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Is Day Trading and Speculation for You?

September 18, 2015 By Nagesh Belludi 1 Comment

A few weeks ago, even as stock markets around the world suffered a turmoil triggered by downbeat economic news from China, a prolific 36-year-old Japanese day trader claimed to have made $34 million by betting big against the market trends and timing the bottom precisely.

Notwithstanding frequent mention of such success stories and blaring ads in the media tempting you to stake money on your wits and your instinct to profit from market swings, it can be very hard to make money consistently in day trading and short-term speculation.

As a fundamentals-based long-term investor, I don’t think there is anything wrong with day trading or short-term speculation. With skill, strategy, and the right temperament, it’s possible to be just as profitable in speculating as in investing with any other time horizon.

Over the years, many sophisticated stock-analysis services have emerged to facilitate trading and speculation by amateurs such as these pictured day-traders from Bangalore. Vast online social networks such as StockTwits engage in the exchange of information, opinion, gossip, rumors, and stories of successes and losses.

Day Trading and Speculating by Amateurs in Bangalore, India

For a few successful trades, luck may be the main factor. However, in the fullness of time, the most important factors for consistent stock market gains are discipline, temperament, and risk management.

Most day traders fail because it’s too darn hard to time the market. They lack a coherent technique that works consistently. Instead of following a definite strategy rooted in fundamentals or a structured thought-process, they follow the news-tickers, minute-by-minute stock prices, volume- and price-trends, and poorly understood media-fed euphoria. Moreover, most day traders engage in short selling, a complex skill that goes against the grain of the conventional buy-and-hold mindset. Worst of all, most speculators don’t understand how their emotions come into play—both when they lose and when they win.

Like anything that requires focus, drive, discipline, persistence and a stroke of luck, day trading and speculation are hard to do successfully. It may take years of painful education and experimentation before creditable success. The U.S. market regulator Securities and Exchange Commission (SEC) offers the following cautions on day trading:

  • Be prepared to suffer severe financial losses
  • Day traders do not “invest”
  • Day trading is an extremely stressful and expensive full-time job
  • Day traders depend heavily on borrowing money or buying stocks on margin
  • Don’t believe claims of easy profits
  • Watch out for “hot tips” and “expert advice” from newsletters and websites catering to day traders
  • Remember that “educational” seminars, classes, and books about day trading may not be objective

'Reminiscences of a Stock Operator' by Edwin Lefevre (ISBN 1500541052) Idea for Impact: Most studies on day trading and speculation reckon that over three-fourths of amateur traders lose money, some of which may have been borrowed. The high risk that comes with high-yield investments and the self-inflicted stress of loss and debt may not be for you.

A Low-risk Alternative: There is no fail-safe way to invest without any risk. If you don’t have the time, energy, determination, or a strong understanding of investing, consider low-cost index funds. Do your own research. Read my previous article about John Bogle, founder of Vanguard and his tireless advocacy of low-cost index funds.

Recommended Reading: Edwin Lefevre’s 1923 classic, “Reminiscences of a Stock Operator”, is a fictionalized biography of Jesse Livermore (1877–1940), one of the greatest stock market speculators of all time. This “font of investing wisdom” (per Alan Greenspan) is filled with insightful trading advice and shrewd market/price movement analyses.

Wondering what to read next?

  1. The Extra Salary You Can Negotiate Ain’t Gonna Make You Happy
  2. The Easier Way to Build Wealth
  3. Book Summary of John Bogle’s ‘Little Book of Common Sense Investing’
  4. The Problem with Modern Consumer Culture
  5. Wealth and Status Are False Gods

Filed Under: Personal Finance Tagged With: Getting Rich, Personal Finance, Simple Living

Burt, Bees, and Simple Happiness / The Curious Case of Burt Shavitz

September 8, 2015 By Nagesh Belludi 1 Comment


Narratives of entrepreneurial success and great wealth are fascinating

Today’s high-achieving culture adores people like Elon Musk who dream big, set ambitious goals, stubbornly get things done, and build wealth for themselves.

This scale of purpose, however, is not for everyone. A surprising number of people find their purpose by going the other way—by rejecting the trappings of wealth and pursuing humble, unpretentious, contended lives.

Consider the case of Burt Shavitz, the namesake and co-founder of Burt’s Bees, a prominent beauty-products company. Burt, whose bearded face and scruffy hat grace the tins of the company’s hand salve and ointment, died this summer at age 80.

The small, simple, happy life

Burt Shavitz’s extraordinary reclusive life exemplifies what Marcus Aurelius wrote in Meditations, “Very little is needed to make a happy life; it is all within yourself, in your way of thinking.”

As a young professional photographer in the sixties, Burt grew increasingly disenchanted with city life in his native New York City. He was particularly distressed by the loneliness of an old woman whom he photographed at a home across his apartment—she always looked out sorrowfully from behind dingy curtains and never left her room. “As soon as I took this shot, I knew that that would be me, ninety years old and unable to go outside, if I didn’t get the hell out. I borrowed a van from a former girlfriend, packed up everything I needed—my bed, what clothes I had, an orange crate of books—and disappeared into the declining sun,” Burt recalled in 2014.

Burt left his city life for the backwoods in Maine and started living in a camper van. He led a hippie lifestyle; he had no ambitions and very little money. He took to beekeeping after unintentionally stumbling upon a swarm of bees at a fencepost. One day, while peddling beeswax by the side of the road, he met Roxanne Quimby, a single mother who was hitchhiking to work. Roxanne and Burt soon got romantically involved.

Roxanne had an entrepreneurial mindset: she made candles, lip balm, and hand lotion from a 200lb stash of unsold beeswax and started selling personal care products to tourists and at fairs. Over time, when their business thrived enough, Burt and Roxanne moved to North Carolina to establish a factory. However, Burt missed Maine very much. After a falling out with Roxanne, Burt sold his one-third stake in the company to her for a measly $130,000 and returned to Maine. (In 2007, Roxanne and her associates sold the company to Clorox for $913 million; she claims to have given him $4 million of the proceeds. Burt’s Bees/Clorox continued to pay him an unrevealed amount for continued use of his likeness and his name on its products.)

Idea for Impact: Happiness is mostly a matter of perspective

After returning to Maine, Burt no longer kept bees to make a living. He just enjoyed life—doing what he wanted, when he wanted. He told Flare magazine in 2013, “I’ve always had enough. I never starved to death, and I never went without a meal. I served in the army and went to Germany and slept in snowbanks, and walked 100 miles in the day carrying an 80-pound pack. What was it that I needed? My beekeeping produced enough cash that I could maintain my vehicles and pay my land taxes. What do I need? Nothing. No wife, no children, no TV set, no washing machine. All the pins sort of fell into place my entire life.”

During his later years, Burt lived in a cluttered country home in Maine that had no hot water and liked to watch nature pass by. A 2013 documentary called “Burt’s Buzz” captures his long and unconventional life. This highly recommended documentary (entirely on YouTube) juxtaposes Burt’s ideal day—“when no one shows up and you don’t have to go anywhere”—with the rock star adoration that he received from fans during a visit to Taiwan as the ‘brand ambassador’ of Burt’s Bees products.

In interviews—as in “Burt’s Buzz”—Burt denounced the emptiness of consumerism and extoled the virtues of simple, reclusive living. Evidently, he never regretted missing out on millions, but felt hurt by a three-decade-old business deal with Roxanne gone bad. “I’ve got everything I need: a nice piece of land with hawks and owls and incredible sunsets, and the good will of my neighbors,” he once said. An obituary in The Economist observed,

Settling back in his rocking chair, feet spread to feel the heat of the stove, Burt Shavitz liked to reflect that he had everything he needed. A piece of land first: 40 acres of it, fields and woods, on which he could watch hawks and pine martens but not be bothered, with luck, by any human soul. Three golden retrievers for company. A fine wooden house, 20 feet wide by 20 feet deep, once a turkey coop but plenty spacious enough for him. From the upper storey he could see glorious sunsets, fire off his rifle at tin cans hanging in a tree, and in winter piss a fine yellow circle down onto the snow, and no one would care. … He would wander into the woods or lie on his lawn to watch the baby foxes play, murmuring “Golly dang!” with simple happiness.

The seventeenth century French writer Francois de La Rochefoucauld once wrote, “Happiness does not consist in things themselves but in the relish we have of them; and a man has attained it when he enjoys what he loves and desires himself, and not what other people think lovely and desirable.” If, indeed, contentment consists of liking of what one has and having what one likes, Burt’s humble life illustrates how happiness arises from the harmony between oneself and the life one leads in one’s simple corner of the world.

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  3. What the Stoics Taught: Shunning the Materialistic Frenzy of Greed
  4. Surprising Secrets of America’s Wealthy // Book Summary of ‘The Millionaire Next Door’
  5. Why I’m Frugal

Filed Under: Business Stories, Living the Good Life Tagged With: Entrepreneurs, Happiness, Materialism, Money, Simple Living

This Man Retired at 30 and is Ridiculously Happy

December 12, 2014 By Nagesh Belludi 1 Comment

“What’s money? A man is a success if he gets up in the morning and gets to bed at night and in between does what he wants to do.”
—Bob Dylan, American Musician

Early in my professional life, I pursued an ambition to attain wealth—not because I sought after luxury, but because I wanted to realize a financial foothold that could help me become financially independent and invest in a meaningful life. I’ve been “retired” for two years now, work very hard on my true pursuits, and live life on my own terms. I might fancy a change in the future; for now, I am living the dreams and I couldn’t be happier.

Money is a False God

Most people spend the better part of their adult lives chasing the almighty dollar in an ostensible pursuit of success and happiness. Wealth, characteristically manifested in the acquisition of things, becomes so defining of their success that it becomes their primary measure of accomplishment. Later in life, they wake up to the distressing fact that everything they’ve earned isn’t bringing them the wonderful life it was supposed to.

Pursuit of riches becomes such a trap because many people easily appraise life in terms that are defined by others.

Enjoy a Life of True Wealth

I admire anyone who is self-disciplined and is willing to live their life on their own terms. Last year, The Washington Post carried an interesting interview with a man who had retired at the age of 30, not caused by extreme wealth but by living with less. Mister Money Mustache realized early that the pursuit of material things could lead to a persistent sense of emptiness. Rather than being unfulfilled, his family’s live-with-less way of life has made them “ridiculously happy.” Here is an excerpt of the interview.

Q: You describe the typical middle-class life as an “exploding volcano of wastefulness.” Seems like lots of personal finance folks obsess about lattes. Are you just talking about the lattes here?

A: The latte is just the foamy figurehead of an entire spectrum of sloppy “I deserve it” luxury spending that consumes most of our gross domestic product these days. Among my favorite targets: commuting to an office job in an F-150 pickup truck, anything involving a drive-through, paying $100 per month for the privilege of wasting four hours a night watching cable TV and the whole yoga industry. There are better, and free, ways to meet these needs, but everyone always chooses the expensive ones and then complains that life is hard these days.

Wondering what to read next?

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  5. Wealth and Status Are False Gods

Filed Under: Personal Finance Tagged With: Materialism, Personal Finance, Simple Living

With Needs, Without Wants

December 2, 2014 By Nagesh Belludi Leave a Comment

Contentment is worth more than riches. Having few desires and feeling satisfied with what you have is vital for happiness.

Be Happy with What You Have

In a This I Believe essay, Marianne Bachleder of San Francisco reminisces about consumerism and about being conscious of how much she already has:

We forget to be happy with what we have and in our forgetfulness we spread the infection of discontent. It’s a mistake easily made in a world where everyone is expected to pursue every want—the newest gadget, the latest update.

…

I may want shiny things, but I don’t need them. What I do desperately need is the peace of mind found in moments of contentment and gratitude. I need to identify each of my wildcat urges to purchase or possess as either “want” or “need.” My needs are basic, predictable, manageable. My wants are chaotic changelings, disturbers of the peace that can never be satisfied.

I will tend my needs, I will whittle my wants, and I will say often, “I’m happy with what I have.”

Thrift to Wealth

'The Little Book of Main Street Money' by Jonathan Clements (ISBN 0470473231) Jonathan Clements, personal finance columnist at Wall Street Journal and author of ‘The Little Book of Main Street Money’ and the forthcoming ‘Money Guide 2015’, spoke of thrift and the wealthy in an interview with Vanguard:

Over the years, I have met thousands of everyday Americans who have amassed seven-figure portfolios—and the one attribute shared by almost all of them is that they’re extremely frugal. When I was at Citi, I used to joke to the bankers that they would know a couple was wealthy if they pulled up to the branch in a second-hand Civic, wore clothes from J.C. Penney, and asked to have their parking ticket validated.

Shop at Amazon & Support a Noble Cause

Gyaana Prawas : Science/field trip for tribal kids in South India / Aapatsahaaya Foundation Dear readers, during this holiday season, if you succumb to the urge for the latest and the greatest or if you are shopping for gifts for friends and family, please consider shopping at Amazon.com using this link or clicking on a recommended book on the right sidebar of this website.

With no additional cost to you, 100% of the referral fees earned by this blog from the international Amazon Associates program support the education of underprivileged kids in South India. Our philanthropy partner is Aapatsahaaya Foundation, Bangalore. In 2013, your purchases funded part of a science/field trip for tribal kids.

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Filed Under: Living the Good Life, Personal Finance Tagged With: Attitudes, Giving, Materialism, Personal Finance, Simple Living

Book Summary of John Bogle’s ‘Little Book of Common Sense Investing’

January 25, 2011 By Nagesh Belludi Leave a Comment

The Little Book of Common Sense Investing, John Bogle “In investing, the winning strategy for reaping the rewards of capitalism depends on owning businesses, not trading stocks,” argues John Bogle in making a strong case for low-cost index funds in his text, “The Little Book of Common Sense Investing.” With statistics and graphs, Bogle rationalizes that low-cost index funds outperform most investment professionals and offer better-than-average returns for investors over the long term.

John Bogle is the legendary founder of the investor-owned Vanguard Group, currently the world’s largest mutual fund company by total assets under management. Over the course of 25 years at the helm of Vanguard, until his retirement in 1999, he focused the efforts of Vanguard on offering cost-conscious investment choices to the masses. John Bogle is the bestselling author of many other books on investment advice.

Superiority of Low-Cost Index Funds

John Bogle founded the world’s first index mutual fund, the Vanguard 500 Index Fund in 1975. Since then, “Saint Jack” (as critics labeled Bogle mockingly) has untiringly promoted the virtues of low-fee, no-load, low-turnover, passively-managed index (or more precisely, index-tracking) mutual funds. Investing in such funds, he contends in “The Little Book,” is the simplest and most effective way to invest in a diversified portfolio of stocks and bonds, and profit from earnings growth of businesses and the dividends they yield.

John Bogle methodically discusses every theme relevant to successful investing: the myths of speculation and market timing, inflation, frictional costs (fees charged by brokers and investment advisors, costs of transactions, front-end and back-end loads,) and the effects of compounding and taxes. He then convincingly counters arguments against investing in total market index funds through easy-to-follow quantitative appraisals of investing in individual stocks and bonds, actively managed funds, hedge funds, and sector-specific funds. At the end of each chapter, Bogle reinforces his position with words of wisdom from some of the greatest minds in economics and investing: Ben Graham, Warren Buffet, John Maynard Keynes, Peter Lynch, and the like.

Invaluable Insights for Investors

The majority of people do not have the time, energy, determination, or aptitude for understanding economics, examining investments, managing risk, and building wealth for themselves. They are either overly cautious, or they invest heedlessly, submit to market trends, or engage in speculation. In reading John Bogle’s authoritative book, modest investors will recognize that low-cost index funds offer them broad diversification, reasonably good returns over the long-term, and the ability to outperform a majority of investment professionals.

Informed investors will find, notwithstanding many drawn-out discussions, a great reiteration of John Bogle’s now-familiar, commonsensical ideas on the merits of index investing.

Leadership Reader’s Bottom-line

  • “The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns,” by John C Bogle
  • Subject: Personal finance, investment advice
  • Required reading for building wealth prudently through investments. The excellent insights in “The Little Book” deserve every investor’s considerations.
  • Recommended topics for further reading: asset allocation, financial planning, and retirement planning.
  • 4 out of 5 Stars

Wondering what to read next?

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  3. Here’s the #1 Lesson from Secret Millionaires
  4. The Easy Tracking Spreadsheet That Can Transform Your Money Habits
  5. Is Day Trading and Speculation for You?

Filed Under: Leadership Reading, Personal Finance Tagged With: Books for Impact, Getting Rich, Personal Finance, Simple Living

The Easier Way to Build Wealth

April 6, 2010 By Nagesh Belludi Leave a Comment

“Work a lot, spend a little, save the difference, invest it wisely, leave it alone. It’s not that hard. We just make it harder than it needs to be. Paying too much attention to the details of markets is a chief culprit.”
— Morgan Housel in Motley Fool

It is amazing that most people just do not seem to accumulate enough wealth despite making a comfortable living. Many live from paycheck to paycheck, even with steadily rising incomes. Borrowers often fall behind on their mortgage payments. Credit card and consumer debt is growing at an alarming pace. Employees in the prime of their lives are not setting aside anything significant for retirement. As a result, many baby boomers cannot stop working at the usual retirement age because they are not ready to fund the rest of their lives.

Every Dollar You Make Equals LESS than a Dollar for You to Spend

Are you sometimes disappointed at not realizing your dreams of building wealth or becoming financially secure? The overwhelming odds are that at the root of your feeling of financial insufficiency is how you tend to spend.

A common folly is to assume that every dollar you make equates to a dollar you can spend. In reality, you need to make much more than a dollar to spend each dollar. Apply the following some simple arithmetic to calculate the true purchasing power of your income.

  • Suppose that you are employed in the United States and you are in the 28% tax bracket. If you pay 6.2% in Social Security deductions, 1.45% in Medicare deductions, and your state income tax rate is 4%, then your total deductions are 39.65% of your income. On every $1 you earn, you pay $0.3965 in deductions. Therefore, for every $1 you make, your purchasing power is just $0.6035. In other words, you have to earn $1.65 (1.65 = 1/0.6035) to spend every $1. For instance, you would have to earn $3,811 to buy a 47″ flat screen TV that costs $2,300.
  • When you invest your money, you do not pay Social Security or Medicare deductions on dividends and capital gains. If the tax rate on long-term gains and dividends is 15% and your state income tax rate is 4%, you will retain $0.81 of every $1 you make in long-term gains and dividends. Even then, you have to earn $1.23 in dividends and capital gains to spend $1.

Harness Your Purchasing Power

“Anything you do to make yourself more valuable will pay off in real purchasing power.”
—Warren Buffet

There are only two ways to get rich: make more money and spend less. The first method is relatively difficult: it is never easy to get a significant raise or a better job at a better place, win the lottery, take a second job, sustain a secondary source of income, or consistently make sizeable gains in the capital markets. It is easier to build some discipline in your spending habits.

  • Track all your expenses for a month. At the end of the month, analyze your cash flow. Scrutinize your expenses in terms of ‘wants’ and ‘needs.’ Happiness comes from matching your wants to your needs. Consider ideas for cutting costs and their consequences. Examine your discretionary spending. Scale down or dispose of unnecessary services or subscriptions, irrelevant utilities and features. Consider reprioritizing your expenditures with a medium- and long-term perspective.
  • Examine your spending instincts. Be mindful of the perils of consumerism and materialism. Do not let your rising income fuel increased spending. Simplify your life.
  • A one-time windfall, bonus, or tax refund is no excuse for indulgent spending. Be selective in your purchases without abandoning your plans for paying off debt, saving money or funding your retirement account.
  • Seek to be disciplined and prudent, not necessarily thrifty or frugal. Cultivate an appropriate financial discipline without hurting the quality of your life. Reward and treat yourself for your achievements. Invest in anything that makes you feel good, happy, or helps you realize your goals.

Wondering what to read next?

  1. Yes, Money Can Buy Happiness
  2. The Extra Salary You Can Negotiate Ain’t Gonna Make You Happy
  3. The Problem with Modern Consumer Culture
  4. You are Rich If You Think You Have Enough
  5. Wealth and Status Are False Gods

Filed Under: Personal Finance Tagged With: Balance, Getting Rich, Materialism, Personal Finance, Simple Living

Fight Clutter and Simplify Life

October 28, 2008 By Nagesh Belludi Leave a Comment

Classic Clutter-Busting Strategies

This ‘Unclutterer’ blog article lists essential strategies to get and stay organized. Below is an abridgment; see full article here.

  1. A place for everything, and everything in its place. If an object doesn’t have an official home, then it will always be out of place. Once you’re finished using an object, immediately put it back in its place.
  2. Establish routines. Set up a regular schedule for tasks that have to be completed daily and weekly: laundry, cleaning, cooking, organizing, filing, home and auto maintenance, etc. The more methodical you are, the simpler it is to maintain your home and office.
  3. If you don’t use it, need it, love it, or feel inspired by it, get rid of it. Just because you might have space to store something, doesn’t mean you have to keep it. Your home and office should be filled with useful and inspiring things, not objects that cause you stress and anger. Plus, the less you own, the less you have to worry about, clean, organize, finance, and maintain.

Call for Action

One of the primary drivers of the feeling of not being on “top of things” is disorder and clutter. Given our busy lives, we tend to let things get out of hand. This can frequently lead to a chronic preoccupation over the lack of orderliness in our lives.

Set aside some time, perhaps just 30 minutes, and

  • Eliminate. Toss out things you have not used in the last two years. If you are not using something on a regular basis, you probably do not need it. Consider donating to charity or let somebody else have things you do not need.
  • Organize. After eliminating unneeded and unwanted things, store articles close to where you use them. Consider investing in filing cabinets, cupboards or storage boxes.
  • Simplify. One of the biggest hindrances to “getting things done” is complexity and redundancy. In today’s consumer driven societies, we tend to buy things we don’t need or, worse, things we already have and cannot remember. Use common sense to prioritize what you will own and what you will do and fight complexity.

Control your ‘stuff’—do not let them control you.

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Filed Under: Sharpening Your Skills Tagged With: Clutter, Simple Living, Stress, Tardiness

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About: Nagesh Belludi [hire] is a St. Petersburg, Florida-based freethinker, investor, and leadership coach. He specializes in helping executives and companies ensure that the overall quality of their decision-making benefits isn’t compromised by a lack of a big-picture understanding.

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