investing.

After these recommendations, I have few additional recommendations, although I track and read a very wide variety of sources. The next book I would recommend is Ben Franklin’s Autobiography. I do not recommend many investment books, because I think that much more objective materials can be found in research papers on the websites of financial academics.

To find investment research papers via Google Scholar, go to Google, click “more”, click “Scholar” and enter a search term. Look for most cited papers. Read abstracts, intros, and conclusions. This takes time, but you can find a lot of interesting and objective information on topics that interest you.

Documentary film: “Inside Job”

If you want a better understanding of the causes of the recent financial crisis, I strongly recommend that you watch this two-hour documentary movie: “Inside Job” 2010, which is directed by Charles Ferguson and narrated by Matt Damon:

http://en.wikipedia.org/wiki/Inside_Job_%28film%29

“Inside Job” received the 2011 Academy Award for “Best Documentary Feature,” the 2011 Writers Guild of America Award for “Best Documentary Screenplay,” and the 2010 Directors Guild of America Award for “Best Documentary.”

Be aware that watching “Inside Job” could make you very angry. Nevertheless, it can be an excellent financial education. The financial industry is not your partner. It never was been, and it never will be. “Inside Job” details the most recent and egregious example of this lack of partnership.

The industry’s marketing to individuals is all “partnery” and “advisory,” but this really is just a business that makes a lot of money off your assets, whether or not your assets do well for you. This is an incredibly reckless, very poorly regulated industry that will smash the global economy for its bonuses, take taxpayer bailouts, and then go right back to the reckless practices that generate huge bonuses.

Unless you:

  • learn as much as you can to be a knowledgeable consumer of financial products and services,
  • carefully select a competent advisor, if you need an advisor,
  • pay directly for advice, and
  • avoid products that the industry directly or indirectly compensates your advisor to recommend

then, to your probable detriment, you are just a source of industry revenue and profit.

Almost everyone you deal with in the financial industry is directly or indirectly just a sales rep, despite the title on the business card and the kind and understanding words. You may not be able to control the overall financial environment, but you can do a better job of protecting yourself from excessive industry costs. Keep your hand on your financial wallet at all times.

In addition, if the financial crisis ticked you off – whatever your political leanings or political party affiliation – do not assume that more securities and financial regulations will hurt Wall Street and thus the economy, in turn. No matter what the regulatory environment, the financial industry will always find ways to make money off you.

However, this industry should not be permitted to take exorbitant risks, put the upside returns in their pockets, occasionally trash the economy, and then stick the rest of us with the bill for the downside on the imprudent risks that the industry took. When the petroleum industry does something similar, we get to watch a camera showing oil gush from a hole on the bottom of the ocean for months. With a financial crisis, we need something like “Inside Job” to watch, in addition to stock tickers that go down, down, down. Remember “Inside Job” and decide whether you want to plan your retirement with “too big to fail” financial institutions looming over your family’s lifetime financial security.

 

Learning about personal finance and investing
Scroll to top