Tuesday, July 30, 2013

There must be a real chance that you may fail

If you know exactly how a challenge or task will turn out, is it really a challenge and will its completion mean much to us?

Paul Graham writes:
"The best protection is always to be working on hard problems.  Writing novels is hard.  Reading novels isn't.  Hard means worry: if you're not worrying that something you're making will come out badly, or that you won't be able to understand something you're studying, then it isn't hard enough. There has to be suspense.
 Well, this seems a grim view of the world, you may think.  What I'm telling you is that you should worry?  Yes, but it's not as bad as it sounds.  It's exhilarating to overcome worries. You don't see faces much happier than people winning gold medals.  And you know why they're so happy?  Relief.
I'm not saying this is the only way to be happy.  Just that some kinds of worry are not as bad as they sound."
On a harsher note, Nassim Nicholas Taleb writes in The Bed of Procrustes:
"If you know, in the morning, what your day looks like with any precision, you are a little bid dead - the more precision, the more dead you are."
Charles Murray offers this view in Coming Apart:
"People need self-respect, but self-respect must be earned - it cannot be self-respect if it's not earned - and the only way to earn anything is to achieve it in the face of the possibility of failing.  . . .  People need self-actualization, but self-actualization is not a straight road, visible in advance, running from point A to point B.  Self-actualization intrinsically requires an exploration of possibilities for life beyond the obvious and convenient."
It's not supposed to be easy.

Stock market always goes up over the long run? Define long run.

My passion for following the financial markets had a basic start.  For many years, my thinking on investing was limited to this idea: picking individual stocks is difficult.  Not a bad start considering that almost all fund managers cannot beat the S&P 500 and there's a good argument to be made that those who do beat the overall market in the long run are simply lucky (except Warren Buffett and a few other people: they seem to have real and rare skill).

Then I discovered low-cost index funds.  Again, not a bad idea.  Low-cost index funds are endorsed by Buffett and other master investors as most appropriate for most people. 

But then I learned about how the stock market alternates between long periods of boom and long periods of bust (or going sideways).  And my awareness of how the stock market can go down or sideways for 20 years or more (a generation) led me to dig deep into different investment approaches.  What can an investor do during generation-long periods of declining stock prices?

I do believe that index funds are the most appropriate investment vehicle for almost all of us.  I also think long-running bear markets (a bear market is when the overall direction of the stock market is down) pose a difficult challenge to index funds.

The admirable John Bogle, founder of Vanguard and the first index mutual fund available to the public, might say index fund investors should hold on through thick and thin and for the long run.  But what if the long run is 20-30 years of a declining and highly volatile stock market?  Even if we believe America will always bounce back from difficulty, how many of us can keep that faith in the stock market as we watch our 401(k) account tank?

Consider just the most recent 15 years or so.  The stock market is essentially flat since the technology bubble's peak in 2000.  And if I had invested in the market in 1999 or 2000, I would be about even if I held on to my index fund shares through two gut-wrenching stock market crashes (dot-com and housing crashes). 

So then do you try to find a good stock picker who can identify stocks that will go up when the overall market is going down?  But remember how difficult it is to pick individual stocks: almost nobody can do it consistently as Buffett has done.  How about trading stocks?  While I personally feel that trading is a compelling way to navigate the markets with a portion of my portfolio, I feel that trading doesn't seem like a good idea for most people.  Stay out of the market?  But how do we know when to get out of the market?  Of course we can avoid the stock market.  There is no law that says we have to invest in the stock market. 

For those who want to be in stocks, it seems Mr. Bogle's advice can be sound.  If we can follow it.

Sunday, July 28, 2013

Have some source of income, however modest

You can certainly have multiple jobs while having a full-time job.  But if you left your full-time job to pursue several careers with uncertain prospects for pay, then having some income, however modest, is a huge confidence boost.  Any job will do.  Remember, there is dignity in all labor.

When you leave a regular job to pursue your interests, you are likely full of confidence and excitement.  That's good.  We have to protect and capture our moments of inspiration.  But all of us will surely face difficult challenges in our new careers.  Even if you have savings, your confidence and excitement will dip at times as you make mistakes, face rejection, and face the realities of making a living.

It's especially important to give your motivation and confidence a boost every now and then when starting a business because there are so many things to do and the outcome seems so uncertain.  Having some income stream, however small, will give you reassurance and confidence during difficult times.

And no one is immune from difficult times.  There is nothing wrong with difficulty.  The problem is wishing you will never face any.  Since difficulty is inevitable, prepare yourself by keeping busy and having some income.

What is a portfolio career?

Hello and welcome!

I'm excited to start this blog on my adventures with a portfolio career.  I define a portfolio careerist as someone who wears several hats (e.g., writer, freelance photographer, and part-time restaurant server), may have multiple sources of income, and perhaps best of all, is able to pursue his or her passion as a result of having multiple and flexible jobs.

Despite the word careerist, a portfolio careerist can achieve a more balanced life compared to someone who has an office job.  Indeed, for the person who is able to pursue their passion through a portfolio career, being a portfolio careerist is anything but the sole and mindless pursuit of "success." I've certainly found that having a portfolio career allows me to pursue my interests, have more time for family and friends, and be more productive.

Always feel free to contact me with comments and questions.  Welcome and I'm looking forward to the journey ahead.