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Personal Finance Disclaimer


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The content of this blog is for educational and entertainment purposes and does not constitute as investment advice.  Investing is a risky endeavor and may result in loss of principal.  Past performance does not guarantee future performance; in other words, any investment strategy depicted here, no matter how rigorously planned, constructed, and tested, is not guaranteed to perform as favorably in the future.  It is prudent, before pursuing any of the strategies on this blog, to consult an expert or investment adviser for a second opinion.

Please see www.investopedia.com or consult an investment adviser if you don’t understand any of the financial terminology used here.

In addition, opening new credit card accounts may have minor but potentially adverse effects on your credit score.  You are strongly advised to closely monitor your credit score as you open new credit cards in pursuit of frequent flyer miles and reward points and to use credit responsibly to avoid paying unnecessary fees and interest charges.

In following the advice presented on this blog, I accept no responsibility for any losses of wealth, damages to your credit, surprise fees and credit card interest incurred, or any other negative impact on your finances.


 

For the Investing portion of the blog, the following assumptions about you as a reader also apply:

In order for the investment advice on my site to be of value, I’ll make some assumptions about your attitude, personality, and basic knowledge.  No, I won’t expect you to know the Black Scholes equation in your sleep, how to price Credit Default Swaps, or even where the market will go tomorrow.  Except the first one (keeping an open mind), it’s alright if any of the points here don’t accurately describe you and you’re new to my site as long as you’re flexible and willing to change.

We may not agree with my views about the markets or the economy but I’ll assume we agree on some very basic things outlined below.  However, if you don’t change your fundamental views and attitudes to the guidelines below, then unfortunately, there’s little I can do to help you.

You must have an open mind.

This goes without saying whenever approaching someone else for advice.  You might not hear what you want to hear but you have faith that it may be of use to you.  And if you run into dangerous advice, you can always exercise your judgement and reject it.

You believe the economy and financial markets will make progress in the long run (say a 15+ year time span.)

This is the only statement I’ll urge you to accept on faith rather than economic principles or theory.  Markets have been slowly going up over time for many hundreds of years, and there’s no rule that says they have to.  OK, this reflects economic growth but then again, there’s no rule that says economic growth has to continue indefinitely.   So you agree that the world economy will continue to expand in the long run?  If yes, please read on!

The world could radically change in less than 2 decades.  We could have nuclear war, an asteroid impact, a devastating volcanic eruption, collapse of major countries, etc. which will definitely hamper the ability to recoup your initial investment even after 15 years.  Let’s assume these very low probability scenarios will never turn up – you have bigger problems to worry about if they do!

You are investing to supplement your wealth over time, not to get rich quickly.

I hear of stories of people who got rich off of the markets alone but I don’t personally know of anyone who accomplished that.  I suppose it happens but it’s very rare and not something you can count on, even if you work very hard at this goal.  Worse, you could end up losing big by taking too much risk and/or investing in assets you know little/nothing about.

You don’t believe financial markets (and Wall Street) are conspiring against the common people.

This is one of the most bizarre excuses not to invest but it’s been popping up more ever since the Occupy Wall Street movement took off a few years ago.  You’d rather not improve your wealth because you perceive it’ll make someone else wealthy (and you don’t even have proof)?  Well, I’ve got news for you: most of the wealth in the stock market is from ordinary people like you and me.  Millionaires and the top 1% might own a larger share of the wealth in the stock market but that’s still a minority of all the wealth.  Sure, most trades happening are between 2 institutional investors, but those institutions are managing money for ordinary people.

Even all the assets under management at a major investment bank like Goldman Sachs is just a drop in the bucket compared to the entire stock market.  It’s very unlikely (and outright illegal) for them to try to manipulate the markets in their favor.

You believe markets are nearly efficient (rather than 100% efficient or rampant with inefficiencies.)

You may have heard of the Efficient Market Hypothesis.  In a nutshell, it states that you cannot use easily accessible information like past prices, financial statement data, and the news to beat the market.  Basically, if there’s an obvious opportunity to make a quick buck in the markets, someone has already taken it.  From my observation, the efficient market hypothesis tends to hold up on a day to day basis, but we, as humans, are also subject to psychological biases that make it difficult to invest in our best interests 100% of the time.  For example, if you’ve ever owned a stock that you truly believe in but continues to lose money and you insist on holding onto it despite analysts and even your friends trying to convince you that it’s a bad investment, you’ve been a victim of your own psychological biases.  Generally, the more volatile a market is, the more likely traders and investors will fall victim to their psychology, and this creates inefficiencies which can be exploited.  This is definitely not a subject for a beginner as I’m still on the road to figuring this out.

You will not cry if you lose a small percentage of your wealth (and give up by selling.)

AKA panic selling.  While getting out of a losing position is generally prudent given the situations, selling because you can’t emotionally take the loss is a bad idea.  You aren’t thinking logically and letting your emotions dictate your investment decisions!  Instead, decide how much money you’re willing to lose on an investment BEFORE you enter it and get out once your threshold is reached.  In other words, even the most robust investment plans are not immune to the daily fluctuations of the market, but don’t let the short-term volatility derail your long-term commitment to investing.

You have a basic understanding of Algebra, Statistics, and Economics.

You don’t need a PhD or even a college degree to be successful at investing.  Even if you never went to college, if you still have a working knowledge from your Statistics and Economics classes, you’re good to go.   If there’s any word or concept here you’re not clear about, please see: www.investopedia.com.

You believe successful investing doesn’t have to be complicated.

I recommend a simple passive index portfolio for you to start with.  You can further customize it over time as you learn more, get help from an advisor, or undergo changes in your financial and living situation.  Making it too complicated, even with the help of a financial advisor, will likely increase the chances that something will go wrong.