The Real World Sounds Cool

Last Tuesday night. Church council swan song. Final meeting. The topic. How to pay for an $80,000 roof repair. A 5 year loan with slightly higher monthly payments or a 10 year with slightly lower ones.

A consensus builds around the 10 year. Then I recommend the five because I argue we need a sense of urgency to pay it off before another expensive, unplanned for problem surfaces. Given our aging building and our feeble finances, we can’t fend off overlapping fiscal crises.

I add that if our next administrator is “on it” like our exiting one, then the 10 year would be fine since there are no pre-payment penalties, but who knows whether he or she will be equally vigilant when it comes to monitoring our strapped budget.

That’s when I was introduced to the “real world”.

In unison, a few people said, “But ‘closely monitoring the church’s finances’ is on the new and improved job description.” In other words, don’t worry about it, it’s a done deal.

My internal thought was the same as my Millennial daughter’s recent text to me, Hahahahahaha. I wish!

A good friend of mine who sells hair care products for a living is always exasperated with me. I mean always. Tenure, sabbatical, self-actualization, all trigger words. His constant refrain is that I don’t live in the “real world”. The “real world” is one where you have to continually find more customers in order to make monthly and quarterly sales targets. Or get fired. In contrast, I just show up at my classroom and teach my ass off for whomever appears on my class list. I’ve always dug my unreal world, but in his mind, it’s a grossly inferior place. An aggravating anomaly.

I have to confess, in my unreal world, job descriptions haven’t mattered much. Few in the unreal world reference their job descriptions with any regularity and there’s always some sort of gap between what’s written and performance.

So the real world really intrigues me. It would be quite convenient to know everyones’ work performance matches their job descriptions. Much cleaner and more predictable than the messiness of my unreal world.

 

Think Differently

PressingPausers have proven to have little interest in personal finance. Correction. PressingPausers have proven to have little interest in my thoughts on personal finance. Big dif. So why do I persist? Idk.

Just like getting dressed in the morning while on sabbatical, the fact that NO ONE will read this is liberating. Whatever shorts and t-shirt I left splayed on the floor last night are good, not many peeps are going to see me anyways as I write a blog post NO ONE will read. If a blog post falls in the woods. . .

Classic investing advice is to keep investing expenses to a bare minimum; determine what balance of stock, bonds, and cash will enable you to sleep well at night; and keep trading to a bare minimum.

In the US, investors currently have 56% of their assets invested in stocks or more than 10 percentage points higher than its historical average of 45.3%. At the top of the bull market in 2007, it stood at 56.8%. This has a lot of analysts worried that a correction is coming.

Another investing maxim of increasing popularity is to stop trying to outsmart the market. Instead, as Kendrick Lamar advises, “Be humble!” His next vid will prolly be about investing in passive index funds like this. The chorus. . .”Be passive!”

Another oft-repeated investing maxim is never invest more than 5% of your net worth in any individual stock because they’re far too volatile. A mutual fund or exchange traded fund is a basket of hundreds or thousands of individual stocks that go up and down at different times, thus creating a smoother, steadier, long term increase in value.

But damn is AAPL en fuego. Check this missive from a Vanguard forum of knowledgeable investors I’ve taken to reading recently. Wait a minute. That last sentence presumed you’re reading this, which you’re not, so note to self—revise that. This missive from a Vanguard forum of knowledgeable investors has me thinking about chucking conventional investing wisdom and improvising like #3.

“Hi—
Long time lurker first time poster. Thank you to all who have contributed to my education here, absolutely invaluable.
I’m writing about my mother and father in law’s finances, which I am slowly taking over at their request.
FINANCIAL PICTURE
Savings
$425k in various super low interest checking / savings accounts
Investments at Fidelity (unlikely to change brokerages):
Rollover IRA: $675k of which
* 86.8% AAPL he’s a lifelong Apple fanboy, bought $11,500 worth way back when, which is now $575k.”

Hindsight is 20-20, but if I was my daughters age again, for every $2 dollars of savings I could set aside, I’d put $1 in a super safe certificate of deposit and the other in AAPL. And then rebalance annually and pay 15 or 20% on the capital gains. As the aforementioned anecdote intimates, I would’ve done really, really well adhering to this “barbell” plan.

But this way of thinking suggests I’m suffering from an advanced case of “optimism bias” which causes a person to believe that they are at a lesser risk of experiencing a negative event compared to others. Note to self—AAPL can’t continue its recent run. VTI is a much safer, wiser, long-term instrument for building wealth. VTI is also long overdue for a serious correction, or to use the fancy pants mathematical phrase, a regression towards the mean. It’s as certain as the Mariner’s August playoff fade.

Sometime soon, the half of the barbell holding certificates of deposit earning 3-4% is going to bring great comfort.