At the beginning of 2020, I decided to transition from full-time work to part-time work. This has greatly increased the amount of time I have on hand, and I’d like to channel some of it into personal development on a daily basis.
I’ve since decided to take note of the best personal finance article I read each day, along with 1 single lesson that I’ve learnt from it.
Everything I learn will be compiled into a blog post every week, so it can hopefully provide you with some value too. (Admittedly, this is also to help me, since I learn best when I write.)
If this provides any benefit to you, let me know. If you have any ideas on how to improve these round-up posts, please let me know as well.
Blog Post: Why is the Market Doing Well Lately?, by Oblivious Investor.
Lesson #1 – The stock market is concerned only with profitability. Even if unemployment skyrockets, this may not affect profitability, and thus may not affect the stock market. Also, the stock market’s valuation is based on expected or probability-weighted value of earnings. Right now, worst-case scenarios seem unlikely, so the stock market has been rising.
The concept behind probability-weighted profitability makes a lot of sense. Considering that the world has been handling the COVID-19 situation fairly well, and doomsday or world-ending scenarios are no longer likely, it makes sense for the stock market to rise.
Blog Post: The Money Mind: Is It A Natural Talent Or A Learned Skill?, by Mr Tako Escapes.
Lesson #2 – Superior genetics doesn’t play a part in wealth creation, because money is a human construct, and it’s possible to pass on genes without being wealthy.
A very cool science-backed nugget of information on wealth creation.
Blog Post: Why Finance Bloggers Can’t Tell You How to Invest, by Strong Money Australia.
Lesson #3 – Investing is completely personal, right down to our risk tolerance, strategy and lifestyle.
I enjoyed this post because I made this mistake during the short downturn earlier this year. After reading a few posts online about bloggers who stopped investing when the S&P500 passed a certain point, I stopped as well. In my panic, it didn’t occur to me that my circumstances (still in the wealth-accumulation stage) are different from theirs (retired). It was silly of me, but we live and learn I guess ?
Blog Post: How to Invest for Retirement with Limited Assets and Avoid Sequence of Returns Risk, by ESI Money.
Lesson #4 – 3-5 years of income should be in cash equivalents, with the rest in index funds. Upcoming monetary needs should come from the stock market, if it’s doing well, or if it’s flat. Otherwise, if the stock market is down more than 5-10%, draw from the cash equivalents instead. The 3-5 year cash supply helps to withstand large drawdowns.
Definitely a fantastic way to avoid sequence of returns risk. On another note, ESI Money also recommended the gold standard of retirement being having growth assets that throw off enough income such that you’d never have to touch the principal. The underlying asset still grows with the market, acting as a hedge against inflation, so that future income streams are preserved or increased.
Since I plan to do just that, although I don’t exactly go for growth assets, it still makes me feel like I’m on the right track.
Blog Post: On Using Digital Assets to Build Wealth, by Four Pillar Freedom.
Lesson #5 – Instead of buying assets like stocks, bonds, and real estate, consider building digital assets from scratch. When income from digital assets grows, consider re-investing or acquiring even more digital assets. This will result in even more significant growth.
It wasn’t until recently that I discovered what digital assets are. And while I can’t say that I know how they work, I think it’s worth a shot. Nevertheless, I still plan to accumulate $1 million of traditional assets to live off, and any earnings from digital assets will just be an added bonus ?
Blog Post: The Difference Between Frugal and Cheap: Frugality Earns Profit, by TicTocLife.
Lesson #6 – What determines a frugal purchase? Good value, plus the purchase price being less than the market price.
I actually previously wrote a post myself on frugal vs cheap (I never published it though), and this learning point adds as a nice supplement to my existing knowledge.
Blog Post: When You Overcorrect, Give Yourself A Break, by City Frugal.
Lesson #7 – Although you may be picking up new habits, your perception of yourself is slower to change, leading to you over-correcting on your new habits. For example, if you’re trying to make a habit of writing, instead of writing just 1 hour every day, you write for 8-hour chunks every day, burning yourself out in the process.
To correct this, start journaling about your habits. For example, if you see yourself as a lazy and inconsistent person, the evidence in your habit journal will force you to think otherwise.
This reminds me of a conversation that I had with A Purple Life a few days ago, where I admitted I felt like an idiot for not posting at all last year, and that net worth updates don’t count as posts. She told me that it does count, and that I should be nicer to myself. I need more reminders like that. Thanks Purple ?
And that’s all 7 posts for this week. I read so many wonderful ones over the week, and it was difficult choosing just 7, so I’ll just keep on reading and writing these “7 Lessons” posts. ?
As always, thank you for reading and supporting this blog.