Wednesday, March 30, 2022, Delray Beach, Florida


Notes From My Journal

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Worried about your stock portfolio? I get it.

The market is, for the most part, overvalued. And it’s been fluctuating scarily since Russia invaded Ukraine.

My friend and colleague Alex Green wrote an essay in The Oxford Insight recently, which made a point about investing that I learned from him (and others) 20 years ago. It has been the foundation of my passive wealth building strategy for all those years. And I credit it with two important facts: (1) My portfolio of stocks, bonds, and other financial assets has grown steadily all this time without a single down year. And (2) during uncertain economic times like we are living through today, I don’t worry much about market fluctuations.

Today, I give you my core wealth building philosophy, which is based on my personality. (See “What I Believe,” below.)

And then, I give you a part of Alex’s essay that addresses this point.

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Building Wealth

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What I Believe: About Investing 

To be successful at anything, we must begin with the ancient Greek aphorism, “Know thyself.”

With respect to investing, that means understanding your instincts and emotions with regard to fear and greed. Here’s an easy-to-answer question that can shed light on those characteristics right away:

What is more important to you? Becoming richer? Or being sure you won’t become poorer?

If, like me, your fear of getting poorer is greater than your desire to get richer, you must do three things:

* Diversify the assets you invest in.

* Establish a “sell point” when you first invest, in case things go south.

* And size your positions – i.e., regulate how much money you put into each asset class and each particular investment within each asset class.

 

Alex Green on Making Money in the Stock Market… 

“Jeremy Siegel – a professor of finance at the Wharton School of the University of Pennsylvania and author of Stocks for the Long Run: The Definitive Guide to Financial Market Returns & Long-Term Investment Strategies – has done a thorough historical study of the returns of different types of assets over the past couple hundred years.

“What he discovered is dramatic: $1 invested in gold in 1802 would have been worth $90.05 at the end of 2021. The same dollar invested in T-bills would have grown to $4,437. A $1 investment in bonds would have been worth $36,390.

“And a single dollar invested in common stocks with dividends reinvested – drumroll, please – would have been worth over $45 million.

“Just look at the massive moves in the graph below…

“Look back through history and start whenever you choose. You’ll find the rolling returns for different asset classes are remarkably consistent.

“And equities win in a landslide. Since 1926, the stock market has generated a positive return in 71 out of 96 years.

“Historically, the odds of making money in the US stock market are 50-50 in one-day periods, 68% in one-year periods, 88% in 10-year periods, and 100% in 20-year periods.

“(That’s something to remember whenever stock prices start wilting like last week’s roses, as they have lately.)”

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Fun and/or Interesting

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Interesting: The Origin of “OK” 

The initials “OK” debuted in print 183 years ago, beginning the rise of one of the world’s most recognized words. Charles Gordon Greene, editor of The Boston Morning Post, likely authored the satirical piece that included this newly minted expression. In the late 1830s, writers often entertained themselves by abbreviating misspelled words and adopting them as slang. For example, “no use” became “know yuse,” which was then shortened to “KY.” At the Post, “all correct” was recast as “oll korrect,” hence the acronym “OK.”

Three days after its first appearance, “OK” found its way into the newspaper again. And by the year’s end, several publications had utilized the phrase. But “OK” really gained popularity ahead of the 1840 presidential election. Backers of incumbent Martin Van Buren began calling themselves “the OK Club” and instructing voters to “Vote for OK” – referencing the Kinderhook, New York-born candidate’s nickname, “Old Kinderhook.” Meanwhile, challenger William Henry Harrison got a boost when a newspaper editor insinuated that Van Buren’s mentor and predecessor, Andrew Jackson, struggled with syntax and signed his presidential papers “OK” because he thought “ole kurrek” was the actual spelling of “all correct.” Harrison won the presidency.

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Recommended Places

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Assisi, Italy

Some years ago, K and I spent several very pleasant days in Assisi. It is the birthplace and burial site of St. Francis, the patron saint of animals and the environment. But you don’t have to be into St. Francis to appreciate:

* The beautiful Umbrian landscapes

* The Via San Francecso for an introductory walk

* The massive 13th century San Francesco Basilica

* The Basilica Santa Chiara

* Santa Maria degli Angeli

* The Carceri and Monte Subasio

* La Teraze di Properzio (for lunch or dinner)

* The Carceri monastery

* The Rocca Maggiore

* The Piazza del Comune

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Arts & Letters

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Edna St. Vincent Millay is one of my favorite American poets. I was both amused and bemused to discover that she didn’t like writing letters:

Edna St. Vincent Millay to Witter Bynner, May 2, 1935 

“I simply can’t write letters. I have made a name for the disease from which I suffer: I have named it EPISTOPHOBIA. I haven’t written a letter all winter. I wish it were socially impossible to write a letter. I wish there were no post-office, no stamps, no facilities whatever for expediting the smug, intrusive, tedious letters that people write.” (Source: Letters of Note)

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A Word to the Wise

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Something that is superjacent is positioned immediately above or on top of something else. Example (from “The Castles of Moravia,” a 2011 article by Evan Rail in the Travel section of the NYT): “Village streets threaded around the hillside, eternally watched over by the superjacent castle.”

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Readers Write

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A book recommendation from JW: 

“Mark, have you read the book Status Anxiety by Alain de Botton? I’ve been reading it and found myself wondering what you’d think. I always appreciate your rare intersection of wealth building, philosophy, and art. Let me know if I can gift you a copy if there’s any interest!

“With gratitude for your many years of shared wisdom.”

My response: 

Thanks for the recommendation. No, I haven’t read Status Anxiety, but I’ve read a fair amount of Alain de Botton, and I’m roughly acquainted with his arguments in the book. I covered much of the same ground in Living Rich, but from a more pragmatic (how to live rich without necessarily being rich) perspective. I will put it on my reading list.

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