Friday 12 June 2015

Fingers In Pies, Wealthy And Wise

The FTL obviously took up a lot of time this past season, with one consequence being that I’ve not been able to keep up with other blogs, although I’m not sure I have missed too much to be honest. I do usually read Daily 25’s weekly entry to see how that big hitter is faring, but there aren’t too many others that I seek out on a regular basis.

I did see this week on Twitter that the man behind the Betfair Pro Trader blog (James Butler) has completed a book he has been working on for the past six months - from his prison cell, unless I have my James Butlers confused.

With the title of “Programming for Betfair: A Guide to Creating Sports Trading Applications with API-NG”, the book “is a guide to creating sports trading applications” and more details are available here.

The trigger for this post wasn’t so much the book, the merits of which can be dissected far better by others with specialist expertise in this area, but by a recent post on his blog:
Completing the book was a long six months, full of doubts and rewrites. I am glad that the book is finished so that I can contemplate new projects. But just because I have put all my code into a book doesn't mean that I have nothing left to write on this blog. My observations of bot trading on Betfair will continue and decrying some of the nonsense you read elsewhere.

There is more code to write, which will probably find its way into another book in the years to come. Then there are my investments to catch up with. I am very much a believer of "getting rich slowly". Not everyone can be an Elon Musk or Richard Branson, creating a string of successful money making products. In fact, very few of us can. It's all part of the normal distribution. There is little space at the top of the distribution peak for many people. Every winner needs a loser and every big winner needs a lot of losers.

Be happy with what you have and make the most of it. By all means try to improve your lot but don't gamble for it. Invest wisely with your time to increase your knowledge and invest wisely with your capital to increase your wealth. There are many who win big only to lose big later. You can make a lot of money quickly and lose it just as quickly. It's all about risk and reward. The more risk you take the bigger the reward but also the bigger the potential loss.

I am sure you have seen plenty of blogs where people run up large wins at the beginning and then the blog ends abruptly. Blogs where people proudly boast their winnings but withhold their losses, even manipulating the figures or starting over so as to hide their failings. Sports trading is only a small part of what I do. I am in no hurry to make large sums of money. Approaching my fiftieth year means that the money I have is all the money I will ever have and so I have to invest wisely. I have money in Peer 2 Peer investment sites, I write, I code, I do the odd job, gathering money here and there. My life is varied and its my own. No nine to five and no manager. Time for a holiday.
There’s a lot of common sense in that post, as one might expect from someone closing in on their fifties, (must be a different James Butler - phew) with all the accompanying benefits of maturity and experience, yet not at that age (53) after which the:
benefits of people's increasing experience begins to be outweighed by the inexorable deterioration of all parts of the human body -- including, of course, the brain. 
At 48, James is probably (like me) just now approaching his financial decision-making peak. 

I don’t quite agree with the first part of his statement:
“Approaching my fiftieth year means that the money I have is all the money I will ever have and so I have to invest wisely”
I believe James is a professional on Betfair, (the name Betfair Pro Trader does imply as much), so why his wealth will not increase over the next few years is not clear to me.

I have half an eye on retirement myself these days, but can’t yet bring myself into alignment with the traditional "Glide Path" strategy of becoming more conservative as that destination approaches. While I am sure there’s some psychology at work, with a flight to safety being interpreted as an admission of advancing years, we are all different and the idea of moving to something like an 80:20 bonds to stocks ratio as the traditional strategy recommends just isn’t appealing to me. And not just to me:
"There's no reason to change your risk tolerance just because you're getting older," says Nick Olesen, a Pennsylvania-based financial planner. "It's fine to take on less risk, but you shouldn't pare it down to have it all in bonds because that's what everyone tells you to do. Whatever [the investor's] risk tolerance is, that's what it's going to be. The old rule of age determining your bond portfolio of risk is fading away."
For now, I’m happy keeping the vast majority of my retirement money in stocks. The risk is acceptable because my job isn’t something I dread and can’t wait to quit, so if the worst happens and we have another Black Monday, (I well remember the first), it would be painful, but not the end of the world. My wife will just have to work a little longer. If you’re in a job you hate and can’t wait to leave, then your approach might well be different but sitting in an office all day with slaves to do any real work (although I'm not sure 'slaves' is the politically correct term) is a lot different to hacking away at a coal face for a living.

Basically there's no perfect age for taking on, or reducing, risk. It's a personal choice. Unfortunately my (still living) parents have never had any tolerance for risk, (unfortunate, because my inheritance should have been so much more!), but your health, life-expectancy and job security are also factors. [For any readers familiar with the North Devon area, one of my grandfathers (at one time, I had two) owned an adjoining property, and was offered the chance to buy Watermouth Castle for £10,000 back in the early 1960s, so arguably as the eldest son, and a big proponent of primogeniture, I should be inheriting my own castle].

At some point as we age, we all should have more wealth to protect, with less time to recoup severe losses and would be foolish to keep all our eggs in one basket.

James has his fingers in a few pies so far as income is concerned. Not only does he have his trading income, but he has other income generating investments and activities also.

Multiple income streams are welcome. At one time, trading on Betfair brought in a significantly higher percentage of my total income than it does now, but times change. Paying 50% in charges (Super Premium Charge) is obviously a big part of that (although this week my Total Charges were at 50.003%, offering a brief reprieve) but also markets adjust. 

As James says in his post – "Every winner needs a loser and every big winner needs a lot of win big / lots of losers." Fortunately, there seem to be no end of optimists out there – people with no edge whatsoever, who think that somehow the laws of probability won’t apply to them. While Daily 25 is not one of them, he does share a nationality with some of them according to a recent report in the Economist:
It puts Australian gambling losses at about $1,144 a resident.
Although Australia had the biggest gambling losses per resident, America had the biggest loss of any nation at $136bn. Australians lost a total $21.5bn, the report said.
And neither country can presently use Betfair in-play, (although I think Australia technically can via the telephone). Imagine the opportunities if / when that ever happens.

1 comment:

James said...

Thanks for the write-up and for pointing out the statement "the money I have is all the money I will ever have".

It should have read something along the lines of "all the money I have earned working for others is all the money I will ever earn through that route" or something along those lines.

As usual, I get the urge to blog, dump a load of stream of consciousness down and go back to it later for a tidy up. Only you got their first!

I agree with all your statements in this post. I too have an inheritance but the fingers in pies keeps me going until then. The trappings of wealth are of no interest to me so I don't need much to sustain me. In addition to investing I am also a short-haired hippy who grows his own vegetables!

Talking of reading other blogs, yours is one of the very few that I do read. I see no point in reading blogs that contain little else other than "I made X today, and Y yesterday and if I continue making Z then I will be the world's first quadrillionaire." (Date of last post, ages ago.)