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The normality of being financially "licked" without knowing


Photo by Michael Longmire on Unsplash

This post is a convergence of my thoughts after re-reading a few books I always recommended for novice investors:
and also the continuous reading of web sites posting ideas and analysis for the investing community:
 I am writing because I have friends who don't have the time/inclination and maybe curiosity to look a little bit deeper than the Yahoo financial articles and Motley Fool articles about investing (where people are goaded to consider different companies just because arguments are presented with catchy pseudo-reasons). They are at an age where planning for retirement should be a priority but, for some reason, the basic education of how to do it escapes them completely.
I was in their shoes and get "licked" big time and learnt my lessons, which I will just state here. If you need proofs or explanations please spent some time and read the books I mentioned in the first paragraph.
  1. If it is possible, try to build an investment portfolio based on the couch potato's ideas
  • invest in the whole market, both stocks and bonds or even larger - real-estate, commodities, stocks, bonds and even art
  • minimize management fees as much as possible (ideally buy Vanguard funds or even cheaper variants with the same sector profile)
  • re-balance once per year and adjust based on how close are you to the period where you need to use the funds
  • split the money maturity in buckets (5-10, >10 years, > 20 years)
  • don't panic when the sky is falling and be aware it is happening for all of the people around you
  • and the real kicker: THE 1% IS MUCH MORE AFFECTED THAN YOU WHEN THE SKY IS FALLING !
  • if you need financial advisors search for the ones who are getting paid by the time you ask for advice rather than being paid a percentage of your portfolio, no matter what is their performance managing your money (or even worse, having a liberty to do it in your name based on a fuzzy classification of your "risk-appetite")
When you start to understand why there is a huge financial industry managing money for pension plans, different retirement funds and living off the commissions and advisory services then you will pay attention to the leakages of your money set apart for retirement.

If the terms of your investments are vague or seem opaque is it because if you start to dig and do some calculation on the back of a napkin of the money you are loosing, the amount compounded over time is mind blowing.

If you add  the fact that only a very short percentage of the money managers (less than 15%) are beating the whole market return for 15-20 years then the "run-for-the-exit" impulse is the first reaction.

I got bitten many times by the small print and easy fixes in different accounts I had with different financial institutions. Over time I realized that taking care of your retirement plan in a non-hazardous manner is not only better but also leaves you time to really do something else than just be the mouse in the wheel-house of the banks.
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