Why Personal Finance Has Very Little To Do With Math And More Based on Something You Can Fully Control To Turn Into An Actual Superpower

One of the greatest and ironic truths about investing is that no matter your prior experience, track record, performance, or stellar on-the-ball predictions, everything can and most likely will go out the window in the future. It won’t matter.

The markets aren’t a formula or have one clear solution. They are unpredictable. As investors, we all sign up for this. It’s called volatility, riding the waves.

Every day in the markets is a new day. Prior experience does not indicate future results. Fortunately or unfortunately you must digest what’s out there at the moment since yesterday’s performance, earrings results, and news reports may be irrelevant compared to the stories that come out today. You can make it grueling or enjoyable all dependent on your level of patience.

As a rule of thumb, sticking to fundamentals and earnings reports will put you in the safe park with defensible blue-chip large caps, but as always, there’s no guarantee. Welcome to the school of life.

For investment's sake, a prudent investor always keeps these in?mind:

-Past performance is not indicative of future results

-Risk whatever you are willing to lose

-Sleep on it

-Never fight the Fed

-Don’t confuse brains with a bull market

-Plan for the worst, hope for the best

-Nothing lasts forever

-Never equate emotions to decisions

-Read less and predict more or the other way around

I made up the last one. Sometimes too much information can actually derail you from thinking clearly i.e. information overload. Ever study too hard for a test and remember less?

Observe Chris Camillo’s genius strategy (link article ) who simply observes teenagers and the next generation of investors and world leaders, my generation on what they enjoy, use, and are obsessed with. Observing everyday people’s habits, it will provide you a pretty decent indicator of the next revolutionary initiative and booming asset class that will ‘shoot to the moon and actually stays there, better than anything the WSJ can report on. Strong valuations, moderate P/E earnings, balanced profit margin, and earnings estimates are vital but if you don’t know what you are investing in or venturing out, then you are missing out. The great news is that listening to what consumers cling to can be done all for free and investing only requires a few dollars on the side.

It is recommended to hold onto an individual stock or diversified low-cost ETF, which is much easier to do for at least 5 years, otherwise dealing with the tax liability of short-term income tax is not worth it. Sadly, most investors, especially newcomers who’re witnessing a bear market for the first time in 2022, engage in panic selling with their short-term gratification get-rich-quick scheme mentality. Too bad since they can profit the most following the long-term approach with the longest time horizon. Good things come to those who wait especially since the markets go up over time!

In a sense, it is an entirely emotional game but utilizing your own emotions will make it a pit fire. Currently, as we speak, this has been the worst start to the new year for markets EVER. Major indexes such as the Dow to Nasdaq-100 and S&P 500 are down collectively 7–17%. Mortgage rates are at their highest point since pre-pandemic at roughly ~3.7% for a 30-year mortgage and the 10-year Treasury yield rose to ~1.7%. Markets specifically volatile assets from crypto to high-flying tech and meme stocks have been on a rollercoaster ride attempting to unpack the latest uncertainty with geopolitical tensions between Russia and NATO, hyperinflation, interest rates, supply chain constraints, China’s control over Taiwan, and I’ll just put it in here since it must be affecting someone, Tom Brady’s retirement announced today. Emotions are a natural part of investing but we want to let them go when it comes to our money moves.

101000

Since the institutional education system doesn’t seem to prioritize personal finance or mental health, as much as students would like them to, I needed to teach myself investing 101 and personal finance as soon as I could in middle school. I was fortunate enough to have my parents who immigrated from Poland open up a Roth IRA and 529 College Savings as soon as I was born so I could contribute my earned income to my Roth as soon as 15 when I started working as a tennis coach, model, and tutor. It was worthwhile, certainly not worth my time for $10 an hour at minimum wage but it was understood since I was below the working age anyway. Getting out there and experiencing real life taught me the best lessons, especially money-wise.

Until I started investing and keeping up with the markets I learned it is an extremely macho-dominated opaque confusing world. It’s hard to trust anyone since everyone will only state their wins never losses! No wonder half of America isn’t financially literate nor can handle their finances properly. There was a study that came out the other day that found 90% of Americans surveyed cry whenever they have to confront their finances. Despite the number of resources, outlets, teachers, blogs, platforms, guides, Reddit forums, and Jim Cramers, Americans still seem to have difficulty crossing that hurdle and confronting the reality, the most important yet nervous part of their lives: their nest egg. No wonder the national savings rate soared close to 50% at the start of the pandemic! Americans had no other choice than to safeguard themselves, stop spending, each Ramen, or go evicted with no readily available capital preservation strategy onboard. It is frightening how many people have less than $1k in savings. Prepare for the worst hope for the best is the most crucial lesson. Jan 2022 has taught us that big time.

One of the greatest pieces of advice I can tell you as a novice investor is to block out the noise and invest passively over time. Do not poor a lump sum or windfall and over-index that has a 10% chance of becoming the next unicorn.

Time is on your side. It’s better now than later. If you are younger than me, 21, I urge you to run not walk to a brokerage platform. Open up that credit card if you haven’t done so already to start building credit and invest as much as you can out of your paycheck or savings. Your 80-year-old retiree self will be proud. I cannot even fathom how high inflation will be in 2080. Let’s focus on the present, shall we?

All you have to do is log on online to a reputable FDIC-insured investment platform/brokerage with a decently sized AUM holding and one that serves a variety of clients from institutions to families and open a brokerage and Roth IRA account from there. I would advise ditching the phone whenever investing or paying for something for that matter. It saves you money in the end. Trust me. It’s all psychological.

Once social media and investing went to mobile, mental sanity and bank accounts went bust. Once they are created, deposit as much of your paycheck as possible, aggressively save and invest, max out your Roth IRA accounts and once you start working, contribute to your tax advantageous accounts. It may be hard to save more than 20% of your earnings starting out but it will surely increase as you go. Whatever discretionary income you’ve got, reinvest it. It will pay dividends for a lifetime, far longer than that Chanel bag. The rest should be invested in yourself, through education, personal finance, and health. Health = wealth after all.

Logical Reasoning

Personal finance and investing aren’t just for stat majors or physic enthusiasts, it is for everyone. No matter what you study or the industry you work in, money is a part of your life forever. It doesn’t have to control you if you control it by investing in yourself and becoming involved in the continuous process. Time in the markets beats timing the markets. Please don’t strive to be a full-time day trader and predict the markets. 80%+ of day traders lose at least 35% of their capital invested! You will lose more money conducting technical analysis and charting stocks than consistently saving, investing, rebalancing, and observing. It will serve your time and mental sanity as well.

The most advanced mathematics you will witness within basic investing and in the markets is algebra, percentages, and sometimes, rarely fractions. I’m sure you can handle it. If you want to risk your chances for loss and dive into derivates, options, and forwards, be my guest but they come with added risk, higher barriers, and less guaranteed return. To understand the fundamentals and valuations behind the P/E ratio, EPS, debt to equity ratio, and market cap, it’s all listed online. My go-to source for quick facts is Yahoo or CNBC.

To be an investor means you are simple, practical, basic, and stick to what you know. You aren’t here to impress anyone. You can do that with your materialistic goods if you truly desire. Just expect to waste money and drain your self-esteem in the process.

In fact, if you do have a portfolio manager to consult, remember to take advantage of every penny you are giving up through expense ratios. Most of the time, you aren’t just paying for portfolio allocation, monitoring, and management, it is for advice and endless check-ins. This is your money on the line. If you aren’t pleased with the service and simply give away your money and let someone with more experience and qualifications who does this full-time, it is in your best interest to keep in touch with them. Anyone can learn to invest. There’s no crystal ball. Just because we are paying someone to manage it doesn’t mean they will earn us a 20% return or anything at all! Most of the time the wealthiest people on earth still have portfolio managers not becuase they aren’t able to invest themselves it’s rather becuase they don’t want to deal with the mental battle or aren’t in the space at all nor like investing! It is too emotionally draining for them that they believe a stable unbias somewhat unemotional manager will save their money better than they ever can. Everyone has different priorities with working with an advisor and within that practice, make sure you know what you are paying for. Expense ratios are charged as a percentage of your invested amount, AUM each year whether you had a negative or positive one.

It’s all luck-based, a manager provides some sort of comfort and experience positioning your money in the best places their team of traders recommend but it doesn’t guarantee anything.

If you can’t handle fractions, your portfolio advisor can always trim your losses for you, rebalance them, and punch in all the trades for you. It’s easier than ever to execute a trade. No thinking is involved. If you want to buy 10k shares for $5, the system will now automatically tell you if you have enough funds to cover it or not. No more guessing or calculating based on share price and funds available. If you are old school, I guess you can call them too. The democratization of finance is happening folks! The markets are waiting for everyone, even the non-tech-savvy or mathematically gifted to join.

Don’t overcomplicate your finances. It is your balance sheet: assets — liabilities = net worth. Stay diversified, and prepared, and invest in what you understand and believe will help down the road. Focus on what you can control and enoy the process. This is an investment in your future.

Investing which provides portfolio income is an alternative source of income that you shouldn’t be fully reliant on a.k.a day trader mode. It should provide a stable cushion to increase the quality of your life later on once you decide to eventually cash out, the point where it stings the most. Strive to have at least 5–10 passive income sources, one of which is portfolio income and the rest from earned income, main job or several side-hustles, and business income through a tax-efficient business, rental property, blog, YouTube channel, LLC, partnership, cash-burning website, you name it, if you own it, consider it a business, and as a business, you can depreciate business-related expenses as it appreciates. That’s not available with personal gross income, only net income= revenue — expenses where expenses are tax-deductible within a business. No wonder 60%+ Americans don’t pay taxes. They all own businesses!

Welcome to the way financial freedom and flexibility are really made. You don’t have to be a CEO of a Fortune 500 company or over-priced VC-backed unicorn to be wealthy. You’ll be surprised how many plumbers, electricians, contractors, etc. ‘dirty jobs’ live in Greenwich or Fifth Ave. The dirty, hidden, quiet meaningful jobs pay just as well if you structure them right. That’s the ultimate key.

Living a rich, not wealthy life starts with upgrading your income not expenses and being completely focused for the next few years or decades or for however long you make it take. It’s not about how much you earn, but rather how much you keep. What if it was as easy as not quitting? It’s disappointing how many people quit too early due to boredom and lack of patience or diligence. Don’t be one of them and start investing now or never. The best time to invest is today, the worst time is tomorrow. Go get after it.