Response to Reader – Thoughts on Personal Finance, Emotional Market, Life, the World
Reader Muzie had shared with us some great comments. Thanks! I feel compelled to respond which should allow me to elaborate more on my thoughts and myself :) Here goes.
Does it truly matter Piggy?
No, it does not. What truly matters is the questions that I was trying to provoke beyond my words for everyone who reads it. And that is different for everyone, because what truly matters for each person is also unique. We already spend too much time measuring all kinds of shit in our life and have come to value quantity vs. quality. More is better. Bigger is better. Success is determined by how famous, powerful, and rich one gets.
I like to talk about money and personal finance sometimes because it is a practical side of modern life, so it is relevant. Moreover, it enables me to bring out deeper questions. And now, writing these thoughts remind me of what a sign in Einstein’s office says, “There are something that counts that cannot be counted, and there are things that can be counted that don’t count.”
I suppose I want us to explore what cannot be counted :) and to approach through what can be counted. In another sense, we take care what matter less so that we can focus on what matters but without mistaken what matter less as priority in the process.
There is a saying in Chinese, æœ¬æœ«å€’ç½® (ben mo dao zhi), which can be interpreted as mistaking the means as the end, or overemphasizing methods in the expense of content/quality.
You said yourself youâ€™ve tried to trade markets, and found it didnâ€™t work. Thus I assume you are investing this money for the long term. 10, 20, 30 years from now, most of us will look at this time like a blip on the radar, an episode of little or no consequence.
You are right about the blip thing. I have tried trading from couple years back and have gained experience (and still learning). I have already said before trading market is like gambling. You can make it big with some expertise and some luck, but you can lose equally as much. For us with couple decades, it matters little because the average will likely not change whatever we do. Invest stably or trade aggressively. I think everything evens out at “the end”.
I mentioned choosing the allocation, which still matters for many because it will depend on their situation, what they think is “enough”, what they think of the market trend, and how they will react to certain scenarios. I also think it is okay to adjust one’s strategy base on experience and learning.
I went through the same process. I was thinking â€œdo I really want to place my whole life in the hands of others who may or may not be willing to buy these stocks I have now, for a higher price later on?â€ or â€œDoes â€œfinancial independenceâ€ really mean anything when it is essentially tied to the fickle mood and nature of a mob of people?
On the other, I can see this same mob is extremely cautious now. Yes, yes, stocks are up 25%. They are still lower than twelve years ago. I find that saying people are being exuberant in any shape or form is very much stretching the reality.
Whenever I read that market is selling off after a small rally, such short-term trading is a detraction from investing and should not be call investing. That is again, gambling (hence, there are some lucky winners). Makes me want to throw porcupines at people.
So I definitely agree with you. Do we really rely on such fickle stock market for “financial independence”? What with all these “experts” who are not more than operating with emotions and thoughts of greed and self-interest? Even the way people had become tight-wad with the money now, is merely an emotional reaction. Like a pendulum, from one extreme (overspending) to the next (not spending at all). “Exuberant” being the word, as you used. This is not a change brought about by true understanding of themselves and reality, it will hardly be permanent.
I took action in November and got 100% invested again. I will take no further action and have discovered I can live with the consequences should the money disappear.
The fact is, we know the market is fickle on short-term because it is mostly a reflection of current human nature and behavior. On the long-term, we still have high possibility of some sort of average growth to rely on… Well, or that our market could have disappeared, which is unlikely but if happens, we will have much more serious problems to deal with than worrying about investment.
Therefore, the path is clear. I am also invested and I continue to add to the pool.
The crash made me discover I can live with a feeling of abundance if I realign my values. Which doesnâ€™t mean selling everything and calculating every possible scenario of doom, as I did back last summer.
True financial independence, I now think, is realizing if the money I have now completely disappears, I am confident in the value of my skills and my will that I can make money again.
After all that I have just said, let me go back to the 1st question. Does it really matter? Nope, and Muzie, what you said is exactly why. Awareness, critical thinking, introspection, and finding of your own values, are all things that I attempt to promote whenever I write… and it leads to your answer, which is also mine. A sort of a detached mentality that allows us to operate optimally because we have a sense of understand of ourselves, reality, and what is important.
I had walked myself many times through disastrous scenarios, not as worries but as to practice and see my own reactions. I am confident that with my abilities and physical status, if I lose all my money, my job, and my home, I will survive.
I also agree that retirement isnâ€™t nirvana. In fact, feeling disengaged from society and unable to contribute is what I imagine can put many seniors in depression. Retirement goals have become a psychological burden for all of us and itâ€™s very liberating to have an â€œIâ€™ll be OKâ€ attitude. I stil think aiming to gather a million $ is a worthwhile goal. Itâ€™s very satifying to know one has enough money to have extra freedom from financial ties. But I view it more as a â€œgiftâ€ now than a pre-requisite for further happiness. I still think stocks will do their 7-8% over time – but I donâ€™t think view it as â€œa wasteâ€ if it doesnâ€™t happen.
Yes, I agree that gathering a million is still a worthwhile and interesting milestone. I also agree that we can bet on some % of return averaged over time. Personally, I find 5-8% that will make me happy, and of course, understanding that I am betting my money still (less of gambling vs. short-term trade).
As for retirement, I will address in the next post. It’s going to be too long for here :P
It is good to stand back, observe these things and the market, but one must not get himself influenced too much by other people who, at the end, donâ€™t know any more than we do what will happen. The world and its economy is a supremely complex machine, and even those that say inflation is a given I think are slightly arrogant and over-confident in their abilities.
Truth be told, none of us knows what is going to happen. Inflation is likely because the Fed went on a frenzy with printing money, which dilute the value of each dollar. But like you said, the system is vast and there are too many variables. Again, no one knows what is going to happen. Experts, no experts. Some may have lucky guesses. Some more lucky than others. One thing is certain, is that the system will ultimately correct itself. ie. like people say we need a smarter planet, which is a bunch of bull crap because the planet is as smart as it could be, and it will be fine… it may just become a planet without humans :P
General people either think something’s very good (before) or very bad (now) going to happen and act to the extreme on those thoughts and emotions. There is almost no middle ground. They had forgotten to stand back and observe to see things as they are. This is exactly awareness, which enable us to see and learn to the best of our ability. Thus, we can make the best choices possible in the moment. And they are not results of being told or because we feel this or think that. That is self-realization and true living.
In the end, all these money, social, political stuffs… matter very little. On the surface, we have the market… hypes of technology… the next best thing. Underlying, we are in a world running amok with emotions and thoughts — ego. And people seem too invested in it to pull out of it (to be able to stand back and observe), which mean things will only get worse, even if it appears good.
I will end by saying — We live in a very interesting age. And we do what we can :)
Update: Forgot the extra comment…
It is not our job to become mini-macro-economists. We cannot be. One has to look the market in the eye, see how willing they are to actually take a chance losing money, and act accordingly.
I don’t totally agree that “it is not our job to become mini-macro-economists.” I believe we have responsibility to learn things that are relevant in our life, than depending on experts, especially with the amount of resources available now. No, we will not be in position to know all the details and dirts, but there is a certain level understanding that can be reached, and it is a responsibility to learn these things closely related to our life.
All there is in life are just “relationships”.
It is not our job to become nutritionist nor trainer, but does that mean we just eat whatever and do whatever? I’d like to say no. But yes, one can start dieting and training, while learn through mistakes and experience and act accordingly.