Happy New Year! May 2019 be a year filled with happiness and success for everyone reading this blog.
At Apprise Wealth Management, we want to help people make better decisions about money. We also read constantly and like sharing some of the commentaries we enjoyed reading the most each week.
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Here are this week’s articles as well as a brief description of each:
1. Lollapalooza Effect. Warren Buffett’s right-hand man Charlie Munger associates the term lollapalooza with an outcome that is far bigger than the sum of its parts – or multiple factors acting together in ways that feed off each other. A lollapalooza is also a great problem-solving tool. If you learn the important models and can use them when solving problems, you will learn that multiple models tend to converge in one direction, simplifying the decision-making process. This effect also helps explain why the content presented in these weekly blogs is not solely focused on investing and/or personal finance. It can be more productive reading around our field of interest instead of always focusing on staying within it. This post provides examples of lollapaloozas and some of the cognitive biases that can affect our decision-making processes. (See also: Munger’s “Psychology of Human Misjudgement” speech.)
2. Debt: A Love Story. If you have a high-paying job, a relatively low level of debt, and a reasonable level of retirement savings, you are likely better off than the majority of Americans. This story (and this one) provides details about the dangers of living beyond your means and accumulating too much debt. Despite our best intentions, we can wind up heading down the wrong financial path.
3. The Spacing Effect: How to Improve Learning and Maximize Retention. Unfortunately, students are taught how to pass tests rather than how to learn. In other words, they memorize the material to pass the test and forget it afterward. The spacing effect, which involves learning information and concepts in multiple, spread out sessions, improves our ability to recall what we learn. Using spaced repetition can help us slowly learn almost anything. Perhaps more importantly, it works for words numbers, images, and skills. It can be used by people of any age. The effect also cuts across disciplines, meaning it can help us learn anything ranging from artistic styles to mathematical equations. Wouldn’t it be great to learn information that can be effectively retained and last a lifetime?
4. Next Year. In the past, we have talked about how hard it is to forecast the market’s performance during a particular period. However, it never fails that as one year ends and a new one starts, investors in common stocks want someone to tell them what the market is going to do. In this post, we see a chart showing the year-end price targets of numerous market pundits. It is not surprising to see strategists predicting the market will move higher this year. Over the past 50 years, stocks have delivered positive returns 72% of the time, so calling for higher prices is rational. This post, which summarizes market predictions since 2005, found that 96% of strategists forecast higher prices. What is most striking is the magnitude of their misses. The worst was 2008: an 11.7% rise was predicted; the outcome was a 38.5% decline.
5. 50 Reasons Why We Don’t Invest for the Long-Term. Generally, we invest in order to meet our long-term financial objectives. Typically, we obsess about the short-term, which causes us to make decisions that leave us worse off. Why? This article provides 50 reasons. Here are a few:
· Because we make decisions when we are emotional
· Because we are obsessed with what is happening right now
· Because we think we are more skillful than we are
It can be argued that a long-term investment approach provides one of the few genuine advantages investors can possibly exploit. Keep this in mind next time you want to make a change to your portfolio.
We hope you find the above posts of interest. If you would like to talk to us about financial topics including your investments, creating a financial plan, saving for college, or saving for your retirement please fill out our contact form, and we will be in touch. We can schedule a call, a virtual meeting via Zoom, or a meeting at Apprise Wealth Management’s office in Northern Baltimore County.
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Phil Weiss founded Apprise Wealth Management. He started his financial services career in 1987 working as a tax professional for Deloitte & Touche. For the past 25+ years, he has worked extensively in the areas of financial planning and investment management. Phil is both a CFA charterholder and a CPA.
Located just north of Baltimore, Apprise works with clients face-to-face locally and can also work virtually regardless of location.
