DISCLAIMER -  I am not a Financial Advisor and do not work for any Brokerage Firm. The opinions given are of my own and are not to be used as professional advice.  These are my findings and can hopefully help you to make informed decisions on investing. Consult a Broker or Lawyer before making any investment.
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Best Investment for end of 2022?    
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The year 2022 has been a wild ride for investors.   Friday, after Federal Reserve Chairman Jerome Powell gave his blunt assessment that the Fed would continue to up the interest rates due to the choppy waters of the bond market, it triggered a 1,000-point drop in the NYSE.   Investors are already skittish, and with little or no direction from Washington, the direction of the market appears clearly bearish.

With the S&P 500 down 22 percent in the first half of 2022, and bonds down 2 to 5%,  no investment seems too secure.     This is only the third time in recent market history that we have seen both bonds and the S&P 500 both go down at the same time.  I have included that Schwab investment letter twice in recent weeks. So I won’t include it again today. 
If you want to read about this unusual circumstance, it is in the following blog article from 2 weeks ago:
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https://lifecanbesimple.net/blog/ways-to-protect-your-investments-on-huge-market-drops

It is certainly a time to start looking at some stop-loss sales as I put forth in that article also.   I would note that the first of my 15 stop loss sales was triggered on Monday morning around 9:30, so we are in a very bearish market.

So is there ANY investment that is a sure thing in the year 2022?   Several months ago, I wrote an article on a good place to put $50.  I now conclude that the market waters are just not safe to SAFELY invest in the market, so I am going to again promote that the best place for your money in 2022 is the Treasury I-Bond.  

The rate in February was set for 9.62% for that six-month period, and I think with inflation raging, in November, the next six-month rate may exceed 10%.    I ask, WHERE in this market can you get a locked 9 to 10% return?   I cannot think of a single one except for the I-Bond.
I know that our DGI investments in stocks with high growth potential and medium to high dividends might exceed it, but they also might show a negative return if the market goes belly up.  

Here is the article about DGI investing:
https://lifecanbesimple.net/blog/dgi-investing

I believe in DGI investing, and have 11% of my money in DGI stocks (or ETFs) and 11% in high paying REITs on either stocks or ETF Reits (like RIET or HOMZ.)

https://lifecanbesimple.net/blog/investing-in-reits-real-estate-investment-trusts

I always try to keep 11% of my money in the full stock market Indexes and buy more on these huge market drops like on Friday.    I buy these full stock market indexes.:  ITOT, VTI, and SCHB.   

The ETF: SPY which is the total S&P 500 is also a good one to buy on the dips.   

But with the shaky market, I have over 50% of my money currently in cash, CDs, or I-Bonds.  It is not easy to watch your overall portfolio go down day after day as it has the past few weeks.    But if you stay in cash or bonds, you have minimal earnings at best.  

I recently read that in the 136-year history of the market, equities have consistently outperformed Bonds and savings accounts.   So when the averages come in if you stay in equities, you will probably be ahead based on history.   History typically repeats itself, but there is no guarantee that it will.   Make your decisions carefully and consult someone who can give you a good long-term strategy.

So back to our question for this article.  Let’s say you have $100 or even $5,000, and you want to be sure you don’t lose any money.   You can lock it up for 1 year and then get your principal and interest.   If you lock into a one-year CD, most likely it will pay from  1.4%.   5 Year CDs up to 2.4% which is better than earlier in the year.  Not much to show though for years of earnings.

We did an article on Bonds.   Read it at:
https://lifecanbesimple.net/blog/what-is-a-bond
 
What if I told you there is an almost sure lock investment that will yield you at least 9.6% for six months and might go above 10% in the following six months?  

IT IS TRUE.   The investment vehicle is a Treasury I BOND.   These are relatively new on the market.  They are based on the 30-year Treasury bond  (yielding somewhere around 2.75% to 3.25%  plus the inflationary adder. ) 

Currently, the inflation is so high for the next 6 months  (beginning in February 2022), the rate is locked at 9.62%.    You can purchase these online at  www.treasurydirect.gov

I am so pleased with the rate that I am purchasing one per week for the next 52 weeks and considering doing this indefinitely until inflation is back under control which probably won’t happen earlier than 2025 if we get a new president with market logic and leadership to guide our country.

What are the limitations of an I-BOND?

1.       You can only purchase $10,000 per year per family member.
2.     Minimum purchase amount is $25
3.     The interest rate resets every six months.   Let’s say it goes down 2% in the next six  months.  Hmm.. All the way down to 7.6% is not all that bad.
4.    If you take money out before five years, you lose the last 3 months of interest.
5.     You must leave the money in the account for one year before withdrawing it.
 
That is it in summary.  So if you buy today and need the money in 14 months, you will only get 11 months of interest.    I say that is still a heck of a deal.
 


Read all the rules and limitations at:
https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds.htm#irate
 
Read about I-Bonds at www.TreasuryDirect.gov   You can set up an online account and purchase a bond in approximately 30 minutes or less. 
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If you already have cashed out some of your retirement accounts, maybe this is a good place to park your money while the market stabilizes.     I would not recommend taking a lot of money out to buy these, but put your new money in I-BONDS until the market stabilizes.   Locked over 9% returns make a lot of sense in this unstable bearish 2022 market.
 

 
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Unfair Advantage – Robert Kiyosaki

DISCLAIMER -  I am not a Financial Advisor and do not work for any Brokerage Firm. The opinions given are of my own and are not to be used as professional advice.  These are my findings and can hopefully help you to make informed decisions on investing.  Consult a Broker or Lawyer before making any investment. 

 
Unfair Advantage by Robert Kiyosaki  is one of the best books I have read this year.  It is the fourth one I have read in the Rich Dad Poor Dad series.  If you have not read any of the earlier books, I would definitely recommend reading Rich Dad Poor Dad and The Cashflow Quadrant before reading this book as he refers back to the first two several times.   They seem to build on one another.

The premise of this book is that without a rich person’s mindset we will never gain that ‘Unfair Advantage’ being taught in this book.  The rich understand to make huge amounts of passive income, we must acquire assets.     To fully grasp this, we must understand the Cash Flow Quadrant:

​A quick review of the Cashflow Quadrant is in order.    Everyone who makes money is in at least one of the four quadrants.  The Left side of the quadrant is made up of people working for their money.   The “E” quadrant is made up by employees working for a wage.   The Bottom Left “S” quadrant is made up of mainly self-employed people such as professionals, doctors, lawyers and small business owners.   (Most are sole proprietorships.)

The Rich makes most of their money on the right side of the Quadrants.  The “B” quadrant is made up of large businesses.  (Over 500 employees which normally are businesses being run as corporations or LLC – Limited Liability Corporations.)   The B Quadrant allows for profits without the input of the owner. (This happens over time.  The owner typically is a leader in the business early on.)   The biggest money is made in the “I” quadrant.  These are the Investors which are professional Level 4 investors.  These are the rich investors who typically pay no income tax by using the tax laws to their advantage. 
 
What I learned from Unfair Advantage:

This book teaches you what your schools and college never taught you.   We learn from Mr. Kiyosaki how to leverage our money to make huge amounts of passive income.  This is all about today’s ‘Real Life Investing.’   His rich dad urged him to be careful who he choose to be his teachers.

The industrial age ended around the year 2000.  However, our schools are still teaching the same outdated information that worked back in the Industrial age.   Back then, we were taught to get a good college education, go to work for a good company, invest our hard-earned money into a 401-K Retirement fund and retire after 40 or 50 years of work.    

What we are not told today is that the size of the ‘middle class’ has been shrinking year by year since 2000.   Jobs that used to be high-paying long-term jobs are now being outsourced to foreign countries to save on labor costs.  Job security which used to be a reality is just not there today.   We need to learn real-world teaching to know how to navigate the financial world today.

In 1971, President Nixon took America off the gold standard.  Nothing backs our money anymore, and we just keep printing more and more money as the national debt climbs into the trillions.   We are running up a debt that neither we nor our children will ever be able to pay.  By 2010, the dollar has lost 95% of its buying power.

Inflation is rising.  In the year 2000, gold cost $282 an ounce.  At the time of the writing of this book in 2010, it was at $1400 an ounce.  Today it is well over $3,000 an ounce.    Think of all the rising costs of housing, fuel, food, transportation, etc.  We need a better financial plan to survive.

There is no true accurate financial education in our colleges or high schools today.

​ROI has always meant Return on Investment.  Rich Dad says that today it means the Return on Information.  We must continue to read and learn every day.  Grow in our financial education and learn from teachers who understand investments including the stock market and real estate.
 
Invest in your financial education. Know how to invest and how to not lose money.  Turning your retirement money over to mutual fund managers in your 401-K is not safe. They get paid first even when you are losing money on stock market downturns and crashes.

Taxes are not fair.  

• The harder you work, the more you pay in taxes.
• The harder your money works for you, the less you pay in taxes.
• The harder “Other People’s Money” works for you, you pay even less tax.

 
In 1997, Robert Kiyosaki quoted his Rich Dad who said that your home is not an asset.  It costs you money for mortgage payments, for Insurance, upkeep, etc.   It is a liability.  But a property purchased through an LLC (Limited Liability Corporation) is an asset.  The renter pays the mortgage for you, and profits come into you.  And when you buy the properties, sometimes even the owners themselves will carry the note allowing you to truly make money off of “Other People’s Money”.

The Bible says that “My people perish for lack of knowledge.”  Millions today are perishing due to no true financial knowledge to understand the difference in an asset and a liability.

The key in any investment is to minimize loss.  Even in the stock market, there are ways to limit loss by using ‘Stop Loss Sales’.   Mr. Kiyosaki makes his living from selling books and teaching classes on finances.

You must have CONTROL over your investments.

Mr. Kiyosaki spends a greater portion of a chapter explaining why Capitalism is good and needful.  Capitalism is good.  True Capitalists only profit when they make life better, often saving consumers time and money.

To end this financial crisis, schools and colleges must change.  We as investors must learn “Real Life” investment Information.   Understanding tax laws gives us the ability to use our tax to invest.   But to do this, you must be trained and understand HOW to do it.

The rich don’t work for money.  They use their minds to gain information on how to obtain Passive Income.  Passive income makes you money without you having to work for it.   While you sleep, passive income puts money into your bank account.
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When we take part in Rich Dad Financial Education, we become part of the solution to the financial crisis we face in America.  And as we learn, it gives us the knowledge to navigate all the changing waters of today’s investments.  Things change.  Tax laws change.  We must constantly strive to get more and more information by reading and attending seminars and training.  Be sure you know your teacher is wise in the real-life world of investments.

I recommend reading this book and believe everyone who invests can take home a lot of valuable information.  We must realize that not everything we learned in school was factual and change with the times.  We must continue to read, learn, and grow in accurate knowledge.  Be sure the teachers you are listening to are truly trained in ‘today’s real world’ investments.   Change yourself, and then you can change the world around you.
 

 
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Minimalism – Living a Life of Discipline

Discipline is a great topic.   It is needed in both living a simple life and in investments, but today we will discuss it mainly from living a simple, successful life viewpoint.  The little image above really defines Discipline and what it takes to be a person who is disciplined.

Few things in life are accomplished without discipline.   I have been reading several books recently on Mindset, Habits, and Mental toughness.  One thing in common with them all is the requirement for discipline.

The reason many fail to be successful in accomplishing their goals in life is a lack of discipline.   It is easy to start, but even easier to get distracted and lose focus.    We must develop the discipline to FOLLOW THROUGH on what we start.   Repetition is the key to success.   Try to get a good habit of repetition and do it over and over.  Soon that habit will give you the ability to acquire the needed trait of discipline.

If you are attempting to budget, and a big expense comes up that would throw the budget out of whack for the month, Discipline allows you to calmly control the situation and just modify your other expenditures to allow for the unforeseen expense.  Discipline teaches you to allow for unforeseen circumstances that will plague you all through life. 
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Discipline and control go hand in hand.   Your mindset has to be very steady and calm which allows you to respond to situations, not react.  Disciplined people are unmoved by all the chaos going on around them.

If you want to lose weight on a diet, you must start and then have enough discipline to continue to control your eating habits.   If you want to be above average on your investment returns, it does not come easy.  You must study, read, and have great discipline.   Discipline clearly ties in with another good trait and that is perseverance.   If you stick to things and keep on keeping on, you will accomplish great things.

Merriam-Webster Dictionary says Discipline is the

1.  training that makes people more willing to obey or more able to control themselves.

 

1. training to act in accordance with rules; a drill is example of military discipline.

 

1. an activity, exercise, or regimen that develops or improves a skill; training:

 
Sticking to specific and regular mealtimes is an excellent discipline for many dieters.
 
So control of self allows us the discipline to accomplish things.   In the book “The 10x Rule”, Grant Cardone says we should not just try to be disciplined in our lives, but DO IT.    Trying leaves us room to not succeed, whereas when we say we will “Do” something, we will commit more firmly to accomplishing our goal.
 
Without discipline, you will not accomplish a lot.   Discipline makes us do what we may not want to do because it is needful.    Sleeping in may be more relaxing than getting up to do your daily exercises, but being disciplined will allow you to fight through the issue and get up and face the new day.

If you go on a diet, and you lose 10 lbs. and that was your goal,  it feels great.  But if we are not careful, we will go right back to where we were.   That is called the Yo-Yo effect.   We lose 10 lbs., get excited that we reached our goal, and then a week later, we gain back 12 lbs.    To really win at whatever our goal is, we must have enough discipline to not only accomplish a goal but to sustain it.  That means changing our methods and habits that caused us to be overweight, to begin with.  Weight is just a result of a bigger issue of perhaps eating too many desserts or failing to exercise daily.

It is easy to start on some goal, it takes a lot of perseverance to stick with it and stay disciplined.  Almost all the books I have read on habits, continually speak of having discipline.

What are the Advantages of being disciplined?

• Sticking to new habits will come easier
• Goals will be accomplished more quickly
• Your self-esteem will increase as you see yourself in control
• Others will see you leading a consistent productive life
• New goals will seem less difficult to achieve as you now know you can do whatever it takes.

 
Are the disadvantages of discipline?

I really can’t think of any.  Being disciplined will allow you to have continual and consistent success in whatever you set your heart to do.
 
 
In my earlier years, I had a desire to do well but lacked the discipline to continue on the path of the goal.
 
The bible encourages us have discipline in our spiritual life.
 
Tit 3:8  This is a faithful saying, and these things I will that thou affirm constantly, that they which have believed in God might be careful to maintain good works. These things are good and profitable unto men. 
 
So what will it take to get discipline in your life?   First, you must really desire to do things in an orderly, consistent fashion.    Getting the proper mindset will get you going in the right direction.  Believing you can is the right first step. 
 
Henry Ford once said:   “Whether you think you can, or you think you can’t, you are right.”
 
Start today.   First, plan out your work or goal, and then follow through consistently on it.    Failing to plan is planning to fail.   Always have a plan and work through every setback.
 
When you obtain the needed discipline, you will find yourself in control of your attitude, words, thoughts, actions, and will have the right mindset due to the right self-talk you are speaking to yourself.  Have control over yourself.   It is a wonderful way to live, and your productivity will increase and your goals will become so much easier to obtain.   Life can be simple if we live with Discipline.
 

 

 
 
2 Links on Minimalism articles from Joshua Becker’s weekly blog:

How Minimalism saved Stephanie Giese’s family of 7 from Financial ruin.
https://www.becomingminimalist.com/minimalism-saved-our-family/

Bradley Williams on 10 things they learned to do without living in a van.
https://www.becomingminimalist.com/van/

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Ways to Protect Your Investments on Huge Market Drops

DISCLAIMER -  I am not a Financial Advisor and do not work for any Brokerage Firm. The opinions given are of my own and are not to be used as professional advice.  These are my findings and can hopefully help you to make informed decisions on investing.  Consult a Broker or Lawyer before making any investment. 

One of the reasons many people refuse to invest is the fear of loss.  It is real, and I understand your feeling.   Anyone who says that big market drops do not bother them either has very little in the market or the money is of little significance to them.   I preach the wisdom of riding out the market bumps with the ebbs and flows.   And for all the bull markets we have seen, they are always followed in time by a bear market. 

If you are unfamiliar with those terms, a bull market means stocks are going up the majority of the time, whereas a bear market is when the stocks are dropping most of the time.   Trying to time the market is very difficult.  I tried a few times and found that most of the time I was either late in selling or waited too long after the bottom to buy back in.   Typically when the market rebounds, it is by 1,000 to 2,000 points.   So on those days, you want to be invested to gain the most traction and good returns.     

I have tried to take the buy and hold strategy the last few years, and have done well.    However, a huge drop in the market could throw a wrench in your plans when you reach your retirement years like me.  The reality is that a huge loss would be very difficult in which to recover.   A young person can lose a lot and still come out in the long term.   So this article is geared toward you that are in your 50s or older.   However, some of the strategies might be wise even for the younger audience due to the current market.   Below is the method I have for years recommended.

This article from Fidelity came out in June urging people to stay the course even in the choppy markets.

Fidelity shows that people churning money in and out on a whim rarely break even with the people who continue to buy when everyone else is panicking.
 
Here is an excerpt from that Fidelity article:

Stick with your plan, even when markets look unfriendly 

When the value of your investments falls, it's only human to want to run for shelter. But the best investors don’t. Instead, they maintain an allocation to stocks they can live within good markets and bad.

The financial crisis of late 2008 and early 2009 when stocks dropped nearly 50% might have seemed a good time to run for safety in cash. But a Fidelity study of 1.5 million workplace savers found that those who stayed invested in the stock market during that time were far better off than those who headed for the sidelines.

In the decade following the start of the crisis in June 2008, those who stayed invested saw their account balances—which reflected the impact of their investment choices and contributions—grow 147%. That's twice the average 74% return for those who fled stocks during the fourth quarter of 2008 or the first quarter of 2009. While most investors did not make any changes during the market downturn, those who did make a fateful decision with a lasting impact. More than 25% of those who sold out of stocks never got back into the market and missed the gains that followed.

If you get anxious when the stock market drops, remember that’s a normal response to volatility. It’s important to stick with your long-term investment mix and to have enough growth potential to achieve your goals. If you can’t tolerate the ups and downs of your portfolio, consider a less volatile mix of investments that you can stick with.

So the old, proven, continual purchasing whether the market is up or down appears to be a good way to go.  The term is dollar-cost averaging.   If you buy when the stock is high and sell when it is low guarantees a loss.  But if you purchase while the price is down, the average price per share drops.   This gives you the ability to make up quickly for any early losses.   

With that being said, let’s look at where we are here in August of 2022.  I think a little insurance might be wise at this time.  The S&P 500 has had a huge drop over the first half of the year.  (22% loss.)   Normally when these bellwether stocks crator like this, the bonds kick in to offset some of the losses.    If your portfolio was like mine, the bonds lost from 2 to 5% making this a horrible year.    

​I read an article from Schwab 2 months ago and they explained that this is only the third time in the history of the stock market that stocks and bonds went down at the same time.   Here is that article:

THE THREE BEARS
Stocks, bonds, and cash are all in a bear market or teetering on the edge of one—a very rare event. Over the past 72 years, there have only been two prior periods with a triple bear.
 

Stocks, bonds, and cash are all in a bear market or teetering on the edge of one—a very rare event. Over the past 72 years, there have only been two periods with a triple bear—both took place in the 1970s.

• On Friday, the S&P 500 and MSCI World Index both briefly slipped into bear market territory before recovering by the end of the day, closing very near the -20% threshold from the market peak on January 4, 2022.
• U.S. bond yields have jumped in 2022, posting their worst start to a year on record. Other bond markets around the world have also performed poorly. The trend in German bond yields reflects the U.S., trending lower since the early 1980s until recently. Both the U.S. and German 10-year bonds have suffered a loss of just under 10% on a total return basis so far this year.
• The return on cash, represented by three-month U.S. Treasury bills, has been lagging inflation, resulting in a negative return on an inflation-adjusted (or real) basis for many years. The surge in inflation over the past year has pushed the real return deep into negative territory, similar to where it was very briefly in both 1951 and 1980.  

Will a bull market return?

A bull market is likely to return, as it typically has. But when? Well, every period is different and there can be no guarantees. It is worth noting however that the prior periods featuring any of these three bears were often very brief. 

• Occurrences of cash bear market extremes historically marked a peak in inflation. We may already be seeing signs  that inflation peaked last month,  such as falling input prices and excess inventories reported last week at big box retailers like Target, Kohls, and Walmart (which we had projected in the November 2021 article Will Shortages Lead To Gluts?)
• Emergence of climbing global bond yields since 1980 have been consistently followed by some deflationary event that contained the rise: 1986 oil crash, 1989 fall of USSR, 1991 Japan going bust, 1998 Asian contagion, 2001 China joining the World Trade Organization, 2008 housing bust, 2011 Eurozone debt crisis, 2013 shale revolution, 2020 global pandemic. Perhaps another deflationary event may be just around the corner as risks of recession rise.
• Once stocks breached the 20% threshold, the time it took to reach their bottom before beginning a new bull market was often surprisingly short: 39 days in 1966; six days in 1987; 36 days in 1990; the same day in 1998; 12 days in 2011; the same day in 2018; and 11 days in 2020. The four exceptions to these brief periods were: the start of the 1970s when it took 117 days; the end of the inflation era in the early 1980s when it took 157 days; the early 2000s Tech Wreck where it took 595 days to bottom; and the 2008-09 Great Financial Crisis, which took 241 days.  

How much lower until the bottom?

Nearly every stock bear market for the MSCI World Index came alongside a global economic recession. Non-U.S. stocks do not seem to have fully priced in a recession, but they may be close. The price-to-earnings (PE) ratio for international stocks, represented by the MSCI EAFE Index, has rarely been lower than it is today, outside of a recession. 
 
 
So here is where we stand.   A dual loss market in 2022.    I want to encourage you to do several things.    One is to be sure in turbulent markets like we are in right now, have a lot of cash and/or bonds.   The article on I-Bonds was timely this year.   I-Bonds have a 9.62% lock on rates for the current 6 months.  The rate adjusts every six months based on the long-term Treasury bill rate plus the inflation rate meaning November may surpass 10%.

https://lifecanbesimple.net/blog/safe-place-to-invest-50-today
 
I personally at my advanced age have 54% of my investments currently in Cash or bonds, with a large segment weekly going to I-Bonds.    The next thing to be sure of is to have a lot of money in the overall stock market indexes.   ETFs like:  ITOT   VTI  SCHB   VOO  SPY etc.
And then be sure you have some investments across all the 11 sectors of the market.     I discussed those 11 sectors in my article on investing with ETFs.

https://lifecanbesimple.net/blog/simple-path-to-investing-with-etfs

When you diversify, that helps you to offset bad sectors with those that are great.   All of the time some sectors are outperforming others.  This year the oil and gas business has been the best with Exxon up 61% this year.   Health care is another sector performing well in the current market.
 
So if you are diversified, and have a lot of money in full market stock indexes, does that guarantee you no loss in a huge drop in the market?   No, it does not.  That is why I am so cash conscious right now.    When you look at the news, with problems all over the world, Russia invading Ukraine, and the leaders in Washington out of step in almost every area, what is the likelihood that we will go from the current 33,500 NYSE average to 36,000? 

It might happen, but with all the gloomy news, we may be ready for another huge drop like in 2008 or 1972 or worse of all, 1929.   I wasn’t around for the great depression, but I remember both 2008 and 1972, and both were hard to bear.   I hate to be a bearer of bad news, but realistically, we could go from 33,500 to 25,000 very easily, and a drop to 15,000 would not greatly surprise me.   That would mean a 50% or greater loss in your average stock holdings.   Can you withstand a loss of 50%?   I am too old to recover from such a huge loss.  If you are in your 20’s, you could.   But would it not be smarter to have some insurance against such a catastrophic loss?

Recently I have read 4 of Richard Kiyosaki’s books in the Rich Dad, Poor Dad series.   Last week, I watched one of his online seminars, and in that presentation, he said he does all he can to NEVER lose money.   Now to never lose money and invest is pretty much impossible, but there are ways to hedge your losses.    Mr. Kiyosaki introduced me to several, and one of them I want to cover today.   

This method is like having an insurance policy.     How this is done is by issuing a STOP LOSS sell on your stocks and ETFs.   Mutual funds and Nasdaq stocks are not eligible for this, but the ETFs and Stocks with 1 or more shares held are.    If you have never heard of a stop loss sale, let me explain it a bit.   A stop loss LIMIT order allows you to specify the price you will receive on the stock or ETF when you set the value to trigger the sale. 

Now, remember that a down market generated this sale.  Is it possible that if you specify a LIMIT, you will receive it?  Possibly, but unlikely.   So, your order might never process.    Now if you do not specify a LIMIT on the stop loss order, then it probably will be filled, but not at the price that you specified to submit the sell order.   You would receive the current market price if there is a buyer. 

So if you specify the stop loss to be issued at $40 for example, probably the best you could hope for would be $39 or a bit over.   And someone has to agree to buy it.    For every sell order, someone has to buy.   So if it is a huge market drop, your $40 stop loss might wind up sold for $35 or not at all.    So keep in mind, that a STOP LOSS order is not a contract for the price you specified.   Just a request to sell at the current market price.

What I did this past week was I went into my holdings at Fidelity, Schwab, and Vanguard, and any with a substantial balance on them, I clicked on the SELL tab.  From there, I choose   STOP   or STOP LOSS (depends on the broker), and you key in the price you want to trigger the sale.   As I mentioned earlier, I buy all my stocks and ETFs to hold long-term, so I do not want them to sell on a minor bounce in the market. 

Richard Kiyosaki suggested using 80% of the current value which is what I used.   So on a $50 stock price, if it goes to $40, it will trigger the sale.  Now of course this does mean I would lose 20% of the value of the security, but a 20% loss is so much less than a potential 50 to 80% loss.  

At Fidelity, I chose a GTC order meaning Good until closed or canceled.   I did the same at Schwab and Vanguard, but their GTC orders are only good for 60 days.  So on Oct. 12th, I will have to rekey those.  Of my 80 or so holdings, I am only entering 15 to sell with Stop Loss orders .  I may bump those up in time, but the big holdings are what concern me.

I found a great video on Fidelity explaining how to understand and place stop-loss orders.  Watch it here:

https://www.fidelity.com/learning-center/trading-investing/trading/stop-loss-video
 
Should you consider a STOP LOSS order for your larger holdings?   If you consider the danger of the current market, I do think it is worthy of consideration.    In life, I have found that you normally don’t need insurance if you have it.   So, if you key in some stop loss orders and never use them, it is just insurance.   BUT, if the market takes a huge downturn, and it could happen, you will eliminate some of your loss.   

Think about it and read some other authors on the topic and discuss it with your broker.    Since we no longer pay commissions to buy and sell Stocks or ETFs, we can simply repurchase the sold items if it was done in just a market shakedown.   But if a catastrophic drop, I think you will be glad you did sell.  


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​The Practice – Seth Godin

DISCLAIMER -  I am not a Financial Advisor and do not work for any Brokerage Firm. The opinions given are of my own and are not to be used as professional advice.  These are my findings and can hopefully help you to make informed decisions on investing.  Consult a Broker or Lawyer before making any investment. 
 
The Practice by Seth Godin  is one of the best books I have read this year.  It is only the second one I have read about being an author and writing.   The Practice is a highly acclaimed book in the field of writing.  It actually pertains to anyone putting forth creative work from authors, to poets, artists, or musicians.  If you are a creator, a problem solver, or just a generous leader, this book is for you.  It is about making things better and putting out content.  We all need to learn how to find a way to be more creative.

If you want a book on writing, I suggest starting here.  Seth Godin lays out some clear paths to get work done and shipped on a timely basis.   He cuts through all the excuses and simply makes the point that if you are a writer, your job is to write.    Maybe it won’t be great, but you start, and you seek to improve.  Even if you have limited talents, Mr. Godin believes you can become a great writer.  Our job is not to be perfect, but to put out ‘our work’.  That is “The Practice. “
 
What I Learned from The Practice

SHIPPING - because it doesn’t count if you don’t share it.  Be creative, because you are not a cog in the system, you ARE THE CREATOR AND PROBLEM SOLVER.

WORK – because it is not a habit.  There’s a practice available to each of us.   The practice of embracing the process of creation.

IT IS POSSIBLE – For people like us, our lives follow a pattern.  Are you searching for something?  Most of us are.  Followers are not searching, but we are.  Leaders seek to make things better.  The chance to make a difference and to be seen and respected.

Perfectionism has nothing to do with being perfect.  Attitudes are skills, and there’s no such thing as writer’s block.   He says this over and over in the book.  “There’s no such thing as writer’s block.”

You are enough – Just write.  Start where you are.   The world conspires to hold us back, but it can’t without our permission.   There’s nothing that we can do to ensure that tomorrow turns out exactly as we hope it will.   We must take our chances, speak up, and contribute.   Just write.

Resistance is real.  We must fight through our hard times and persevere. Trust the practice and engage in the process of creation and shipping.  Then the resistance loses much of its power.

We must just do the work, even if we have doubts. 

Shantideva once said:  “If the problem can be solved, why worry?  And if the problem can’t be solved, then worrying will do you no good. “

Talent is not the same as skill.  We are born with talent, but we earn skills.  You put out the work but must realize you can’t reach everyone.  We are to find those in who we interest and those that will read and listen to our content.
 
As we put out more and more content, we return to these simple narratives:

• This is the Practice
• It has a Purpose
• I desire to create change
• The change is for someone specific
• How Can I do better?
• Can I persist long enough to do it again?
• Repeat

 
Writer’s block is a myth.  It is a choice and it is all invented.  Stories are real and stories can change.  

1,000 true fans are all you need.  True fans will drive across town to see you and pay you for your work in advance.  They will let you sleep on their floor.  You make a difference in your true fans’ lives.

Layman Pang once said that his life was “To Chop Wood and Carry Water.”  In the practice, day after day, we must continue to chop wood and carry water.  Again and again and again.

We must continue daily to ask ourselves “How Can I make this better?” No matter who you are, you must read and continue to read again. Be aware of other work about you, and use it as motivation to develop your skill.   You can learn from other authors.   Read to gain insight and knowledge.

Good taste comes from Domain Knowledge.  Combined with the guts and experience we learn how to veer from what’s expected.  There is no shortcut to excellence.

We can change the world, but we can’t change everything.  Trust the process.  It is at the heart of the practice.

In conclusion at the end of the book, Seth Godin asks:

Where do IDEAS come from?

1. Rarely from watching television.
2. Some from listening to a lecture.
3. Some from reading a book.
4. Ideas fear experts and hate conference rooms.
5. Ideas don’t need a passport, and often cross borders of all kinds with impunity.
6. An idea must come from somewhere because if it merely stays where it is, it is hidden.  Hidden ideas don’t ship.  They are alone.

The Path Forward is about curiosity, generosity, and connection.  You have everything you need to make magic.  You always have.  Start where you are and don’t stop.

Go make a ruckus.
 
I recommend reading this book.   If you intend to ever write or get involved in being an author, it is very helpful with many writing tips.  If you are involved in anything that involves creativity, books, poetry, art, or music, this book can be an asset.

 
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The Simple Path to Investing Using ETFs

DISCLAIMER -  I am not a Financial Advisor and do not work for any Brokerage Firm. The opinions given are of my own and are not to be used as professional advice.  These are my findings and can hopefully help you to make informed decisions on investing.  Consult a Broker or Lawyer before making any investment. 

Learning how to invest is sometimes a scary thing to many people.   If you are young (or old) and have never invested before, determining where to start is difficult.  I remember opening my first investment account back in 1973 at Merrill Lynch.  I was the tender age of 22 and thought I was ready to get started.  Immediately I realized that Investment houses and stock brokers talked a whole different language than I did.   I was blessed to have a good broker, and he bought me a copy of “The Intelligent Investor” by Benjamin Graham and suggested I read it.    It has been years since I read it, so I have not done a book review on it. In the book, Mr. Graham spends a lot of time explaining how to read company financial statements and how a person should try to buy a company’s stock when its price is less than their Net Asset Value.   

Probably just reading that one paragraph is enough to make many of you want to stop reading.  But hang in there with me.    If you have a background in finance or accounting, this will make more sense.  But if you know nothing about accounting and financial statements, there are still plenty of ways for you to invest.

In two of my earliest articles, I tried to explain the 4 main vehicles that are used to invest.   They include Stocks, Bonds, ETFs (Exchange Traded Funds), and Mutual Funds.     Now there are many other ways to invest than these, but these four make up a large segment of the stock market financial opportunities.   To read about Stocks, ETFs, and Mutual funds, read here:

https://lifecanbesimple.net/blog/investment-categories

To Read about Bonds, read this article.
https://lifecanbesimple.net/blog/what-is-a-bond
 
Today I want to discuss ETFs in a bit more detail.   An Exchange Traded Fund is much like a stock.  With a Stock, you are effectively buying ownership into the company.   Say you like buying at COSTCO discount stores, you might go down and buy a few shares of that company’s stock.  When you buy 10 shares, you become a minor partner in owning Costco.  If they pay dividends, each quarter (or yearly), you will receive a dividend check.   I don’t own Costco, but I own Walmart and McDonald’s.  

Both of these companies pay like 3% dividends, so if the stock was $20 per share,  you would receive $6 per quarter in dividends for each stock share you owned.  So if you owned 100 shares, you would receive $600.  And on top of that, if the stock goes up in price when you sell your shares, you will have a capital gain from the difference.   To prevent having to pay capital gains taxes, you can invest in an IRA (Traditional or Roth), and you never have to pay taxes on the gains in the ROTH IRA, and only pay them on the traditional IRA when you withdraw funds.    But IRAs are good ways to invest money.   Read about those here:

https://lifecanbesimple.net/blog/differences-in-roth-and-traditional-iras

My wife and I both started off with Traditional IRAs, but have converted all of them to ROTH IRA’s so we never have to pay taxes on any money withdrawn.   When you put money into a ROTH IRA, you get no tax break.  But the biggest break of all is all that money comes back to you tax free when you retire or need it.

So the $600 of dividends which is Passive Income (money you did not have to work for), comes in and that is great.   But say your $20 stock goes down to $15.   Until you sell it, you have lost no money.  But if you needed the money for an emergency, then you would have lost 25% of your investment.  It is best to never buy stocks without a large cash emergency fund so that you can ride out the ups and downs of the market.

If you are like me, the idea of losing 25% of my investment is scary.  What if there was a way to minimize that loss?   There are MANY ways, but we are going to zero in on one of the best.   Don’t buy that one stock, but buy an ETF.  The ETF is based on some index or sector type.   There are 11 different sectors to invest in.
 
List of 11 Sectors

1. Energy
2. Materials
3. Industrials
4. Utilities
5. Healthcare
6. Financials
7. Consumer Discretionary
8. Consumer Staples
9. Information Technology
10. Communication Services
11. Real Estate

ETFs are available over any one of those sectors, and then they can get very specific.   An example is a new ETF that just came out in the past month covering all Lithium companies.  LIT    I bought a few shares of this ETF and my $30 is already worth $34 in like 10 days.   Personally, I think Lithium is the next big thing with all the cars switching over to EV power on Lithium batteries.   I could be wrong, but this is an example of a narrow-focused ETF.   This is just one type of industry inside Sector 2 above (Materials).  SLV is all the silver companies.   There is one on GOLD which is GLD. (SPDR GOLD SHARES)     

So a person can identify what they want to invest in, and suddenly you are no longer at the whim of any one stock.    However, you may not reap the higher dividends of specific stock selection, but you are going to get a very consistent average over that sector/group you have chosen.  If your goal is to invest in DGI stocks, you can still use ETFs.   I believe that DGI stocks and REIT (Real Estate Investment Trusts) are the two most promising of all the types of investments available today. 

DGI stands for Dividend Growth Stocks.    A few ETFs that specialize in those are:  NOBL   FDVV  SDIV DHS and my favorite LVHD.  Another great ETF for DGI investing is PFF, I-Shares Preferred Stock Income Sectors.   Preferred stocks are some of the better investments when given proper scrutiny.    We will cover those in an upcoming article.

If you buy any of those ETFs, you are getting a broad range of Dividend Growth Stocks.    Will they give you an exact percentage each month?  No, but it is an average of all the stocks these companies chose to include in their portfolios.     So each of these ETFs will provide varied returns.   Why I like LVHD the most is in this horrible year with the S&P 500 plunging 22%, this ETF is still making money.  That is a tough thing to do.  The others have done well, but LVHD is very, very good.

How can you buy an ETF?   Well, you have to use a brokerage firm or some app that allows you to purchase the ETFs.  Now be aware if you purchase the ETF outside of an IRA, then you will have to pay taxes on both the dividends and the capital gains as the stocks appreciate in value.  I do 99% of my investing inside of ROTH IRAs so I never have to pay any taxes on the dividends or the capital gains.

What is super about ETFs is they constantly change in value throughout the day, and they are totally liquid.   What I mean by that is that you can buy or sell them at any time the market is open.   So if you need your money, they can be sold by simply opening your browser or app and issuing a transaction to SELL.   Of course, it all depends on the market as to whether you will make or lose money.    I have never used ETFs to do short-term trades.   Some people do and some ETFs are designed for that purpose giving 2 or 3 times a certain category in movement.   So say you have 3x Energy ETF, it will go up or down 3 times as great as the underlying sector moves.   So you can make huge profits or lose it all very quickly. 

I don’t believe in day trading myself, and do all my investments as long-term investments.  That means I don’t try to time the market or move in and out of stocks or ETFs, but continually purchase more.   If I see some sector going down with no good outlook, I may sell out that ETF.  But on the larger sectors like the FULL Stock Market ETFs like ITOT, VTI, DIA, and SCHB, I simply continue to buy even more on market dips.

You have to get in and get your feet wet to find out what works for you.  If you are unsure of what to buy, discuss it with your broker, accountant, or lawyer.  All of the ETFs I have mentioned today are very consistent performers, especially in good markets.    The only one mentioned that is somewhat speculative is LIT being the Lithium ETF.  All others are very consistent ETFs that consistently have had good returns.

I urge you to study and read a lot of resources.   I feel comfortable investing today as I have a feel for the market after years of study and some struggles.   I have no crystal ball and can not tell you if the market is going up or down.    Being as high as it is now, it may very well have a huge downturn in the upcoming year.    But putting some money in ETFs in a ROTH IRA is a very logical way to get some passive income.
 
 
  
 
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Minimalism - How to Save Money Reading Books

In the tough economic times, we are in, it is really good to look for ways to do things a bit cheaper.   Book reading has become my favorite hobby.  This year, I have really focused on reading books on investments and trying to live a better and more successful life.  By reading more, I have been able to get a better mindset about life and eliminated a lot of bad habits.  

So far in 2022, I have read 42 books for the year, and we are just past the halfway point.   If I can maintain my current reading rate, I should exceed 60 books in one year.   Probably the most I have read in any one year before would be 15.   

Part of the increase is due to having better focus on my part and cutting back on some of the wasted time where I was watching mindless drivel on TV for 3 hours a day.   I now watch a maximum of 2 hours per day and do not watch the news at all.  I have a better focus in life and desire to be around positive and uplifting people. 

I no longer care to listen to all the whiners, complainers, and political arguments going on in Washington.   My life has taken on a greater level of joy and happiness, and I am not concerned about things I cannot control.   One of the books I read this year said that when you listen to all this negative talk, you begin to have negative self-talk and it is stored in your mind.   This truly is not healthy, and I am going all out to eliminate any negativity in my life.

Another reason for my large volume of reading is getting a much faster reading rate.  My words per minute while reading has doubled by simply reading the book “LimitLess” by Jim Kwik.  In the latter part of the book, he covers how to speed-read and it is not very difficult.   His 3 main points really worked for me, and not only am I reading at double my earlier rate, but I am able to understand and comprehend what I have read better than ever before.    Check out the book review on that book at:

https://lifecanbesimple.net/blog/book-review-limitless-by-jim-kwik

This week I want to discuss some of the methods I have found to save money on books.    You can spend upwards of $25 on a book, so if I had purchased all 42 books I have read, I would have spent well over $150.  I think to date, I have spent $7.50.   So here is how I have been able to acquire all these recommended books by so many authors.   All of these books were either on the topics of Investing, Mindset, or Habits and were recommended by some prior author of a book I had read.
   
HOW TO SAVE MONEY ON BOOKS

Use your public library.    Mine is Wfpl.net here in Wichita Falls, Texas.   I can log into their website and seek out any book I want to read.   I would say that just seeking there first, I have found perhaps ½ of the books.    The cost of a year’s membership at our public library is zero.   So of the 42 books I read,  I would say 20 of them came directly from the public library.   

Our library is tied into Hoopla Digital.   If a book you want to read is available as an eBook, you can download it on the eBook link (in multiple formats including ePub and Kindle), or use the Hoopla Digital app off the Google Store and do a search.   You simply use your library membership card number and pin to log in.    Some of the best 4 books I have read this year were by Richard Kiyosaki of the “Rich Dad Poor Dad” series.  All four of the ones I read I downloaded and read off Hoopla Digital.  You do have a limit of just 11 books per month on Hoopla Digital.  Cost:  $0

Here is perhaps the most important of all my money savers.   On books not available at my library, at the bottom of the home page, there is a link to go to the ILL Research catalog.   This is the Inter-Library Loan program.   It links all the participating libraries in your state (and possibly even out of state) and you can search for the book you are looking for by name and author and see all the available books in all the libraries in your state. 

If logged in, you can simply check for book availability, and if available, request the book.   They will then package up the book and mail it to your library to be picked up.   When it arrives, the library sends you an email. To cover their costs on shipping from and to the libraries, you pay $2.50 per book.   That is where I spent my $7.50 this year.   So far, I have located every book I wanted to read using the ILL or Hoopla Digital links.   Shipping times vary so it may take up to 2 weeks for an ILL book to arrive.

Last night, I found that there is a new option called LIBBY which is also on the bottom of the main page of the library’s website.   A phone app for Libby is also available on the Google Play store.    It is much like Hoopla Digital and provides not only books but also magazines and audiobooks.  

The cost of this service is also free.   I tried it and it even has a SAMPLE button to listen to a 4 or 5 min. sample of the book if audible and the first few pages of an electronic book.   Like Kindle, it is customizable to different font sizes to make it easy to read on your phone.

Probably if you are an avid reader, you have invested in a Kindle book reader.  If not, you can download a phone app for Kindle and read directly off your phone or your computer.    If you have PRIME at Amazon, there are literally thousands of free books out there.    When on the Amazon website, type in  “Free Kindle Books  ‘followed by what you are looking for ” 

Examples:                 

“Free Kindle Books Investments”
“Free Kindle Books Habits”
“Free Kindle Books Positive Outlook”
“Free Kindle Books Passive Income”

Or any topic that interests you.   I used to read Westerns, and I think I paid for 3 westerns in 10 years and read about 50 to 100 for free.

Also, many authors offer free kindle books on Amazon.  One of my favorite authors is Joshua King.   You can get a free kindle book on investments every day by simply going to this website address:

https://militaryfamilyinvesting.com/free-kindle-book-schedule/

Be sure that you are on the dates allowed in the grid when it comes up, and also be sure it is for free when you get to Amazon.   Sometimes it still has a $2.99 to $54.99 price showing.  Don’t purchase it unless you want to pay the price.   I think Amazon occasionally fails to mark the books down.  But 98% of the time or more, it will show the book for 0 costs.  That is when I do the buy now.   If you accidentally purchase a book, Amazon will let you return it and give you a refund.

There are literally dozens of free book programs available.  One is called www.BookBub.com where you get an email daily for the genres you are interested in.  Another is www.BookFunnel.com    Both offer Free book options.
Recently I signed up for one called The Fussy Librarian.   Again a daily email showing books I might be interested in and in the email, it has a link to download the book from Amazon.   Just be sure the cost is zero on the buy now.

If you read a lot and want most new books that come out for free almost immediately you can pay for Kindle Unlimited.   I have never used it, but  I think it costs $12.95 a month.   You get 3 free months.  

Most people have Amazon Prime to get free shipping and access to special pricing and the 5% cashback option on the Amazon card.  Just this month, they started a new PRIME option in the Amazon book store.   You can also read for free up to 10 books at a time if they show to be free on PRIME. 

Be sure it is PRIME, not Kindle Unlimited.   What is super about the Prime is you can download 10 books, and if you find another one that you like better before you finish reading any of the 10, you can simply return one of those.

I hope this gives you some ideas on how to read much and pay very little.   If you have unlimited resources, don’t worry about paying for the books.  Just purchase and enjoy.  But if you are like most of us, save the dollars and invest those dollars to use for retirement, vacation, or just fun times with your families.
 
3 Links on Minimalism articles from Joshua Becker’s weekly blog:

How to Live A Simple Life That Will Make you Happier
by Mvoca

Perfectionism Almost Ruined my Life by Mar B. Vich

How This CEO Has Only 89 Things and How it Helps Him
 

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The Psychology of Money – Morgan Housel

DISCLAIMER -  I am not a Financial Advisor and do not work for any Brokerage Firm. The opinions given are of my own and are not to be used as professional advice.  These are my findings and can hopefully help you to make informed decisions on investing.  Consult a Broker or Lawyer before making any investment. 
 
The Psychology of Money by Morgan Housel is one of the better books I have read this year.  It is one of the top-selling books on Amazon, meaning it is read by a large audience.   The book talks a lot about investments but goes a lot deeper into why people feel the way they do about money.   

When we were born and how the stock market was doing when we turned 21 has a lot to do about whether we will be avid stock buyers or not.   I had no idea that we are so prone to think that the stock market moves as it did when we turned 21.  When you turned 21, if the market was flourishing, then you may be a big investor.   Not so likely if you came in during the time of 2007 to 2008 in the housing downturn.
 
What I learned from the Psychology of Money:

Mr. Housel begins the book by giving stories about different people and how money affected them.   I will only list one for brevity.   Ronald Read was a man that was a low key as you could find.   He fixed cars at a gas station for 25 years and swept floors at a J C Penney for 17 years.   He bought a 2 bedroom house for $12,000 at age 38 and lived there for the rest of his life.  He was widowed at age 50 and never remarried.  His favorite hobby was chopping firewood.

Read died in 2014 at the age of 92.   That was when his story made international headlines.   2,813,503 Americans died in 2014.  Fewer than 4,000 of them had a net worth of over $8 Million when they passed away.  Ronald Read was one of them.   This former janitor left $2 million to his step kids and more than $6 million to the local hospital and library. 

How did he acquire all this money?  He saved what he could and purchased blue chip stocks.  Then he waited for them to grow in just a few decades to $8 million.   Not complicated, but very consistent.  He had a plan and stuck with it and didn’t waste money.

Each of us have experiences that cause us to have different perspectives on money.  The reality is that your personal experience with money makeup maybe less than .000001% of what has happened in the world, but you may think you know 80% of how the world works.   We must learn that we know very, very little about money to be successful in investing.

Mr. Housel warns us to be careful who we praise or admire.  Be careful also who you look down on and wish to avoid.  To be successful is not given to us.  It has to be earned.  Not all success can be attributed to hard work nor can poverty be due to laziness.   Time and circumstance happen to all.

One of the hardest financial skills is getting the goal posts to stop moving.  Things change and yesterday's rules may not work today.  Never stop reading and learning.    When we learn “Enough” is enough, we are good.  If not, this insatiable appetite for more can push you to the point of regret.  Don’t get too attached to anything.   Why does it matter?   There are things worth fighting for in life. 

Learn that the following things are invaluable:

• Reputation is invaluable
• Freedom and independence are invaluable.
• Family and friends are invaluable.
• Being loved by those who you want to love you is invaluable.
• Happiness is invaluable.

Your best shot at keeping all of these is to know when to stop taking risks that might harm them.   Know when you have enough.

Planning is important and the most important part of every plan is to plan on the plan not going according to plan.   A plan is only useful if it can survive reality.    The future is filled with many unknowns.   Be sure to allow room for error in your plans as there will be mistakes along the way.

Some things to consider in planning.  
In the last 170 years:

1. The Stock market fell more than 10% from a recent high 102 times.
2. Stocks lost a third of their value 12 times. (or more)..
3. Annual inflation exceeded 7% in 20 separate years.
4. The words “Economic Pessimism” appeared in the newspaper at least 29,000 times according to Google.
5. The standard of living has increased 20-fold over these years.

Seeing things clearly without pessimism or optimism is hard to do.  But we need to strive for facts.   Peter Lynch, the great investor who managed the Magellan fund at Fidelity said “If you are terrific in business, you’re right six times out of ten.”      Consider where you stand in making business decisions.

The highest form of wealth is the ability to wake up every morning and say “I can do whatever I want today”.  People want to be wealthier to make them happier.  However, happiness is a complicated subject meaning different things to different people.  The one common denominator in most people is that they want “to control their lives.”  The ability to do what you want, when you want, with who you want, for as long as you want is priceless.   This is the highest dividend that money pays.
John D. Rockefeller had money and many possessions.  His feeling was that “controlling your time” is the highest dividend money pays.

One of the greatest authors on investments was Benjamin Graham who authored “The Intelligent Investor”.  He gave very practical advice on how to make smart investing decisions.     Mr. Housel says that when you apply his formulas today, few of them work.   Benjamin Graham’s main focus was buying stocks for less then their net working assets which sounds great, but very few trade that low today.

Before his death, Mr. Graham was asked about whether his plan still worked.   He stated: “In general, no.  I am no longer an advocate of elaborate techniques of security analysis in order to find super value opportunities.  40 years ago when our book was published it was a rewarding activity.  But the situation has changed a great deal since then.”

So as Robert Kiyosaki said in “Rich Dad, Poor Dad”, you had best keep reading and learning.  What used to work in the past may not be the same in today’s world.
John Templeton, the great mutual fund creator, said “The four most dangerous words in investing are: ‘It’s different this time.’ “

Mr. Housel spent a whole chapter discussing how we must make room for error in our decisions.  Not everything we think will work does.   Don’t assume the future will be the same as the past.  The future may be 1/3 worse than the past few years.   A 1/3 buffer is enough to allow most of us  to sleep well at night.

Long-term financial planning is essential.  But things change—both the world around you and your own goals and desires.   We don’t know what the future holds, so we must plan for unexpected events.     Market returns are never free and never will be.  They demand you pay a price, like any other product.  

The volatility/uncertainty fee-  the price of returns-  is the cost of admission to get returns greater than low-fee investments like cash and bonds.  You must believe the “feel” is worth it to be successful and come up with a plan that works.  There is no guarantee.  Sometimes it even rains at Disneyland.

Mr. Housel urges us to go out of our way to find humility when things are going right and forgiveness and compassion when they go wrong.   It is never as good or bad as it looks.  The world is big and complex.   Luck and risk are both real and hard to identify.   Become OK with a lot of things going wrong.  You can be wrong half the time and still make a fortune.   You must define the cost of success and be ready to pay it.

Some things to consider:

• Allow Room for error.
• Avoid the extreme ends of financial decisions.  (Goals/desires change)
• Like the risk as it pays off over time if made with good planning.
• Define your plan carefully.   Be sure advice comes from people playing the same game.
• Respect the Mess.   We can disagree because not everyone views things the same.

Mr. Housel closes the book by discussing his personal ways of doing things.   He keeps 20% or more of his assets in cash.   He says this is indefensible on paper, but it is just what works for him.  He does it because cash is the oxygen of independence, and more importantly, we never want to be forced to sell the stocks we own.  

But everything I’ve learned about personal finance tells me that everyone—without exception—will eventually face a huge expense they did not expect—and they don’t plan for these expense as they were not expected.

I recommend reading this book.   It is a bit more theoretical than exact investment advice, but I believe most of it is sound.
 
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THE COMPOUND EFFECT by Darren Hardy

DISCLAIMER -  I am not a Financial Advisor and do not work for any Brokerage Firm. The opinions given are of my own and are not to be used as professional advice.  These are my findings and can hopefully help you to make informed decisions on investing.  Consult a Broker or Lawyer before making any investment. 

 
The Compound Effect by Darren Hardy is one of the best books I have read this year.   While not geared specifically to investments like I thought it would be, it is a very eye-opening book.    Darren Hardy is a no-nonsense motivational speaker, and his success and determination are very apparent in the book. 

Darren Hardy is the publisher of Success Magazine, and from page one, this book resonants with HOW TO BE SUCCESSFUL.   

When I got the book, I thought it was going to be about how you win in the investing world by the compound effect.   While it is true, this covers so much more than investments.  I did an article a few months ago called the Rule of 72.   If you are not familiar with that rule, it is an accounting rule that makes it easy to determine how long it will take for your money to double.  You take the percentage of return and divide it into 72.  So if you get 12% interest, that means it will take 6 years.   If you want to know how many years it will take to double your money if receiving 9%, you can also divide it into 72 and it will take 8 years.  

Check out the article at:
https://lifecanbesimple.net/blog/rule-of-72-and-investing-1-a-day

What Darren Hardy explains in his book is that success is truly a mindset.   Reminds me a bit of the book Limitless by Jim Kwik.   You must learn that success comes in small consistent habits.  If you have bad habits, you need to break those and replace them with good habits.    Every single win comes from starting with small manageable steps.

What I learned from The Compound Effect:

Darren begins with the phrase “Slow and Steady wins the race.”   He believes that given enough time, he can defeat anyone, just like the tortoise did to the hare in a fairy tale.

Darren was raised by his father in a single-parent home.   His dad started him early in teaching him to have discipline.   Each day as a child, Darren remembers his dad out in the garage pumping weights.  He had a big sign over the barbells that said “No Pain, No Gain.”    A former University football coach, he was out there daily working out.  He did not believe in wimpy excuses, and would not let a player come out of a game unless they were puking, bleeding, or showing bone.    Sounds pretty hard nose.   My dad was very similar in that he just wanted us to get the work done and keep our excuses and complaints to ourselves.   

Darren relates much of his success to being taught to have discipline in his life, and I totally agree that it made a huge difference in my own life.  I never in all my years of working ever had to have someone come up and tell me to get to work.   We are supposed to work and that is why we are paid by our employers.

Darren’s dad set an example in discipline, and had a saying:   ‘Be the guy who says “No”.  It’s no great achievement to go along with the crowd.  Be the unusual guy who is the extraordinary guy.’   Darren never had trouble with drugs as he never wanted to let his dad down.

The Compound Effect reveals the “Secret” behind Darren’s success.  He believes it began with his dad modeling it and living it out day by day.   He had to live that way, and that is the reason he has been so successful.

The Magic Penny Story.   Darren asks if you were given an option, take  3 million dollars on Day 1 or a penny on day 1, and let it double in value for 31 days, which would you choose?   Most everyone of course would select the 3 million.   However, if you multiple it out, on Day 30, your one penny that doubles each day would be worth 5.3 million.    On Day 31, it kicks when it comes out to $10,734,000.      This is the effect of the compound effect.   Slow steady builds win the race.

Everything done in small simple steps is the key to success.  If you work slow, with consistent good habits day after day, you wind up winning.    Choices, Behavior, and Habits send you up the ladder or down.   Depends on what you choose and how consistently you do the same things over and over.    Sit around watching tv all the time, be sure you won’t accomplish much.

The choices we make are at the root of all results.   Every decision we make alters the trajectory of our life.   To be effective, we must own 100 percent of our actions.   To be accountable is the beginning of the compound effect.

Preparation + attitude/mindset + opportunity + action = luck.   Luck is truly earned, not just some random happening.    Arnold Palmer, the great golfer, said “It is funny.   The more I practice, the luckier I get.”

To get a handle on our lives, we must track everything.   Darren urges everyone to get a little notebook and for 3 weeks, write down everything.   Every penny you spend, every food you eat, every use of your time, everything you do in regards to exercise.   Then you can see where your mistakes are being made so you can make improvements.    

Most people have no idea how much time they are wasting watching mindless drivel on television.    Watching the news can cause us to be depressed.    And we waste so much money.    He gives an example of the $4 latte which many spend daily on the way to work.    In 3 weeks, it costs you $60.   In a year, that is over $1,000.  In 20 years, if you count the compound effect of simple interest, you have thrown away $51,000.    Buy a $10 gallon can of coffee and you have enough to make coffee for over a month.

Habits are very important.  Aristotle said, “We are what we repeatedly do.”  95% of all we think, feel, or do is a result of a learned habit.   The core motivation for doing the things we're doing is based on your Core Values.    It is crucial to write down what makes up your core values.   I watched a one-hour video presentation Mr. Hardy put on, and he had us write down those core values and stressed we must never do anything that compromises our core values, regardless of the money we might make.  In the same presentation, he had us write down our definition of Success.   That means so many different things to people.

In The Compound Effect, he gives us 4 strategies to clean up bad habits.

1.  Identify your triggers as to what motivate you.   The who, what, when, and where that is triggering a bad habit.
2.  Clean house – scrub out the bad and get rid of it.
3.  Swap your bad habit with a new good habit.
4.  Ease in and start slow with new habits OR  Jump in with both feet and immerse yourself with a new good habit.

Be patient with yourself in breaking old habits.  Some will be difficult.

Momentum plays a big part in the compound effect.   Big Mo is the main force in our success.   Darren Hardy gives the sample of the Merry Go Round which we all played with on the school ground.  Very hard to get it rolling, but once started, it turns and turns on its own.    Our lives lived in a successful mode have this same kind of Momentum and Compound Effect.

We are affected by 3 kinds of influences in our lives.
1. Input – What do you feed your mind?
2. Association – Who do you spend time with each week?
3. Environment – What kind of surroundings do you have?

We can not let garbage come into our lives.   The result is the old computer adage of Garbage in, Garbage out.   What we take in has much to do with what we put out in our lives.   Darren urges us to limit our intake of television or media to one hour per day.  Spend worthwhile time with our families.  Cut back on watching the news or reading non-pertinent news.  We need to be sure those having input into our lives have a positive influence.    Reduce or eliminate all negativity.

Invest in good relationships and associate only with those that share your passion for excellence and positivity.   Change your perspective and be sure it aligns with your core values.   Go way beyond others' expectations.   Those who go the extra mile become EXTRAORDINARY.    Strive to always be extraordinary.

Motivation without action will only lead to self-delusion.  We must act on the areas of our lives that need improvement.  The compound effect is a tool that when combined with positive and consistent action will make a huge difference in your life.   Make your life different… make it one with significance.   Darren Hardy urges us to give generously of our time and energy, and the ripple effect will be a great blessing back to us.

I urge you to read this book.    This is another book like Richard Kiyosaki’s Rich Dad Poor Dad where you must question your limiting beliefs.   I am not saying to question God or the accuracy of the bible, but question what habits you have and modify those to let yourself have a full, joyful life that will be a blessing to your family and everyone who associates with you.

I watched a podcast on DarrenDaily.com, and he urges his listeners to figure out what would improve their life the most.  Then in each quarter of the year, study that one thing.  For instance, in quarter 3, I decided to try and eliminate all negative self-talk and replace that bad habit with a good one.  

He suggested reading 5 books on that topic and zeroing in on that one thing.   I searched for Amazon books using the search “Free kindle books Negative Self Talk” and then “Free Kindle books Positive Thinking” and found more than 20 books in these 2 searches.  I downloaded the ones that appeared to be the best for me.   I intend to read all 8 of those books and strive to eliminate one more bad habit and replace it with a good habit.  All of this is just an example of using some of the ideas from Darren Hardy which first started my thinking in “The Compound Effect.”   I highly recommend this book.
 
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