Tuesday, 1 June 2021

Keeping Score

I mentioned Morgan Housel a couple of times late last year, and his book "The Psychology of Money" which is well worth reading if you are interested in finance. 

One of the main takeaways from the book is that investing is quite unlike any other field. In the opening chapter he writes:
In what other industry does someone with no college degree, no training, no background, no formal experience, and no connections massively outperform someone with the best education, the best training and the best connections? 
The 'outperform' in this instance is the often heard story of someone like a janitor or librarian who dies at a good old age and leaves several million in their will, and Housel includes the story of Ronald James Read who:
"was an American philanthropist, investor, janitor, and gas station attendant."
All that Read and others like him have done is typically invest what they can from their average salaries in stocks / index funds and let time do the rest.

Fewer than 4,000 of the 2.8 million Americans who died in 2014 left more than $8m and Read was in this group.

The Washington Post praised Read, writing, "How a man of modest means accumulated so much wealth contains exemplary lessons for saving that apply to all of us.

The writer, Barry Ritholtz, noted that lessons could be learned from Read's experience adding: 
"But there is also a cautionary tale about recognizing the value of your finite time here on Earth. Perhaps learning to enjoy life while you can is part of that equation."

This subject was also touched on by Morgan Housel in a recent podcast interview I listened to, when the name of Warren Buffett was brought up, as it often is in these conversations. 

Early on, Housel is asked about Buffett and essentially the primary reason that he has become so well known and wealthy is because he started investing at age 10, and in his 90s is still going. The formula for getting rich is "be patient and wait for 75 years."  

Housel points out that 99% of Buffett's net worth was achieved after age 50, and 97% after he turned 65 and that his obsession with business and investing has come at a cost to his family and social life.

Most of us want wealth so that we can be independent and focus on other things in our lives, but for Buffett and I suspect some other billionaires, wealth is simply their scorecard in a game they can't quit. 

If you're into podcasts, check out "We Study Billionaires" Episode 378 - The Psychology of Money. It's 75 minutes of fascinating conversation and great to listen to while you're out for a walk or run. 

Back to the book and Housel declares that:

financial success is not a hard science. It's a soft skill where how you behave is more important than what you know.

This applies to sports investing too, as do some of the podcast discussion relating to Benjamin Graham and his evolving formulas!  

While not in the same league as Warren Buffett of course, not many of us are, I do like to track my investments and May was another solid month overall (+3.52%) although most of the gains were from property which is unusual. Seven consecutive months in profit and +33% since the end of October.


Tesla slumped 11.9% last month while my birthday Bitcoin purchase has now lost 40%, not one of my smarter investment decisions but at least I only put in a relatively small amount. Overall my play trading account lost 4.2% last month, and 0.6% year to date. 

I probably shouldn't mention the streak of profitable months because as soon as I mentioned the winning streak (of 19) for hot MLB favourites in the last post, we hit two consecutive losers on Friday. Normal service has since resumed with two more winners at the weekend, but I'll review the MLB, NHL and NBA systems for May in a couple of days. I'll also be publishing some results from the Europa and Champions League this season, now that those competitions are both finished. 

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