As I blindly swung my arm to swat at the tedious drone of the alarm on the night stand, it was pretty much a morning like any other. I labored out of bed, trudged my way through the early routine on autopilot, and set out on my long morning commute down highway 280 towards San Jose. I always found that stretch of road to be an interesting experience in dual realities, as the stunning views of the bay and surreal scene of clouds pouring over the mountaintops were all too often completely hidden by relentless inner thoughts of important job tasks needing immediate attention. Silicon Valley attracts a certain type of always-on engineer and actively feeds their obsessions, and my blossoming career as a successful product designer at a job I loved had long since shaped me into eager, if anxious, submission.
Traditionally the week before the New Year is the time when most blogs reflect on the past or ponder the future, but like the excited kid who just can’t wait to blurt out what he got you for Christmas I’ve got something special I really want to share. Between the turbulent financial markets that seem to have many investors questioning their portfolios, some fun tools that I’ve been tinkering with to help, and the college football bowl season that has me in the competitive spirit, there’s no time like the present to share one last holiday gift. So let’s save the melancholy contemplation and snarky lists for another day and have a little fun with some really interesting financial data.
Who is up for a good old-fashioned portfolio competition?
Anyone regularly using the site the past few days probably experienced quite the show watching new content appear, disappear, and change by the hour. No, you weren’t imagining things — you simply had a nice front-row seat to a pretty large site overhaul. Thanks for your patience! The project is done, and I hope you like the results.
If you’re one of the millions of people launching into the gift-buying spree this holiday season, then there’s a good chance you’re inundated with numbers right now. From
performance statistics and customer ratings to price points and discount percentages, smart shoppers are in a constant search for the best bang for the buck. Even if you’re not the type of impulse shopper that particularly enjoys the experience of browsing the aisles for just the right gift, experienced marketing professionals have learned that maximization of value is a powerful motivator that can pull even the strongest introverts into crowded stores against their better judgement. Why do you think they spend so much money on Black Friday ads touting record-breaking deals?
After a lifetime of this type of shopping conditioning, it’s no wonder that this same maximization mindset might bleed into other decisions as well. Like, for example, what asset allocation you might choose for your life savings. So the same highly intelligent shoppers often create very similar lists of investing options sorted by the most common performance metric available — average return. Just like how you might seek the best resolution for a new computer monitor or the highest customer rating for a new toy, you surely want the highest average return for your hard-earned savings. Right?
Unfortunately it’s not that simple. Contrary to your data-driven instincts, averages lie. So take a break from your holiday shopping, find a comfortable chair with your favorite drink, and let’s talk about how averages distort our thinking.
Whether you prefer jump scares, bloody zombies, or simply a cute dog in a ghost costume, Halloween is all about kicking back and having a little fun with fear. But while watching a good horror flick with a bag of candy may indeed be a good time, the adrenaline may not necessarily wear off so quickly if you’ve been watching the increasing volatility of the markets lately.
Wanna see something really scary?
For anyone not paying attention to the news, the Mega Millions lottery in the United States just topped a billion dollars and is quickly rising even higher. You read that right — a Billion with a B. For the meager price of a $2 ticket, some lucky person will eventually break their way onto the list of the world’s wealthiest people. Talk about an impressive return on investment! Of course the odds of actually winning that money are beyond astronomical, and one in 300 million is a difficult number to even comprehend.
Generating accurate and intuitive charts to help you navigate the professional asset allocation landscape is pretty darned rewarding, and I take a lot of pride in contributing to everyday asset allocation discussions in my own data-driven way. I also spend a lot of time reading those same discussions online, as not only does it help inspire new ideas but it also helps me understand what drives people. Everyone’s motivations are different, and when you put your life savings on the line the stakes are also quite high so people tend to really tell you what they think.
While that variety of strong opinions makes the financial blogosphere particularly difficult to navigate for new investors, I personally find the abundance of different perspectives a fascinating design challenge. That’s because beyond simply crunching numbers like a good engineer, I’m also a designer at heart and love solving complex problems and bringing new ideas to the table. The Golden Butterfly is one such example, but I don’t believe there’s one perfect way to invest and my problem-solving circuits are always scanning for new ideas to help people find an asset allocation that resonates. So in that spirit, today I want to talk about a new portfolio idea that based on all I’ve read I think a lot of people may find helpful.
I always appreciate it when people take the time to write to offer their feedback on Portfolio Charts. The thanks keep me going through the occasional drudgery, the corrections keep me honest, and the suggestions keep the entire exercise fresh and relevant. The combination of all that feedback with my constant creative processing makes the site a personal passion of mine that I hope you enjoy reading and using just as much as I do writing and creating. I’ve long felt like I owe you all a reward of some sort for your great ideas, and today I’m here to deliver.
Since I started Portfolio Charts several years ago, by far the most common request I’ve received is the ability to enter data in one place and have it carry over into each calculator. I just want you to know that I listened. While it took a long time to try lots of different ideas and fail plenty of times along the way, you asked the right guy with the right mix of creativity and pure stubbornness to power through the problem. So while you may notice lots of things have changed on the site recently, let’s cut to the chase and get to the really cool part — the My Portfolio tool.
Designers who work in new product development tend to think a little differently than others. The truly innovative ones have no professional fear. In fact, there’s a common saying in the industry that one should “fail early and often” and rapid iteration where you improve things in stages is generally prized over slowly working out the perfect product up-front. Machines like 3D printers are some of the most indispensable tools in the industry today to help develop ideas, and for every finished product you see on a store shelf there are probably hundreds of printed prototypes sitting on an engineer’s desk somewhere. That may sound wasteful on the surface, but every single prototype represents a new idea or a lesson learned that ultimately led to the final product you know and love.
Today is one of those days when you’ll notice that product design mindset in my own work here, as I just overhauled every single calculator on the site. Even though I released another major update not too long ago, I learned a lot (both good and bad) from that version and was inspired to improve the experience even more. There’s a lot going on, so let’s get down to business and talk about the changes.
If you’ve been paying any attention at all to financial news this week, you’ve probably heard about the large 19% drop that Facebook experienced on Thursday. Facebook is the fourth largest company in the US by market cap — behind only Apple, Microsoft, and Amazon — and the total loss amounts to a staggering $120 billion wiped out. That’s easily the largest single day loss by one company in recent stock market history, and if you’re personally holding a lot of Facebook stock you’re probably not a happy camper.
But let’s say you’re more the index investor type than the individual stock picker. Should you be worried?