Well its not as cold as this picture (taken off our porch a couple of winters ago) but it was 34 out when we woke up and had to get a fire going.I have been exchanging emails with my nephew (my oldest brother's middle child) who just graduated college and is in the process of sorting out what to do next.
You can't try to give too much advice because you alienate the person and because part of being in your early 20's is learning by making your own mistakes.
The best piece of advice I ever received was when I was 18 was "your 20's are for horsing around, you don't need to worry about making money until your 30's and 40's." This has probably changed over time to not needing to worry about money until you are 35 but you get the idea.
When you manage your portfolio there are certain mistakes you are going to make as well. I think the most common ones pertain to hubris. At some point, and this has happened to everyone, you think you know more than you actually do and then something blows up on you.
The goal is simple; have enough money when you need it. The way to get there is simple and you know what it is; save properly and stay diversified. Everyone knows these things but it is easy to stray away from diversification.
Just like a 22 year old sometimes need to learn what too much credit card debt is (not an issue for my nephew) an investor sometimes need to get burned putting half his money into a lottery ticket.
Forgetting the science of it for now, a truly diversified portfolio will mean something is always going up and something is always going down. That blend should get you where you need to be if you also save properly.
7 comments:
As usual, great post Roger....but
as far as "part of being in your early 20's is learning by making your own mistakes." I have always
thought it was even more intelligent to learn from OTHER
peoples mistakes;-)
your idea is better.
Good story about learning from mistakes.
JOHN
Roger, you haven't mentioned the double short for a while. Since you mentioned yesterday that your were still somewhat bearish, I assume you still have it.
As I recall, you were looking at about a 5% position. I am guessing since the market has come back, it would now be about a 3% position.
So, the question is when would you think about getting out of the double short? Or, would you just keep it as long as you are more bearish than not?
Rick Caird
I first bought SDS at a 3% weight last summer. The market then went up, the position went down and the portfolio went up.
This summer I added more to take the position back up to 3-3.5% not 5%. I did do the math needed to take it to 5% if I thought market conditions warranted but that was not the case.
Since adding more this summer (in the 56s, now it is in the 48s) the market is up a lot as is the portfolio.
I have been planning to hold it through the end of the cycle but I have said I am not 100% positive about that.
The drag, as was the case last summer too, has gotten smaller. If that keeps happening I would be thrilled. Market up 30% me up 26% w/b a great outcome.
Your comment about having enough when you need it reminds of the old
Groucho Marx story,who purportedly once toured the New York Stock Exchange and held court with the floor traders after the closing bell. Knowing that Groucho was wealthy, one trader yelled out "Hey Groucho, where do you invest your money?"
"I keep my money in Treasury bonds," is what the leader of the Marx brothers reportedly replied.
"They don't make you much money," a trader shouted back.
"They do," Groucho said drolly, "if you have enough of them."
That's my ulimate goal.
Thanks for your advice Roger
fantastic quote.
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