The new year is here, the Christmas ornaments are packed away, and we can finally get down to the business of making 2018 our best year yet. This is my own busiest time of the year, as updating every asset, calculator, and portfolio on the site with new annual data is no easy task. But while I keep calculating behind the scenes, I believe this is a good time to think big picture while things like New Year’s resolutions are top of mind.
What can you personally resolve to do in 2018 to become a happier and more productive investor?
Not sure how to answer that? Then let me offer a few simple suggestions.
It’s amazing how quickly time flies! 2017 was quite the whirlwind, and I can’t help but feel a small sense of awe as I think back to all Portfolio Charts has done over the year. From new portfolios to new tools and even new countries, I’m really excited about where the site has been and where it continues to grow.
To celebrate the holidays, I thought it would be cool to resurrect the theme from this time last year and highlight the most popular new posts of 2017 sorted by what has consistently drawn the most readers. So whether you’re new to the site and looking for a good place to start or a long-time reader who doesn’t want to miss anything important, it’s my pleasure to present the best of the best as chosen by other individual investors just like you.
Perhaps the approaching Thanksgiving holiday has made me more sensitive to this type of thing, but in the process of counting my blessings I’ve started to become more cognizant of just how negative investing discussions can quickly become. Turn on the TV or browse the internet, and it seems there is a never ending stream of stories feeding your sense of financial inferiority. The better ones tend to focus on how to avoid stress, fear, and greed which is certainly a good message, although running from negative emotions still is not particularly motivational.
The more I think about it, the more I realize there are surprisingly few people out there describing a vision of a healthy investing mindset to aspire to. That’s a shame, as investing is about so much more than flooring it on a mountain pass while struggling to keep the car on the road. So let’s take a moment to pull over, check out the scenery, and think about the real purpose of our journey.
After years of learning the hard way, I’ve come to appreciate that successful investing requires not only a smart plan but also a positive outlook. In my experience, the transition involved a shift in thinking from one of scarcity where more is always better to one of abundance where the concept of “enough” unlocks entire new areas of personal fulfillment. And the key to that abundance mindset is a simple principle that investors too often take for granted — Thankfulness.
Are you a thankful investor?
As we all recover from a happy Halloween full of way too much candy and possibly a bit too much to drink, I imagine that many of you may not feel so great. Indulgence has its downsides, and once the excitement of the sugar high wears off sometimes all you’re left with is an upset stomach. Whether that discomfort is really bad but you recover quickly or is relatively minor but persists for a long time doesn’t really matter, as both situations are equally undesirable.
There’s a similar problem with investing, and scores of articles have been written on risk tolerance, sleeping well at night, and all sorts of downside mitigation strategies to help reduce that pain in your stomach that you just can’t shake when markets aren’t going your way and your life savings are struggling to stay afloat. I’ve written before about how smart asset allocation can help solve the problem, and I’ve just added a really cool metric to take that analysis one step further. It’s appropriately called the Ulcer Index, and understanding how it works can help you find just the right portfolio for your personal pain tolerance.
I’ve always had a particular love for stained glass. Not only are the colors incredibly vibrant, but the medium is also truly dynamic and the lighting can transform the same window throughout the day. One moment it’s dark and rich, and the next it’s bright and lively. With light activating glass and glass transforming light, stained glass is a special symbiosis of art and nature that allows you to look at the same objects totally differently.
In the investment world, the portfolios are the glass and the data is the light. Too often people study portfolios through a single fixed spotlight of US-centric data, but that does the observant investor quite the disservice. Certain investing biases become unfairly engraved as immutable truths based simply on the favorable lighting, while alternative ideas that may actually be much more attractive outside of the gallery setting get lost in the shuffle. But study the same portfolios through the lens of an investor who does not live in the United States, and things get a lot more interesting. The glass lights up in a different way, and new features rise to the top.
I’m always thinking about ways to make the site helpful for more people, and lately I’ve been working on ways to improve the tools for investors outside of the US. Building a site like this is kinda like building a house over time — it’s an ongoing project requiring incremental steps, and sometimes you have to eliminate a key barrier to make room for the next addition.
One roadblock to expanding the portfolio analysis to other countries has been how to handle REITs, as eight portfolios on the site utilize them while the available data applies only to the US market. Well, after a bit of research I’ve determined that the data is actually a lot more useful than I previously realized, and I’ve decided to unlock REITs as an option for other countries in the calculators. Here’s how it works.
I went shoe shopping today for the first time in a while, and I forgot just how frustrating it can be. Finding a nice pair of shoes seems like it should be a pretty simple task these days, but the number of options makes it much more difficult than you’d think! It’s kinda surreal to walk through aisles and aisles of shoes and immediately dislike about 90% of them for one reason or another, and even the ones you like may not be that comfortable once you try them on. Buying shoes can be a real pain.
Well if you think about it, finding a good portfolio is a similar experience — there are lots of good options but very few easy answers. I do my best to curate some of the best options to avoid the cheap knockoffs likely to wear a hole in the sole on the first walk, but just like there’s no one pair of shoes for every person there’a also no single best portfolio for every investor. So you’ve gotta try them on for yourself.
Most people intuitively understand that time is a critical component of investing. Whether it’s the time it takes to work and save a portion of every paycheck or the miracle of compound interest that gets better and better as you go, the importance of time is a central part of any detailed investing discussion. But the human brain is sometimes ill-equipped to comprehend things that are far away, and that can lead to some mental over-simplifications that obscure the reality of future uncertainty. For example, let’s talk a bit about a question I see come up pretty often:
Do stocks get less risky the longer you invest?
Perhaps because of the proliferation of personal finance websites focusing on early retirement, I’ve noticed a lot of talk lately about safe withdrawal rates. I think this is absolutely terrific, as financial independence is one of the single most empowering life goals one can pursue! But greater exposure also has its downsides, as core assumptions such as the portfolio options, withdrawal method, and retirement length don’t always scale the way you might think and misconceptions can quickly propagate.
Withdrawal rates are an intellectual passion of mine, and I’m always looking for opportunities to contribute to the conversation. And with the recent boon in global portfolio data, I’m finally able to address one of the biggest questions that I’m starting to see more frequently these days.
Does the 4% rule apply outside of the United States?
You never quite know what the reception will be like when you post data into the internet void, but I wanted to thank everybody that has taken the time to contact me regarding the latest global site update. Your feedback and encouragement are valuable and extremely appreciated!
Judging from the number of Merriman fans I’ve heard from in the last few weeks, it’s clear that a few assets like international small and value are quite a bit more popular than perhaps I previously understood. I definitely got the message, and while it took a bit longer to assemble the right type of data that I can personally vouch for, I’m happy to report that the Merriman Ultimate is back. And it marks the return of several assets as well — World Small and World Value.