Without much thought to my schedule, I told her I would visit her on Friday, a mere three days away. During the next two days, I moved my appointments around to clear up a whole day, and then I booked a round trip ticket and a rental car.
On Friday, I set out early on the trip and got to her place by noon. When I met her, I saw a middle-aged woman in deep grief and distress. I couldn’t help but give her a big hug, and she wept on my shoulder for a while.
Donate all the garbage. I couldn’t believe how many items in my household we literally didn’t touch, not even once, in the whole of 2014. Things like that are immediate candidates for donation. Things that fall into this category could be electronics, furniture, books, clothes, kitchenware, bedroom sets, used toothbrushes, etc. Ok, maybe not used toothbrushes, but just about anything you don’t use, you can find a better home for, and get a tax deduction for doing so. In some years, we’ve gotten $10,000 worth of deductions. Read the rest of this entry »
I asked my assistant to do an updated stock market seasonality study.
The data we used was the S&P 500 index from 1927 which we found in Nobel Prize winner Robert Shiller’s database.
We assumed that at the beginning of each year we invested $1 in the index, and we observed how the investment fluctuated over the year. Then we took the average over three different periods of time: the last 20 years, the last 50 years, and the last 86 years.
Here is the chart we got: Read the rest of this entry »
Some of you may have already known that my hobby is improv comedy. Here is what happens during a performance. I go on stage with my fellow actors, we ask for a suggestion from the audience, and then we create a comedy play from scratch using that suggestion.
It just so turns out that many lessons I learn in improv are totally applicable to real life. Since after all, life is a just a big improv show. Nobody wakes up with a script in hand for how to live the day.
So allow me to summarize the top three lessons I’ve learned.
- First things first; be a great listener.
Yesterday I received an email from a doctor client of mine telling me how he had a conversation with some fellow doctors, and all of them are pulling their money out of stocks because they feel that with the market breaking new high after new high, a crash is imminent. He wanted my opinion.
First of all, while all of his doctor friends might feel a market crash is imminent and certain, there is simply no such thing as certainty in the stock market. All we can work with are odds. The following are the odds of market corrections:
|Magnitude of market decline||Frequency of occurrence (out of 64 years from 1950-2013)|
|>5%||Every year (94%)|
|>10%||Every two years (58%)|
|>20%||Every five years (20%)|
|>30%||Every ten years (10%)|
|>40%||Every fifty years (2%)|
My study also shows that the market breaking a new high does not substantially change the odds of returns. In other words, the odds of the market dropping over 20% in the next twelve months are still about one in five; the odds of the market dropping over 30% in the next twelve months are still about one in ten.
Read the rest of this entry »
Financial author Allan Roth once wrote an article called “Investment Trick – Annuity Style” where he asks a rhetorical question, “If the S&P 500’s total return is 12% in a given year, what do you think your equity index annuity (that is supposed to track the S&P 500) would return”?
Allan Roth goes on to explain why the correct answer is 3.4%. Boy, was he wrong! Read the rest of this entry »