I first wrote this post three years ago, but it’s one I personally think of often. With all of the stress, struggles, highs, and lows that have been unavoidable facts of life in 2020, I feel compelled to share an old but refreshing perspective that feels appropriate in the moment. Think of it as familiar comfort food for tired financial minds.
Happy Thanksgiving! My sincere hope is that you have much to be thankful for.
Between spooky Halloween decorations, the predictable election anxiety, and a touch of understandable Covid fatigue, is seems fear is on the minds of investors these days. I’ve noticed a distinct uptick in nervous takes from stressed investors worried about everything from low interest rates to high valuations. While families with enough savings and job security to weather the lockdown storm are doing pretty well in the grand scheme of things, the thing about fear is that it’s flexible.
No matter who you are or how confident you feel, I can guarantee you have a pain point tucked away that scares the living daylights out of you. Maybe it’s spiders, heights, or rejection. Or yes, financial loss that delays your retirement or destroys your life goals. Nobody is immune. And many people seem to be sharing concerns that stocks and bonds are about to fall apart and drag their life savings into the dark financial abyss.
But make no mistake — those fears are often quite legitimate! The doomsday analysts may be completely right about the prospects for different assets. Markets shift all the time, and the question is not if but when stocks and bonds give up the ghost. So knowing that the grim financial reaper may be right around the next corner, there are at least three different options for tackling the dreaded unknown.
Like many areas of study with reams of background knowledge, one of the challenges of learning about engineering is the sheer number of books required. And we’re not just talking about small paperbacks telling straightforward linear stories, but massive volumes of technical data where the chapters are often referenced out of order based on the research subject of the day. Even when you eventually identify what you’re looking for, it’s really easy to forget where you found it or have a tough time explaining to others how to compile the same information. So when you find a particularly useful page in the deep sea of options, nothing beats a good bookmark.
Bookmarks are super handy in portfolio research as well. Spend enough time searching for the perfect combination of assets to meet your needs, and you’re bound to eventually find one that piques your interest. Rather than diligently documenting and re-entering multi-asset portfolios by hand, wouldn’t it be nice to be able to save and share ideas as easily as referencing a bookmarked page?
That’s a question I’ve been thinking about for years, and I’m excited to announce that I finally have a working solution. It’s not a traditional bookmark in the physical or website sense, but in a way it’s even more flexible. Portfolio Charts now features portfolio shortcodes!
I’m a big fan of asset allocation. Rather than slaving over daily market news to chase fleeting profits and avoid unpredictable losses, smart investors can create an intelligently constructed portfolio that grows and protects their hard-earned money with low stress and minimum effort. Like following a simple recipe to bake a cake from scratch, all you have to do is purchase a handful of low-cost ingredients, combine them in the right proportions, and let chemistry, heat, and time do all the work. Simple but sophisticated portfolio ideas designed by some of the best minds in the business can help you meet your important life goals while freeing you to focus your own energy on the things in life that truly matter. And with just a small amount of coaching, anyone can do it!
What’s not to like?
Well, to be honest there is one thing that has always sorta rubbed me the wrong way. It’s not a problem with the strategy itself, but an inherent communication issue dripping in bias that I believe subtly chases off a lot of people new to the concept. Asset allocation has a marketing problem, and it all comes down to terminology.
Buried in an otherwise mind-numbingly boring regulatory filing released recently was a seemingly innocuous line item that most people would not give a second thought. Sometime in the second quarter, Berkshire Hathaway invested a comparatively tiny 0.3% of their total portfolio into just a single new company. No big deal, right?
But it wasn’t just any company. After spending decades as perhaps the most respected and widely-cited critic of gold as an investment, Warren Buffett bought 21 million shares of Barrick Gold — one of the largest gold mining companies in the world. It was so out of character that the financial world immediately did a huge double-take. The headline from Bloomberg pretty much speaks for itself:
Berkshire Makes a Bet on Gold Market That Buffett Once Mocked
As one might expect, investors on both extremes of the gold-appreciating spectrum are furiously debating what this all means. Buffett’s closest gold-averse followers are circling the wagons and dealing with a lot of cognitive dissonance, while gold bugs are enjoying dishing out some playful jabs after years of being on the receiving end. Lost in the middle is a vast sea of normal investors watching the news and searching for actionable information.
This article is for that last group just wanting to know the truth about gold and what it can (and can’t) do for their own portfolios.
While useful and accurate data is always my primary concern with Portfolio Charts, I spend way more time than you might realize creating the perfect visual design. Whether it’s selecting the ideal chart settings to make the data pop, finding just the right image to accompany a post, or iterating dozens or even hundreds of visual layouts to find the cleanest option, I’m always looking for ways to beautify each page.
One can certainly argue my design background contributes to my obsessiveness over each detail, but it runs a lot deeper than just wanting to create something easy on the eyes. I learned long ago that little visual choices really do matter. Like the bright aposematic colors that warn predators about the poison dart frog, eye-catching items often communicate very important information. So a truly beautiful design is way more than just skin deep.
It seems like only yesterday that I was first dipping my toes into the crowded waters of the financial blogosphere with no idea how to swim. But time really does fly, and Portfolio Charts just turned five years old! The site has grown leaps and bounds over the years and it’s amazing to see how far it has come. It’s truly a labor of love, and the intertwined journeys of personal education and creatively-shared knowledge have been tremendously rewarding for me and hopefully informative for you as well.
To celebrate the big day I thought it might be appropriate to briefly talk about the origins of Portfolio Charts, share how you can help guide the future, and initiate a fun challenge to mark the occasion.
I don’t know about you, but the last few months have been some of the wildest and most newsworthy I can remember. From a global pandemic and ongoing social unrest on one end to an incredibly inspiring SpaceX launch and emerging hope for a better world on the other, the roller-coaster of emotions has been all over the map. It’s unpredictable, intense, and at times utterly exhausting.
And the markets have clearly mirrored that crazy ride. It seems like only yesterday that I was writing an article cataloging one of the single worst months to invest on record, but the market has since roared back far faster than even the most optimistic investors expected. That encouraging development seems to have changed investing mindsets a bit, spurring a curious reader to pose an interesting forward-looking question:
What are the portfolios that tend to do better after a crisis?
While I don’t have a functioning crystal ball, I do have a ton of historical data at my fingertips. So let’s dig in and see what we can learn about portfolio recoveries.
While I know lots of people who enjoy watching house hunting shows, browsing real estate listings, and imagining life in a new home, I have yet to meet a single person who doesn’t loathe the process of moving. From finalizing the deal on the new place, unloading the old one, packing all of your stuff, arranging the move, and coordinating the timing of every step all while continuing to work your day job, moving can be really stressful. It’s enough to drive many people to reevaluate whether it’s all worth it and just be happy where they are.
Transitioning to a new portfolio can often be equally tricky. Sure, the actual move is just a matter of clicking a few buttons on a computer screen rather than loading your entire life into a truck. But that’s just one step in a long and detailed process. Figuring out the best way to move your money while minimizing taxes and dealing with the uncertainty surrounding future market returns makes moving portfolios a complicated and emotionally-charged endeavor. What if you mess up? What if your new portfolio loses money the moment you buy in?
When in doubt, doing nothing really isn’t such a bad choice. But staying the course isn’t always the wisest decision when that course was set years ago before you really knew what you were doing. It’s ok to change plans when you grow as a person and learn new information, and there’s no reason to let fear and uncertainty get in the way. So no matter whether you’re finally pulling cash out of storage or considering a strategic portfolio change, let’s talk about how to plan a thoughtful financial transition.
The technology gods really threw me a curveball this week. Microsoft rolled out a stealth update of their online Excel tools with what I’ll politely call a bunch of new “quirks”, and many of the site calculators that worked fine for years suddenly were unable to do even the simplest tasks like display numbers correctly. I admittedly push spreadsheets to their graphical limits and have always navigated little bugs the best that I can. But this one was beyond simple formatting issues and quick fixes.
One of the things I’ve learned over the years, however, is not to get too hung up on things you can’t control. So instead of dwelling on what clearly doesn’t work right now, I decided to take this as an opportunity to focus on what I’m good at and step up my visualization game. The end result is a bunch of revamped charts that both work like a charm and should hopefully be even easier to use and understand.