I never really let go of a goal. That's not always a good thing, since all of my unfulfilled goals gnaw on me from within. But it sure feels delicious when one of them wanders in from the wilderness.
Three and a half years ago, when I lost my voice to spasmodic dysphonia, I set my goal on not just beating this incurable condition but ending up with a voice that was better than it had been before I got the problem. My original voice was a bit nasal, and I had a habit of mumbling. If you're going to have a goal of defeating an incurable condition, you might as well add some extras. I wanted my next voice to be better than it had ever been.
As I have written before, I had surgery in July with Dr. Berke at UCLA, who pioneered a procedure to fix this sort of voice problem. It was supposed to take 3-4 months from the day of the operation before a good voice returned. Sure enough, right on cue, this is the 3.5 month mark, and my voice is about 90% functional for most purposes. (I can't shout yet, and by the end of the day it is a bit hoarse.) Still, it's frickin' amazing.
Over the next year, my voice is expected to improve further. But that's not good enough. I'm going to put some serious work into making my new voice better than it ever was. It might take me twenty years, but I'll get there.
The stock improves your diversification compared to the stocks you already own.
Criticism 3: If you buy stocks every month, as you earn money to invest, the transaction fees can get expensive.
Answer: That's true, so don't buy stocks every month. Do it once or twice a year. Each stock you buy or sell will cost about $9 once. Or if you have lots of patience and discipline, invest only when the market drops from its high by ten or twenty percent.
Criticism 4: The S&P 500 changes composition over time, weeding out the weaker companies in a crude way. Your basket of 20 stocks wouldn't get that benefit.
Answer: After you own twenty stocks, sell off the lowest rated stock and replace it each time you add money to your investment, once or twice a year. This prunes the laggard stocks in a crude way similar to how an ETF would rebalance its position.
The most important element of this revised investment plan involves ignoring the advice of pundits and columnists, and especially ignoring your own gut feelings about stocks.
I hope it is obvious that you shouldn't get your financial advice from cartoonists. And feel free to tell me why this modified approach is defective. That's always the point of anything you see on this blog.
You might wonder how real ammo gets into a Civil War reenactment. The funny part is that there are so many ways it could happen. Allow me to list the first several theories that pop into my head.
My favorite theory is that some goober spent the entire weekend hunting for turkeys with his Civil War reenactment blanks and didn't realize it. Later, when he discovered what he had done, he didn't want to face the embarrassment of telling his fellow bearded dorks that he used up all of his blanks. So he figured he'd do the reenactment with live rounds and just shoot over the heads of the other actors. No one would be the wiser. It was a good plan until he stepped in a woodchuck hole and accidentally shot some guy in the shoulder.
The wound wasn't fatal, but the Civil War reenactment medics sawed off the victim's legs anyway, just to err on the cautious side.
The power of the nine items is that they are in the order in which you should do them. That doesn't sound like a big deal, but if you are new to investing, you wouldn't know where to start, and you'd have a hard time finding that answer anywhere else. You would probably end up letting some professional manager handle your money while converting much of your gains into his fees. The nine point list solves that problem.
The other power of the list is that it excludes all of the investment concepts that you shouldn't be messing with. Notice that there are no derivatives, or options, or anything exotic.
Obviously every investor is in a different situation, and I wouldn't expect many people to follow the nine points exactly. But I think it helps to know what the standard model looks like before you decide where to make your own exceptions.
All bets are off for the moment, obviously. The big question this week is which one of your neighbors you should eat first when things get bad. And of course I expect some sort of zombie problem. But in normal times, the nine point list is useful.
Arguably, all of our economic problems stem from too many people not following the nine point investment list.
Astute observers will point out that anyone who had a lot of money in stocks, as the model suggests, would have gotten hammered this year. That's true, but one of the obvious exceptions to the model is that if you think you need to withdraw your money in the next five years, you should reduce your stock holdings to avoid the risk of just such a downturn.
Kids also learn nothing about the importance of a positive outlook, especially how it affects other people. They don't learn about setting goals, or managing risk, or discerning the difference between truth and lies in the media and in person.
You could make your own long list of skills that kids aren't taught during the time they are learning things they will never use. Yes, yes, yes, I understand that some of the subjects taught in school are meant to increase critical thinking and generally expand minds as opposed to teaching useful facts, but isn't there a way to accomplish the same thing with topics that ARE useful?
I'm in the process of building a house. (This is year 3.5 of the process, and ground was broken just yesterday.) While the project is frustrating, it is also intellectually fascinating. I had no idea how many technical disciplines would be involved. There's even an engineer who specializes in knowing how to move the dirt from one part of the property and fill in a hole in another, packing it down in just the right way to make it stable for the foundation.
You could take any tiny portion of the house project and make it an exercise in critical thinking. I can imagine a school curriculum organized around building an imaginary house, advancing from first grade through high school. Kids could learn all sorts of useful skills, from budgeting (math), to calculating loads (science), to learning how couples can decide on the fixtures and furniture. Your geography course could be based on deciding what country to build your house in. Geology would be oriented toward deciding what type of land to build on. Art class would involve interior design and architecture, with a semester on how to identify good art for the walls. Biology would involve understanding your own future garden and plants. Evolution would involve learning why your family dog walks on four legs and you walk on two.
You would learn all the critical thinking you ever needed just trying to design a kitchen that requires the fewest footsteps and fits into a defined space, with a limited budget.
Kids who are gifted would learn more about the math and science behind the engineering of the house. Kids on a more hands-on career path might be learning how to pave the driveway or design the electrical system. Designing and building a house employs almost every useful field of knowledge, excepting maybe history and language.
Maybe we wouldn't be in this economic mess if all kids had to learn about budgeting, mortgage loans, and risk analysis.