innerscorecard

Have you checked out ERE (Early Retirement Extreme) as well?

I thought your risks were managed adequately if you hedged your one stock a year with puts? Or if your potential upside was "asymmetric," even if you ended up losing a lot of money. ::)

I really appreciate this post. Do you think that the groupthink on CoBF is very strong? What were your main sources of investment conversation during this period? Mostly this board, or other investors in real life, or something else?

Liberty, I know we think differently about cash, but imo it remains an hedge against uncertainty… We never know what might truly happen to our businesses… let alone the general market and the overall economy!… To hold some cash imo gives us staying power, even when something completely unexpected occurs… And I believe sooner or later it will! Remember what Klarman writes in “Margin of Safety”: who ends up with more money? He who compounds at 20% for 9 years then loses 15% in year 10, or he who compounds at 16% for 10 years? The second one, of course… despite the fact the first one enjoys a better performance 90% of the time! Therefore, imo the question is not whether to hold or not to hold some cash reserve… Instead, it is: how much cash should I hold? And I am not convinced that to answer that question the level of the general market is something I should not pay at least some attention to… After all we do not invest in a vacuum, and the companies we invest in do not operate in a vacuum! On the contrary, if you believe that holding a cash reserve is only a waste of resources, I don’t see what’s the point in spending so much time thinking about the relevance, or the lack thereof, of the level of the general market. Gio The problem is that Klarman's example isn't axiomatically true, only true with numbers like those. It could also be true that it is better to be fully invested and then take your lumps. I actually don't know which is true, but I'm just saying that there isn't total certainty that holding cash is the better thing to do. Of course, sleeping at night is priceless, so in that respect it's worth it to just keep some cash if it's a push either way.

I like how some investors let you see their portfolios. Greenbelt did last year, and his picks were visible when he was one of the top 3 "master" investors near the end of the year. His picks looked like stock Magic Formula.

Your goal could also be matching (or even only slightly underperforming) the overall markets with less risk. (Of course, the counterargument would be that you could do that too, with different index funds rather than simple broad-market index funds.)

I think the best definition of successful investing for individuals is whether it helps you reach your personal financial goals in the relevant time-frame. So, for example, if your goal is to build wealth for your descendants, then a lifetime really is the appropriate metric. If your goal is to reach financial independence, then perhaps something like 5-10 years (or whatever the relevant timeline to financial independence is) is the best measuring stick. And if your goal is to advance your career by "beating the market," then one year or even shorter really is quite appropriate.

It will be interesting to see Pitt as Burry.

The social skills I learned the most in school were to follow rules and to try to emulate the popular people and the people in positions of authority. I wish I hadn't learned them.

http://basehitinvesting.com/wp-content/uploads/2013/05/The-Security-I-Like-Best.pdf

There's always the Value Investing Podcast. I thought the Motley Fool's Where The Money Is actually used to be decent, back when it was just Matt Koppenheffer and David Hanson. It was shallow, but enjoyable. But after they changed the format, it turned to pure garbage. I unsubscribed. I really enjoy the Radical Personal Finance podcast with Joshua Sheats. He's very open minded, so doesn't just cover the crap we're all familiar with, but interviews van-dwellers, survivalists and others with alternative lifestyles, which I really enjoy.3 I don't like shows like Planet Money or anything else by NPR. It's all so boring and predictable.

I have some friends who were homeschooled. I do think it unlocked a lot of their human potential. They have home-schooler proms and sports leagues and things like that, but you're not getting the socialization you get in school. But that's actually a good thing, I think. School just teaches you to me an employee who fits in. So if that's not your goal, I would think skipping school would be a good way to avoid being too conventional.

But then you run into the familiar structural problems of institutional money managers. And then at least until recently you had the issue that ETFs had to disclose holdings daily. I think now a few have opened up that don't have to do this. Still, it really probably isn't the worst thing in the world to just buy and hold something like QVAL or IVAL. It'll save you a lot of time.

Are you referring to ERICOPOLY's recent lack of posting? ;D

I purposely try to stay ignorant of ways to spend money. If I literally can't imagine it, I can't be jealous and thus unhappy for no reason.

Sure, especially in terms of quantity. Those of us in a more inferior position in life need to save more to make up for it. But it's interesting to me always to see people who want to retire but don't due to monetary issues, who actually have many times the amount of money needed to retire and sustain a better-than-average lifestyle. And these are people who are financial executives and also experienced investors.

I don't know what those acronyms are, so probably not. But I'm guessing they are programs/goals that the frugal community uses? I'll look them up.. For me, the gist is: When I moved out of my parents' place and had to start paying for more of my stuff, I spent a while learning about how to be more frugal (and I already was quite money-efficient, mostly because as a kid I valued free time more than money and so didn't want to work at crappy jobs, so I stretched every dollar that I received to avoid having to go work). I got the 'Complete Tightwad Gazette', read The Simple Dollar and other similar blogs that were popular at the time (Mr. Money Mustache became popular a bit later, so I know about it, but I haven't really read it), etc. I don't do all the stuff that they preach, but I've picked up many ideas and concepts that have saved me many many thousands of dollars without any noticeable effect on my wellbeing (I don't feel I'm making any sacrifices). The most important thing is the mindset of always asking: "Is this worth the price? How many hours have I worked to earn that money? How much happiness/dollar does this provide? Would I be happier with the money in my pocket? As happy with a cheaper alternative?" For me the goal of money has never been to buy lots of stuff, it has always been independence, which I value above pretty much all else. Sorry for using the jargon. To me, there is are a few complementary mental models that the financial independence and frugality movement really lean on. One of them, which I can see in your post, is the idea of the hedonic treadmill. Beyond a certain point, you aren't really happier by spending more money anyways. In fact, living in a way that is more "efficient" can actually make you happier, by making you more self-reliant and independent-minded and resilient. It also has the effect of making your life a lot more purposeful as your decisions seem to be more well-thought-out and thus more appropriate for you than just doing whatever's expected. That's how I think about it anyways.

Our average (me, my wife, 1 kid) for the past few years has been CAD $37-38k. One third of that is rent. We save multiples of what we spend, which is the way I like it. Are you also pursuing FIRE and/or are you a Mustachian/EREist?

The main issue for me is that being hedged means that your returns basically come only from your securities picking skill. I know that for me at least, I'm unskilled enough that I want to take advantage of equity returns in general which are positive over long time frames, and also unskilled enough that I cannot accurately predict the times when these returns for stocks as a whole are negative going forward.

What about yourself, Liberty, since you asked the question?

It's fascinating to me how people think so differently about financial decisions in different areas of their life. You can want to buy only cheap stocks but then feel that life is intrinsically and necessarily so expensive that $4 million is far too little to retire on. I guess that's why few retire early even if they don't actually love working. And then you have the even larger population of people that are decent financial managers at their jobs or even in private businesses but complete idiots when it comes to investing in public equities. Of course it's all been said before. Peter Lynch wrote about how people would spend hundreds of hours researching a washing machine but would buy stocks just on a hunch or a tip. Walter Schloss said that Benjamin Graham told him to buy stocks like groceries, not perfume. All those statements hinted at this behavioral fact.

Looks like for now at least, Greenblatt is giving people decent value for the high fees he charges in those Gotham funds. I wonder how big his funds will actually get, and how soon we'll see performance start to suffer for it. I guess the whole point of his Gotham strategy is that it's very scalable.

I voted 20-29k. My spouse and I currently live in Shanghai, China. An expensive city in a cheap country. Expats here spend a lot of money. So we don't live an expat lifestyle. It's not nice, but we survive. We also don't have expat packages and don't make a lot of money. We live frugally so that we have money to invest so that we aren't living in these conditions forever. The goal is to move to a low-tax and low-cost-of-living jurisdiction in the mid-term future so that we can have a life that is both pleasant and cheap. Right now life is cheap but anything but pleasant.

To be honest with you it was a number I had chose with my wife when we were engaged. What I didn't mention was that all my investing was done in an IRA. At some point if I was going to live off it I would have to pay a large tax bill. My plan was take $1M in safe corporate bonds/government bonds to hopefully provide $50k (after tax) of income. Another $1M I would invest in some distressed hedge funds with guys I know are smarter than I. $1M was for me to start a couple of businesses that I want to start and for me to sleep well at night I'd rather not have the bank debt (even if I could find a bank willing to do so). This investement would be in an economically depressed area has had large population losses and it would be more of me trying to create an industry to help an area I love very much. The last $1M was to bet set aside for taxes (mentioned above), pay off the house, and use to invest myself. In reality what really wiped me out was I knew that I didn't need $4M but $2M would have been perfect so the DIMEQ investment could have gotten me to a number that I really wanted. Now, I've switched jobs, am happier and work harder and longer hours than ever before. This allows me less time to think about investments which in reality makes me a better investor. The reason for my post was that I heard myself in some of those previous people who were doing great. I still think the DIMEQ decision was wrong and know several others who feel the same and know others who lost more than me. What still bothers me about that one is that in two different cases JPM has stated two distinct and different things about how it was acquired. To be honest other than the position sizing I would have still invested in DIMEQ if brought forward today. Once I have a new idea I'll be glad to post it to the boards. Just started to work on something interesting last week but I don't know when I'll be done. Interesting, thanks for explaining. I and many other on this forum have a lot to learn from you. Really look forward to reading your future posts.

Thanks for the story mrholty. I always enjoy and learn a lot from the reading the personal experiences of other ordinary people. But why did you think you needed $4 million (!) to retire...? Obviously, if you like working, you should continue working. But if you really wanted or want to retire, you sure as hell don't need that much money.