Book Review: the art of thinking clearly

Hello folks!

This is part of my attempt at trying to meet my goals for 2017 and pursuit for self-improvement and learning how to think a bit clearer in investing, in dealing with my own thoughts and with people.

I came across the art of thinking clearly by Rolf Dobelli recommended by theescapeartist for sometime and has been interested given the clarity of thought and simplicity of ideas that TEA communicates in his posts. Life is simple as we make it out to be.

the art of thinking clearly
rolf dobelli

The purpose of the book is to illustrate various different fallacies in human thinking in the hope that it can help us avoid these mind traps. The book is laid out in short chapters (99 chapters in total), each of 400-500 hundred words to illustrate an idea with relevant examples and evidence. A very easy read given how information is given out in short chunks and you can immediately apply it to your thinking straight away.

So I saw the piece on the Guardian: There’s a disaster much worse than Texas. But no one talks about it. Which following on from reading the book by Dobelli, you learn that large media corporations display traits of cherry picking: choosing stories that matter to them most (Storm in Texas) and selling it as news and disregarding other disasters that may have a much larger magnitude of impact (floods in South Asia). Hardly surprising if you can imagine if you are a American writing the article, the story about the storm and deaths on your side of the land is more personal and right in your backyard and may have immediate impact on your life rather then the floods in Asia.

And then there’s potentially the best advice from the book: The News Illusion: Why you shouldn’t read the News. One, most news hardly matter. Two, news is a waste of time. Three and lastly, our brains react to news; stimulated by shocking ones (Brexit; Twin Towers; Charlies Gard) and sedated by complex information (Ads, Changes to Tax rules). Together, Rolf suggests that living a news-free world would help us build a clearer mind based on seeing what’s actually around us, listening to others and reading books and articles with more thought to it.

And there are some good mindfulness for the investor’s philosophy:

  • Decision Fatigue: Making decisions is mentally exhausting; Keeping investing simple and eliminate as many decisions that you have to make as much as possible
  • Survival Bias: We tend to overestimate success as we only hear stories of people who succeed. Perhaps we should try to look for the failures before the success and not disregard the people who failed for they have a certain courage to try anyway.
  • Cognitive Dissonance: Our minds reinterpret the situation in hindsight of a failure to convince ourselves otherwise. A sweet lie we tell ourselves.
  • Outcome Bias: We should never judge a decision by its result. A bad result does not necessary indicate a bad decision and vice versa.
  • The paradox of choice: More choices does not necessarily lead to better decisions. In choosing a life partner or perhaps in choosing which stock to buy. Good enough is good enough.

I think it will take me some more time to restudy this book and recognize the meanings behind each fallacy to the point where I can point it out in daily life.

In fact, I have been guilty of the Confirmation Biaswhen my boss told me I have been trying to fit in the test results of a patient with a particular diagnosis I had in mind. Ah well, human minds how complex.

Perhaps reading less news from now on will help.

-FIREplanter

 

 

Dividends Series Q2 2017

Here’s my dividend report for Q2 2017.

A grand total of £490.20 bringing the cumulative total for this year to £787.61. In fact, it is already more than the grand total for the last 3 quarters for 2016. Something must be going right.

chart

I am looking forward towards the end of the year where I can sit down and crunch some numbers to calculate dividend yield and all that. See where how my portfolio is doing compared to various indices.

Meanwhile on the monthly savings front, decent but not great.

Monthly saving July

Again missing out on doing accounts for month of April.

June and July was a month of spending on trips abroad and attending functions which were enjoyable and also useful to catch up with other old friends.

I am missing out on writing regularly which is a bit of a shame. A combination of interest in other subjects, non financially related and travel and learning about life in general. Sometimes feeling that my writing is not up to scratch. All in all, basically less motivated to write. I might try to write some articles of these non-financial stuff if only to consolidate my thoughts and ideas least I forget them.

As FiL’s post on What he learnt from blogging puts it, perhaps I am not prepared enough and underestimated the effort required. I must say though, getting some feedback from others writing and having similar goals helps with the motivation.

Godspeed!

-FIREplanter

 

Dividend Series 2017 Q1

So a quick review of the first quarterly dividends of the year! Hurray I made it to the 1 year mark of my first post. The thing with writing and saving and many things we do in life is you need to be committed. If you want to get good at it, you need to be committed and be prepared to put in the hard yards. Many Ideas, Loads of Imagination but not so much production. I think I need to try harder. I think the key is to keep going at it relentlessly. No one said it was easy.

Similar number of units in the portfolio from the last quarter, according to my accounts department. The snowball is marginally gathering momentum I hope.

On another note, it was tough getting the site sorted past month with hosting my own domain and getting all the site content transferred across. I still have no clue how I did it myself. Too much confusing information and guides out there on the world wide web (more like the ‘wild wild west’) The theme is still not my ideal theme but I will have to make do with it for now. I hope to get a more professional looking interface that is easy on the eye when I have the luxury of thinking about it more. Life is a bitch when you are stuck in Prison Camp.

-FIREplanter

Brexit is Upon Us All. Life goes fucking on.

Life’s a relentless bitch so far for most of us. Just some quick thoughts for this month whilst I can get a break.

So we all heard, Article 50 for exiting the European Union has been triggered. Britain is going to be out of EU, loads of debate and negotiations going on about the terms and conditions of the exit. And then I start receiving emails about 50 opportunites in the Post Brexit World. As I mentioned above, I don’t have time nor energy for all these. If I were to start thinking about whether Brexit is going to affect me and worry about things like this, how would I be able to live my life?? (I should be worrying shouldn’t I)

I am starting to appreciate theescapeartist’s point on ‘No News is Good News‘ in the sense that not actively gobbling up the news or all information or reports out there like a news junkie is actually ‘good’ for your mental health, wealth and general happiness.

The idea of passive investing helps too, giving the market free rein to go where ever it wants. Let capitalism takes its course. We do our bit by focusing on ourselves, having tight finances and good cash flow and asking ourselves what we really need to be happy and really how much do we really need to be content.

The best things in life are the simple things.

I have also read a great article last weekend: The Greatest asset is YOU postulating that basically what we ourselves are our greatest asset. And with time we are in fact transmuting our human capital  into other forms of value, ie Financial capital, social capital, etc. It is up to us to make the transmution process be more efficient and maximise its potential, piling up the right kinds of assets rather than liabilities.

Fireflies-in-trees-by-Yu-Hashimoto
Fireflies in Trees by Yu Hashimoto

Some day I swear. I am going to see it with my own eyes.

Sony World Photography Awards Exhibition at Somerset House 21 April – 7 May 2017. Might be worth having a look. Photos are captured dreams after all.

-Fireplanter

 

Photos of the Week: Life in 1950s Seoul

Sometimes looking at a photo or artwork or listening to music, you can simply appreciate and grasp snippets of pure joy. Perhaps that’s what they call self-actualization. Best things in life are sometimes the simple things and you don’t need financial independence to start enjoying it.

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Photos taken by Han Young-soo of life in Seoul in the 1950s after the war.

‘The war had taken away many things,’ Youngsoo wrote. ‘Not only had it mercilessly trampled down on our beloved families and neighbours, but also their happiness, hope, and furthermore humanity itself. As if that wasn’t enough, by the end it had utterly destroyed everything on the face of the earth leaving behind ruins, despair, famine and sorrow’

Wars are indeed bad. I never been through one and I count myself extremely fortunate. Hope it stays that way.

Check out his other photos here.

Current exhibition at International Centre of Photography in Jersey City, New York till June 2017.

-FIREplanter

How to Be Your Own Independent Financial Advisor

–The Series of Questions you have to ask yourself to assess your own financial health and plan for your financial goals!!–

I frequently trawl through the excellent forum over at MSE to read through other people’s experience and circumstances and questions that they face on a daily basis. Very often, various questions of the nature ‘What should I do with my money’ will come up which I feel that everyone who has a reasonable income will ask at some point or another…

Where to invest £500 per month

Savings for rainy day / retirement / happiness

Where To Save £30k

Here is how I might approach this question..

  1. What are your life goals?
    • Habit 2# of the 7 Habits by Stephen Covey: Begin with the end in mind. To be effective with your money, you need to know what you want to achieve in life. Is it to retire at 65/60/55? Do you want to live in a bungalow/terrence/mansion? Do you want to drive a ferrari/BMW or a nifty Fiesta? How many kids are you going to have, how many holidays are you going to have in a year etc… You get the picture.
    • You need to have a vision of what is going to happen in your future to know how to effectively manage your money and not put your money in inapproprate risky investments that might not provide a reliable return.
    • A different version to this question is ‘What do you need in your life to make yourself happy?‘ because the only logical pursuit in life is happiness.
  2. What is your cashflow like on a monthly basis/yearly basis?
    • Monthly Earnings (Income) vs Expenses (Outgoings)
    • There are various ways to monitor this; ie. budgeting, spreadsheets, tracking all spending on one card
    • I do this very simplistically by tracking my monthly ‘Cash Worth‘ and tracking on Net increase/decrease of Cash Worth on a monthly basis. I can also figure out my savings rate from this.
  3. How much in an ‘Emergency’ Cash fund do you have?
    • The Emergency cash fund should be vital to everyone’s financial planning. The general rule is to have 6 months – 1 years of expenses in cash, preferably in highly accessible top interest paying savings/current accounts.
    • This cash buffer will allow you some leeway to take some more significant risks in investing and more importantly provide some mental relief that if things in life go south for you (eg losing your job, getting ill/accidents), there is some form of temporary self-insurance that buy you time to sort things out.
    • Imagine the alternative of not having a emergency fund and you get redundant. Most people will get into credit card debts/loans to pay for rent, utility bills and Debts are costly to maintain. Or if you don’t have access to those facilities, the cold flat or cold streets might just be your new reality.
  4. How much risk are you willing to take in investing?
    • Now how long is a piece of string? My own take on this is you wouldn’t know the answer to this question until you have taken on the risk yourself and learn the experience of holding a risky investment before learning about your own risk-tolerance. This is where the experience of an Independent Financial Adviser might come in useful or some input from an experienced investor.
    • Firstly, read and educate yourself about the various asset classes and their risk profiles and what role they play in various market cycles and various portfolio setups.
    • Start investing by regular drip feeding into a tax-advantaged account and choosing diversified passive funds or globally diversified multi-asset funds. You learn more about your attitudes to investing as you go along and you can make more informed choices later on when you have some experience. Life is a process.
    • Read this investing ultimate collection by Jacob from Poweroverlife for an introduction to investing.
  5. What are the Tax-advantaged accounts available to you?
    • If you pay 20% tax,
      • Every £100 you make, the Big G takes £20 OR
      • For every 5 day working week, you are working your ass off for the Big G 1 day per week, ie You are working for someone else.
    • If you pay 40% tax,
      • Every £100 you make, the Big G takes £40 OR
      • For every 5 day working week, you are working your ass off for the Big G 2 days per week
    • As noted above, what are you waiting for??? Start using all legally available tax shelters!
    • Have you subscribed to the yearly ISA limits for Stocks & Shares? (Cash ISAs are not too worthwhile at present of writing this article)
    • If you are going to be a first time buyer in the future, have you signed up for the Help to Buy ISA or plan for the new Lifetime ISA come april?
    • Are you paying into a pension scheme? What are the rules of the pension scheme? What benefits do you get from the scheme?
    • If you are in other countries, learn what are your local legislation, laws regarding this. I believe US has IRA, Roth IRAs, 401Ks etc. Basically educate yourself of how the system you are in works.
  6. Mortgages, Loans, Credit Cards, Mobile/Broadband contracts, etc

Okay this is an endless questionaire that most questions you probably would not have the answer to immediately. That is fine. But we need to start asking ourselves the hard questions to make ourselves being accountable to our future. Only then can we focus on the 20% of important decisions that will result in 80% of the results according to Pareto’s principle.

I have never met with a IFA, but I believe the above is what a good IFA should do for a client. In reality, I doubt that’s what will happen. I think IFAs still have a role to play especially to work round a increasing complicated system of financial/tax/pensions bureaucracy and also gearing your investments appropriately  to your goals and risk tolerance. How does your IFA help you in your personal finance and what other tough questions you had to ask yourself in your personal finance journey??

Start asking the tough questions and start learning about yourself as you try to answer them. Baby steps.

Good Luck!

-Fireplanter

Dividends Series 2016 Q4

Time to harvest the fruits of the FIREplant. The beauty of a plant is that you it grows independently as long as there is a fertile and conducive environment for it to grow. Light, water, nitrates, CO2… You can look at it day to day and it will look practically the same. However see it in a monthly, yearly basis and you may see the flowers developing, fruits riping, writhing of the flowers, leaves and then the warmth returns and there’s growth yet again in another season. Patience, my friend is virtue.

Q4 2016 Dividends hasn’t been great, even with the addition of just about 87 arbitrary units into my portfolio in Nov 16. The overall trend is that of decreasing absolute value of dividends over each subsequent quarter over the year. This may be general nature of the portfolio I have built or perhaps due to the marcoeconomic effects of Brexit etc. It probably doesn’t really matter much.

Overall Dividend Yield is about 2.0% in 2016 on the amount invested. (Note that this is with only 3 quarters of Dividend). It would be interesting to get several years of data on this. However I am too lazy to do retrospective studies, so I shall just do a prospective study as I go along.

quarterly-dividends

As I stated in Lighthouse for the Cruising Ship, I am looking for some growth of the Dividends in 2017. That is important for the momentum for Compound effect to build up.

Even the dung beetle takes time to roll up a ball of dung.

-FIREplanter

AD 2017. Lighthouse for the Cruising Ship.

Living is nothing but consuming time until you die.

-Tehching Hsieh

I came across this performance art piece by Tehching Hsieh, a Taiwanese where he explored the meaning of time and living. Within a year from April 11, 1980 to April 11, 1981, he challenged himself to punch a time clock EVERY hour on the hour. In his ‘Timeclock’ piece, he recorded his progress every hour by taking a single film exposure. And then he compressed into a 6 mins video of art.

As crazy as it sounds, 24 punches per day for 356 days equals 8760 hours that he has to be awake to punch the time clock on the hour. I think he only managed to get 8627 mugshots, which meant that he missed 133 punches. All basic societal routine is thrown out, in terms of sleeping, eating, being free to roam about and this brings his interaction to time as close as it can be.  This is in essence watching a deliberate human interaction with time and his reflection on his experience shows how we can reinterpret living and time.

Notes:

  1. Notice how he wears a prisoner-esque clothing, perhaps to reflect the ‘Life Sentence’.
  2. Missing 133 time records in his piece either due to human failure or mechanical failure. Very reflective of how life experience is.
  3. Doesn’t this remind you of everyone around us, punching timeclocks as our daily routine? We are a slave to this then. There are some freedoms we cannot attain.

I punch time for every hour; its repetition but another way to see it, its is not repetition because it’s a new hour

In life we are in a process

 And here I am punching my time clock. If life is as bleak and simple as he breaks it down to be, I think it is up to ourselves to fill in all the bits in between punching the time clock to make it what it meaningful to ourselves and to have to freedom to fill it up with what we value and find important.

Lighthouse for 2017!

There are certain goals I would like to set out to try to get myself going a little. I don’t want to be too focused on attaining too far-fetched goals but hopeful this can be a guide to give me direction when I get lost in my journey (too often this has happened in the past). This are some financial ones I have set out in a forum I am part of:

1) Save £15 000 in 2017
2) See Dividend in 2017 increase compared to 2016
3) Keep outgoings at a similar level compared to 2016
4) Complete a full years worth of accounts, including Savings Rates, Outgoings
5) Read at least 5 Books
6) Join Park Run and get it going.

Others I want to include to keep exploring myself and help me grow as a person:

7) Produce a short film (A simple one will do)
8) Travel more – Crazy idea to plan a hike from Chamonix-Zermatt (Hey if you are not going to do it when you are in your 20s, when are you going to do it?)
9) Write more. Poems, Prose, anything.
10) Spend time with people I love (more than anything, it helps you learn about yourself)

I think like FI, many other things in life needs that bit of planning and visualizing and working towards before you arrive there. For some, it might come naturally or society has pre-programmed it into most, but for others it will take some exploration and deliberation. No one said it was easy.

I am curious what else I will encounter in 2017. And you?

-FIREplanter

2016 in Review

The year of 2016 has been a year of growth, in many aspects of life. Financially, relationships, goals, prospects, meaning…

The FI journey is important in that you need to evaluate what is important in your life first and foremost. Most things in life we have is finite, time, money, food, resource.. The earlier you realise that the earlier you can focus on living in the moment and investing for the future.

The principles you value, the friends you enjoy just being with, the people you meet along the way that you look at them with your heart and think these are beautiful people with beautiful lives. The key thing though is that you need to live to figure these out. My predilection for stories, fiction or not and the moral of the story helps in some way to gain some sort of insight (whether true or false).

Net Savings

monthly-cash-savings-bar-chart

It seems that I am doing fairly well being in positive balance most months of the year. The missing months of July and August is down to poor record keeping. However because of how I track my net cash worth, it will likely reflect in the following months values, hence the yearly net savings value should still be fairly accurate.

One method I found that was very motivating for helping me keep up to speed on a monthly basis was to join a savings community online. There are various threads over at the MoneySavingExpert Forums where people keep each other motivated with their monthly savings and what’s been happening in their various lives that makes savings difficult or easier. Unfortunately, this is not so much as an exciting topic over dinner with friends or mates over beer, hence I have to do it over the online community to gain some encouragement.

Portfolio

portfolio-volatility

My YTD value of my portfolio is up just about 12%. How well have I done compared to the indices?? Worst than some, better than some… Does it really matter? Perhaps. Would it change anything I do? I hope I have better sense than that. I am waiting for a bear market at a appropriate circumstances where I am in a stable financial situation to sort out my mentality with regards to risk. That would be the real test of my mettle I reckon.

This is all really a big ‘experimentation’. I mean you can only know how much you hate or enjoy the rollercoster only after you have experienced it right? However, better buckle up my safety harness!

 

Decade of Deaths, Weddings, and all the rest.

2016 is also the year when my granddad passed away. This was a fairly novel experience for me and my generation and it has taught me some lessons. There are people you love, and you want to be with them when they need you. You want to be able to be with them when they need you. That is important. Two of my friends my age had similar experiences as well and I think I can see some similar reflections on their part. This will happen more often from now on, this is inevitable.

The ages of 20s is also when there are numerous wedding invitations flying across through the mail and where social media is just flooded with wedding photos. I attended 2 of them myself this year and I took it more of an opportunity to reminiscence with old friends and also to figure out what it is all about. I enjoyed it immensely but hope not to get caught up in the hype. I really wished them all well and hope to see them do well themselves.

So the Decade of 20s is now known as the decade of Deaths and Weddings.. Perhaps by the late 20s, I will be used to this.

Imagine a Life of You and I

Everlasting Strawberry Summers

Sneezing at pink blossoms

Sharing stories like no tomorrow of soft rye, work and  adventure

Morning coffees on rain fell weekends

Late night brews and chats

Train rides across the city

Napping in front of moving pictures

The heart yearns for The silhouette of my dreams and likewise the mind is occupied

yet Life is such a stoic existence that the only way is to

Swallow that bittersweet feeling and call it living

Pieces of Me by haleshine

I hope you had a decent 2016. Time provides all and takes all in the end. Enjoy the journey.

-Fireplanter

I Wished I had a Barbershop

I wished I had a business like this.

There is no future in house work.

Maybe when I save some money I can have a barbershop someday.

But I can never save.

Money slips through my fingers like that.

Trouble is I have lived up to every penny I’ve earned.

Why shouldn’t I?

We’re here today and gone tomorrow and then where are you?

Quote from Hannah from The Great Dictator

This classic from Charlie Chaplin has his stylistic style of satire slapstick and moving lines. And then I found this quote which made me stop and record it down.

Now we can all relate to the difficulty of saving, of living up to every penny  we have earned. After all, we have worked hard enough to make the dough, why shouldn’t we be able to enjoy the fruits of our labour??

“You Only Live Once!”

This is especially true in times of true hardship where there is no visible sight of the exit route, where your future looks bleak and you feel trapped by debts, lifestyle inflation and costs of living. The middle class trap. Hence it is very easy to take the easy way out and spend to release the steam or stress. Some even make the mistake of spending on credit, which is basically spending future earnings.

‘Money Slips through my fingers like that’

Ouch.

Fortunately, the start of the line offers us a solution. Own a barbershop. A Barbershop is a business which has a capacity to produce an income. In the real world, this translates to use your savings to buy assets and assets tend to produces an income. 

Assets

There are various asset classes that we can own. They are the following main classes:

  • Cash
    • We all know what cash can do. It appears to be the most apparently valuable and useful asset to us given its liquidity and ability to allow us to buy goods and services. It also can provides us a buffer from dipping into the our more volatile aspects of our portfolio in turbulant markets. Cash is King sometimes
  • Fixed Income assets
    • This includes Treasury bonds, UK Gilts, Corporate bonds. Basically a IOU from the government/company that you lend money to for a set time-frame and they agree you to pay you back a set percentage of interest. The complexity comes from the IOU having a value that can rise or fall with the markets.
    • Risk/Return is higher than cash but less than equities.
  • Equities
    • Owning a business or a slice of the business in the form of stocks/shares and getting a return from dividends. Nothing beats owning a business and it generating a return itself.
    • Key thing is the value of the business/stock/share is only as valuable as the next buyer is willing to pay for. Hence market sentiments and how well the business is run plays into this.
    • It is risky to own just one business but the idea is owning hundreds of companies through a tracker fund would diversify the risk of a few companies not performing as well.
  • Property
    • I call it the ‘Romantic asset’
    • People have this romantic idea that house prices never fall and always rise and will continue to rise and is the best to own as an asset. However the same has been the case for Equities. All asset prices tend to rise with inflation!
    • The disadvantage of property is that it is extremely illiquid and requires some effort in manging the property. 
    • If you are owning to stay in, it doesn’t even count as an asset as it does not provide a source of income. 
    • I would consider investing in it as a diversifer in my portfolio though through Real Estate Investment Trusts as it behaves differently to equities though the market cycles.
  • Commodities
    • The bad boy asset: Steel, Copper, Gold, Oil…
    • The most volatile asset out there! Just reading about Oil price drop over the past year, I get the sinking feeling of one that owns the oil companies. Same for minerals and rare materials, steel price drop affecting the Australia/UK markets.
    • Might be useful at some point but at the size of my investment, it would be a long while before I look at this asset class more closely.
    • Buffet hates these. They don’t produce anything.

Key message is to Diversify Diversify Diversify. Have your finger in every pie (that is worthwhile having your finger in). Don’t put your eggs in one basket. etc etc etc.

Well you get the message.

And hopefully I shall own my own Barbershop one day!

–Fireplanter