“Fearful when others are greedy and greedy when others are fearful.” – Warren Buffet
The last week has been an interesting view on my own psychology, on how all the best-made plans aren’t worth anything if you don’t have conviction and resolve. Fintwit talked about keeping a trading diary and here is my attempt to keep myself intellectually honest!
I am not a trader. I strongly believe that on a really long term horizon stocks will outperform every asset class. I also believe that the best opportunity to purchase assets is when everyone else is scared. In my lifetime I’ve seen two recessions – dotcom and GFC. I had just started my career during the dotcom boom and didn’t know anything and right before the GFC, we bought a house (great timing right :). So never had any cash to capitalize on the downswings in markets. I’d always thought that in the next downswing, I will be prepared and buy in-size! Continue reading “Investor psychology in times of crisis | Lessons learned”→
Warning: Stream of consciousness follows! This week has been wild in the markets and I wanted to put my thoughts on paper and #timestamp my thinking. Standard disclaimer applies; none of this should be taken as investment advice!
The brilliant odd lots podcast had Richard Koo on to discuss his theory of a balance sheet recession. The central idea is that when a credit bubble bursts and the private sector and consumers both start to deleverage it causes the economy to go into a demand loss spiral, which is a counterintuitive result. If excess leverage caused the bubble then deleveraging and repairing your balance sheet is the most rational individual choice, but this de-levering in aggregate is the wrong choice for the economy as a whole. I would highly recommend reading this paper that goes into some details and also reading his book.
Product engagement is a hot topic. As a product person, you are always looking for the quantifiable metrics that indicate that your product is solving your user’s problem and that you are on your way to product market fit.
The conventional metrics for product market fit usually sound like the below with the trend line going up and to the right
User engagement measured by DAU MAU
Time spent on your product (Session time)
Core loop (# of times your core customer value transaction is executed)
All markets are at *all* time highs. What is an average investor to do? Is it too late to get in? Is it time to take profits if you are fully invested? In the last 15 years there have been two spectacular crashes, the hard memories still linger, which makes these decisions even more gut wrenching.
What to do? How to break the break the cycle of inaction?
One of the biggest expenses to hit households is college education for their kids. 529 plans are the most common vehicle available for parents to save for their kids education. Via the SEC
A 529 plan is a tax-advantaged savings plan designed to encourage saving for future college costs. 529 plans, legally known as “qualified tuition plans,” are sponsored by states, state agencies, or educational institutions and are authorized by Section 529 of the Internal Revenue Code.
In a previous post there was tough love, lets move on to happier things, what are the things that are going well for the individual investor?
Indexing Index funds are pretty prevalent and everybody knows about them. Indexing leads to lower fees and fees are the biggest killer of your portfolio. Lower the fees, less the hit. Today’s investor has many more low cost choices available. You can construct a good diversified portfolio with minimal cost yourself without needing a Phd.