2021 has been one hell of a year so far. As a savvy FIREwalker, I’ve watched mostly from afar the complete shit show that is the stock market. It’s like a wrestling match with Reddit on one side and hedge funds on the other. The rich gal hosting the fight is ARK ETF’s fund manager and all us index investors are just chilling in the premium lounge over the raging crowd of FOMO investors. But then out of nowhere, Bitcoin jumps into the fight with the steel chair!? What the fuck is going on?? It’s only February!
Okay, that metaphor is more funny than it is truthful but you get my point. What a wild ride. Volatility is 100% part of investing in the stock market but who knew the ride would take such a visual and personal turn in 2021 (and beyond). This will continue to be the case in the future, simply because more forums like /r/wallstreetbets will pop up and retail investors will continue to get news coverage as wild swings happen. The next generation is ready to buy tickets to the next match and participate so news outlets hungry to sell you ads will gladly give play by play reporting.
All this to say, get ready for 2021 to become more normal to your investment portfolio. You will be struck in the face by the media at every turn in a more interesting way than ever before, challenging your solitary stance against speculative investments and further eroding your will to buy index funds and leave it at that. If you think boring old white guys in suits will continue to spark business discussions (on a media platform), there’s just no way. Instead, let's get /u/DeepFuckingValue from reddit to explain his 38483247928342% increase in X stock.
If there is ever a time to adopt Digital Minimalism and ignore the news, it’s now. Unwarranted speculation is the enemy of long term investing and us FIREwalkers are in it for the long haul. 25 years is the minimum when we think about our portfolio. Even if you consider yourself “older” at 55 years of age (depending on how much you smoke and drink) I likely wouldn’t change that investment horizon either.
Is Fun Money Actually Fun?
Almost certainly no.
They say once you know something to be the truth, you can’t go back. You can’t pretend to not know. You have to deal with the consequences and move forward. When people talk about 1% or 10% of their portfolio being “fun money” you never get to hear the other side. Instead, the argument is always focused on the justification of such money and appeasing FOMO to a reasonable amount.
I’m here to talk about the other side. It matters.
I couldn’t give a bigger shit whether or not you have FOMO investments. Your justifications mean nothing to me because you are not me and I am not you. Different values, that whole thing.
What I will say is don’t expect grandiose returns in terms of dollar amount based on your FOMO portfolio. If you allocate a certain percentage to GameStop or Bitcoin and the like with no evidence besides rocketships and diamond hands, you’re riding the wave of unwarranted speculation. It’s called gambling. You might hit it big and you might not. If you’re sensible and only have 1-10% invested in your gambling efforts, you’re at best hoping for no opportunity loss and at worst just ruining your mentality towards sound long term investing.
As I will reveal in an upcoming post, I have a skeleton in my closet about holding individual stocks (and continue to do so). The difference between me and FOMO investors is I hold assuming the exact same time horizon as my index funds - the 25+ years I mentioned above. My warranted speculation is based upon research and gut feeling, not /u/SimpLord69 telling me to hold the line on AMC.
Big banks and Questrade charge between $5-10 to buy in and buy out of your individual holdings. Add that all to your opportunity cost should your gambling go awry. Since newbie investors are probably using WealthSimple Trade to skirt around the commissions (a good thing), they are almost certainly buying and selling much more as a result (a bad thing).
So much more gambling. Probably losing, although they won’t ever tell you that. And if they are winning some, it’s almost certainly not enough to justify the risk and time spent. Not to mention the damage to your personality. Listening to your in and out day trading of Blackberry stock justifications is as wildly uninformative as listening to conspiracy theories.
You might say, “Hey, these amateurs aren’t throwing down huge sums of money, lay off of ‘em! What’s a few hundred bucks down the hole?”
No. Because I know the truth and I can’t pretend I don't. Gambling is addictive. Lots and lots of research has made this clear. So clear that I don’t even need to bother citing a source for such an obvious claim since you know the truth too. Playing into an addiction, especially when you’re learning about investments and stock market trading for the first time is insanely dangerous to the long term financial well being that should be your mindset.
Who knows, maybe Gamestop has a comeback story and will become an everyday household name for value and convenience in the gaming world instead of crazy stock options as it’s known the entire world right now. If you’ve bought for the 25 year horizon, good for you. I’m still holding onto my stock choice too. Index ETFs are likely a better choice for both of us but long term investing doesn’t have to be made up of 100% of the stuff. What’s necessary is the 25+ years.
I’m gonna finish off my ramble with a dark analogy. Here goes.
In the Netflix show Ozark, the mafia boss poses a hypothetical question to a group of people he is murdering for stealing money from him. His question goes like this: “I run a store. I find out my aunt who works there has been stealing from me. Taking cash from the register. I question her and she confesses. It was the first and last time she promised. Do I fire her? She is my aunt after all.”
The group he’s questioning are forced to answer the question. One by one, they get the answer wrong and he murders them after each incorrect answer. Not answering the question also gets you killed. At last, it comes to the main character who is about to be shot next. “What do I do with my aunt?” the mafia dude asks. Our protagonist does eventually give the correct answer: “Fire her, it’s not the first time she stole from you. It’s the first time she got caught.”
I love this answer because it highlights a fundamental truth of humanity - Greed. Greed was willing to overpower ethical decision making. A family business in this case was one of the casualties. The power over right and wrong stood second to having an extra buck.
With the right conditioning, any human can fall prey to Greed. I can’t think of a better way to condition this irrationality into humans then gambling with your wealth in unwarranted speculation. Because at first it’s only 1% of your portfolio. Then it’s 5% next year. 10% the year after because you’re doing so well and you understand the future of X stock/crypto. Don’t believe me? Ask all the active-fund managers who failed their investors year after year before being closed down. They promised to be the next big thing and were given other people's money to do so. Greed upon Greed.
If you're gambling, cut it out. If you need help to stop, seek help. Easy google search. If you’re interested in becoming a long term investor and want to find out how, here’s my 7 Simple Steps to Investing.
You might say, “Hey, these amateurs aren’t throwing down huge sums of money, lay off of ‘em! What’s a few hundred bucks down the hole?”
No. Because I know the truth and I can’t pretend I don't. Gambling is addictive. Lots and lots of research has made this clear. So clear that I don’t even need to bother citing a source for such an obvious claim since you know the truth too. Playing into an addiction, especially when you’re learning about investments and stock market trading for the first time is insanely dangerous to the long term financial well being that should be your mindset.
Who knows, maybe Gamestop has a comeback story and will become an everyday household name for value and convenience in the gaming world instead of crazy stock options as it’s known the entire world right now. If you’ve bought for the 25 year horizon, good for you. I’m still holding onto my stock choice too. Index ETFs are likely a better choice for both of us but long term investing doesn’t have to be made up of 100% of the stuff. What’s necessary is the 25+ years.
I’m gonna finish off my ramble with a dark analogy. Here goes.
In the Netflix show Ozark, the mafia boss poses a hypothetical question to a group of people he is murdering for stealing money from him. His question goes like this: “I run a store. I find out my aunt who works there has been stealing from me. Taking cash from the register. I question her and she confesses. It was the first and last time she promised. Do I fire her? She is my aunt after all.”
The group he’s questioning are forced to answer the question. One by one, they get the answer wrong and he murders them after each incorrect answer. Not answering the question also gets you killed. At last, it comes to the main character who is about to be shot next. “What do I do with my aunt?” the mafia dude asks. Our protagonist does eventually give the correct answer: “Fire her, it’s not the first time she stole from you. It’s the first time she got caught.”
I love this answer because it highlights a fundamental truth of humanity - Greed. Greed was willing to overpower ethical decision making. A family business in this case was one of the casualties. The power over right and wrong stood second to having an extra buck.
With the right conditioning, any human can fall prey to Greed. I can’t think of a better way to condition this irrationality into humans then gambling with your wealth in unwarranted speculation. Because at first it’s only 1% of your portfolio. Then it’s 5% next year. 10% the year after because you’re doing so well and you understand the future of X stock/crypto. Don’t believe me? Ask all the active-fund managers who failed their investors year after year before being closed down. They promised to be the next big thing and were given other people's money to do so. Greed upon Greed.
If you're gambling, cut it out. If you need help to stop, seek help. Easy google search. If you’re interested in becoming a long term investor and want to find out how, here’s my 7 Simple Steps to Investing.
Use Wealthsimple Trade as a force of good to lower your commissions over your lifetime, not to justify day/swing trading. It's saving me $520/year in commissions. If you’re new to Wealthsimple Trade, I have an affiliate here to sign up (you get $10 but I get $25, sucka!) and another post here reviewing the platform.
Ryan Myricks
Picture: Photo by Henley Design Studio on Unsplash
Ryan Myricks
Picture: Photo by Henley Design Studio on Unsplash