I hope you all had a great Thanksgiving! It was a wild month in the finance world and I had a hard time narrowing down my selections.
Resources cover topics that are always important to readers of this blog including better understanding your bond investments, when to claim Social Security retirement benefits, and improving your psychology around money.
This month we witnessed one of the great financial scams of all time in the crypto space. Even if you have no interest in cryptocurrencies, there are important lessons to be learned about financial scams in general. I also share a practical tip on a current financial scam.
I close out with a couple of fun and thought provoking reads that I hope will help you enjoy the holiday season. Let’s jump in!
Individual Bonds vs. Bond Funds
A few months ago I wrote about bond duration and used bond funds as examples to illustrate my points. In the comments, a few readers made the argument that owning individual bonds is better than a bond fund.
I’ve been meaning to write a follow up post about the differences between individual bonds and bond funds. Ben Carlson beat me to the punch and so I’ll just share his excellent resource: Owning Individual Bonds vs. Owning a Bond Fund.
One reason dominates all others for why I prefer bond funds: simplicity. Last week a reader shared this excellent thread from the Bogleheads forum about building a TIPS ladder. Among the topics covered is how exactly to go about doing that.
Last week I evaluated recent changes I made to my portfolio. One move that has been very successful in the short term was adding I Bonds. But now that interest rates are back in a normal historical range, this creates additional questions moving forward. Harry Sit addresses one, writing When to Stop Buying I Bonds or Cash Out and Buy TIPS.
When Should You Claim Social Security?
Two individuals whose work I respect and follow, Jeffrey Levine and Ed Slott launched a new podcast, The Great Retirement Debate, this month.
They are using an interesting format in flipping a coin at the start of each debate to see who argues which side. This is a great exercise for each of us to do individually to avoid getting dogmatic and entrenched in one way of thinking.
Their first debate centered around an important question, Should I Take Social Security at Age 62?
Mike Piper developed the free online Open Social Security calculator to do the math showing your largest expected benefit over your retirement. But there is more to the claiming decision than that. Piper writes How I Actually Use Open Social Security.
The Psychology of Savers
Sarah O’Brien writes How the top financial habits of ‘super savers’ can help you ‘build the most wealth’.
I suspect the vast majority of readers of this blog meet the article’s definition of a “super saver.” So you’re not likely to learn much here about how to save more. What I found fascinating here and encourage you to look at is the survey results showing how super savers FEEL about their finances.
My gut tells me that saving a lot of money should make you feel more confident about your finances. This should translate to a better life. What I’ve found in my experience interacting with readers and at FI related meet-ups is this is often not the case.
This article backs up my observations. Nearly half of “super savers” surveyed don’t “feel in control of their finances” or “confident about their financial futures.” Similarly they “feel guilty when splurging” and still “lose sleep over their finances.”
This disconnect is an area that fascinates me and that I will continue to explore in my writing.
The SBF/FTX Saga
The most fascinating story to me this past month is the implosion of millennial billionaire Sam Bankman Fried (SBF) and his now bankrupt crypto-exchange FTX. There are many fascinating angles from how seemingly brilliant investors were completely fooled by SBF and how in hindsight massive red flags were overlooked.
For those who haven’t been following this story, FTX recently ran Super Bowl commercials with celebrities like Tom Brady, Gisele Bundchen, and Larry David, hosted events with Bill Clinton and Tony Blair, plastered their brand on NBA arenas and MLB umpire uniforms, and SBF was the second largest donor to Democrats this most recent election cycle.
A lot of the resources I’ve read on this story have been courtesy of the Twitter feeds of Jason Zweig and Eric Balchunas. So I want to give them a tip of the cap and credit for their work. Their writing is behind paywalls at the Wall St. Journal and Bloomberg respectively, so I’ll share other resources here.
Derek Thompson had two great podcasts to introduce and explain important aspects of this story for those not familiar with the backstory of SBF, FTX, and cryptocurrency in general.
Another fascinating read is Kelsey Piper’s remarkable interview with SBF after the FTX implosion and bankruptcy filing. Piper writes Sam Bankman-Fried tries to explain himself.
The Challenge of Predicting Winners
Last week, the intro to my blog referenced how investors love to talk about their winners, but you rarely hear about their losers. I couldn’t have timed that better with my next resource if I tried.
Sequoia Capital is one of the best known venture capital firms in the world. They had a large feature of SBF and FTX, whom they invested in, on their website. It was complete with quotes of several partners’ glowing endorsement of SBF from their first meeting. Then FTX imploded and filed bankruptcy. This feature quickly disappeared from Sequoia’s website.
However, the internet never forgets. Here is a link to the original feature, with the cringe-worthy quotes, as it appeared on Sequoia’s site.
This next resource is an academic paper (translation long, with lots of statistics, and not an easy read) by Jerker Denrell and Christina Fang. It is worth the time to at least read the abstract and give it a skim to get the take home message. Predicting the Next Big Thing: Success as a Signal of Poor Judgement.
Preventing a Scam
A new popular scam is “check washing.” This scam involves stealing checks from the mail and changing the payee’s name and often the dollar amount.
Here is the U.S. Postal Service’s resource on protecting yourself from this scam.
Here are pens I personally purchased that purport to be resistant to this technique. (Full disclosure, I don’t have evidence on how protective these pens are against check washing, but for less than $10 it seemed like a no-brainer to buy a pack and store them with our check books to use when writing checks.)
Fear and Greed
Most investment mistakes can be boiled down to two emotions: fear and greed. Last week, I openly shared how fear may have gotten the best of me, at least with a small portion of my portfolio.
Nick Maggiulli shared a similar tale of the opposite side of that coin. He shares that greed cost him a small portion of his portfolio, writing Proof of Work.
The Upside of Twitter
This month, there was speculation that Twitter may collapse. I have mixed feelings about this.
As a whole, I think social media has a negative impact on our society. However, it can have positive applications when used wisely.
For those of you that enjoy these “Best of” posts, most of the resources come from my carefully curated Twitter feed. So if Twitter goes away, this monthly post may as well (at the very least my process of putting it together will drastically change).
For this month, I will feature two of the best items I read this month. Both came directly from my Twitter feed.
Meg Bartelt challenges us (and herself) to consume less in Meg’s Musings: Consumption Edition.
Brendan Leonard muses about friendship, aging, and expectations writing We Interrupt Your Expectations to Bring You Your Actual Marathon.
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[Chris Mamula used principles of traditional retirement planning, combined with creative lifestyle design, to retire from a career as a physical therapist at age 41. After poor experiences with the financial industry early in his professional life, he educated himself on investing and tax planning. Now he draws on his experience to write about wealth building, DIY investing, financial planning, early retirement, and lifestyle design at Can I Retire Yet? Chris has been featured on MarketWatch, Morningstar, U.S. News & World Report, and Business Insider. He is also the primary author of the book Choose FI: Your Blueprint to Financial Independence. You can reach him at email@example.com.]
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