The Gemfinder Q1 2018

It feels so good to type on a desktop computer (PC) after almost 10 years of not using one. So yes, I treated myself (I hate this phrase) and bought a £800 tower. It’s super-fast, convenient and according to Mrs Foxy, noisy enough.

But enough about my self-indulgences. This is the first edition of the Gemfinder!

I plan to write a Gemfinder article every quarter which will list all important articles, books, podcasts resources I found. As expected, the topics will be about investing, financial independence, behavioural finance and psychology. So basically, if you want to create income streams, save money, and sometimes be entertained, watch this space!

This is not about reporting any news or temporary content. We recently established I don’t read the news.

Hopefully, I’ll keep the content evergreen and you can go back to it months or even years later and find it valuable. Without further ado please welcome the Gemfinder Q1 2018!

Investing

Mass Psychology Supports the Pricey Stock Market (NYTimes) – Robert Shiller (economics Professor at Yale, founder of CAPE ratio) tackles the question: Are investors picking companies they believe in or those that future investors will want to buy?

In ruins? Europe ‘to return 30pc in three years’. (Telegraph) – I take fund manager predictions with a pinch of salt, but it’s interesting to see some real numbers in terms of country CAPE ratios and economic outlook for Europe. Telegraph mentions some passive funds as well, such as Vanguard FTSE Europe ETF and iShares’ Core MSCI Europe ETF – both of which have a 0.1% annual charge.

10 Myths about Government Debt (21-min Youtube video) – What happens when the government prints money? Is the US debt 20 trillion manageable? Can raising taxes fix the problem?

How the Economic Machine Works by Ray Dalio (30-min Youtube video) – Probably the best video I’ve ever watched describing the economy in such a simple and animated way. It breaks down the concepts of credit and debt and economic cycles. Must watch.

Currency-hedged ETFs (Monevator) – A great analysis on whether you should hedge your currency risk when investing. Basically, what if your currency gets stronger while global returns are down? You’re in double trouble because you lose more than the world does. Pension funds know this and invest more in their own country (aka home bias). The theory is that those fluctuations will cancel out in the long term but what if they don’t?

The Age of Amazon and Alibaba is just beginning (Economist) – Online shopping is about  8.5% of the retail world. Does that mean that less than 1 of your 10 items are ordered online? I thought that the percentage would be much higher. Will you invest in these huge conglomerates? I certainly do – my US index funds have allocated ~2.2% in Amazon given its huge market cap.

The common mistakes of all investors (Wu Jhizian podcast) – This is a new podcast I found on investments. William Bernstein discusses the common mistakes all investors make and what to do about it! There are other good episodes too.

Let the paramedics sort them out (Pragcap)The early bird gets the worm but the second mouse gets the cheese. Great article discussing bubbles and market timing with numbers. TL;DR: Be patient and avoid the fear of missing out because statistics say it’ll work out better in the end.

How to Overcome your Fear of Bonds (Pragcap) – The ultimate answer to the question: Why do I invest in an aggregate bond fund if investing in individual bonds gives certain returns upon maturity? A bond fund doesn’t mature therefore is subject to interest rate movements. Hmm… A must read for fixed-income fanatics.

Why investors need to prepare for lower returns (Vanguard) – Not surprisingly, Vanguard released a study that shows bond real returns will be close to 0 and stock returns lower than the previous decade because of high valuations. Jumping out of the markets is not a solution nor is investing in riskier allocations than you’re comfortable with. I know 3-5% stock nominal returns look disappointing for investors given the 10% historical average!

How to Own the World Book (Andrew Craig) – Great book on investments and asset classes in particular. After reading this book you will have a good understanding of property, gold, shares and bonds. TL;DR I wrote a How to Own the World book review.

Financial Independence / Retire Early

Do harder stuff. (Medium) – Happiness comes from accomplishing and fulfiling tasks. How many times you’ve had this great feeling of achievement when you worked hard despite the process being painful? That’s why so many people suggest finding meaning before (and during) financial independence. FIRE alone won’t solve our problems. If you liked the article I suggest you read The Subtle Art of Not Giving a F*ck ( -> my book review).

An Amazing Personal finance Flowchart (MarcusMichaels.github.io) – It asks you questions and suggests appropriate actions based on your circumstances. Like, are you saving for your first house? Do you have high-interest debt? Pay that first, but before that build an emergency fund. Quite clever!

The Ultimate Guide to Safe Withdrawal Rates (part 1) (EarlyRetirementNow.com): A 2016 article but nonetheless very timely. We know the classic Trinity study that shows a 4% withdrawal rate is highly unlikely to let you starve for a period 30 years, hence the SAFE withdrawal rate (SWR). This article studies different combinations of starting dates, retirement horizons, asset allocation and withdrawal patterns. Deep!

Crypto

Cryptocurrency 101 (Medium) – Extremely long article, more like a book I’d say. Everything around the new cryptocurrency concept, how it works, etc.

Avoid Bitcoin like the Plague, Jack Bogle says (CCN) – Perhaps we should listen to this guy.

10 years in, nobody has come with a use for blockchain (Medium) – True that. Is it because blockchain is not useful or that it’s hard to adopt because of UI / UX problems? Blockchain faces scalability problems that need to be solved too. Users like simplicity and convenience but why then are companies not using it?

Psychology

Where Success Leaks (Raptitude blog) – This article was so enlighting. David writes full-time in such an inspiring way. Basically, there is a massive difference between professionals and amateurs in anything you pick. I’m sure you can spot big noobish mistakes in your profession or a hobby you’ve mastered when watching an amateur doing it. But here’s the magic. An amateur can massively up their game by correcting these big repeating mistakes instead of trying to shoot like a pro once in 20 times.

I hoped you liked the first edition of the Gemfinder.

Have I missed a gem? Let me know and happy reading!

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Hi! I’m Michael and I love writing about different ways to earn, save and invest our money. Coffee addict :)

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