The Writers Coin

Viralogy has ranked me as the #10 blog on their list of top ten personal finance bloggers you’ve never heard of.

The good news: someone out there is giving me props by putting me on their top-ten anything list. Sweet.

Bad news: nobody’s heard of me. Which is OK if I had started this whole thing a few months ago, like Bargain Babe apparently did. At least that’s what her Sitemeter button says. Oh and you know what else it says? That even though she only started blogging in January of ’09, she already gets more traffic than I’ve ever gotten in over a year!

Wait—this was supposed to be a celebratory post. Damnit!

In case you didn’t know, there are at least two things that make up a great writer: read a lot and write a lot. There are other tips, but that’s not what today’s post is about.

Today is about some of the great stuff I’ve been reading recently. These are all great articles and some of them have to do with sports, which are a huge passion of mine, especially baseball.

Whether you enjoy sports or not, these are fantastic pieces of writing:

• How David Beats Goliath by Malcolm Gladwell: This is a great look at how average or mediocre teams can equalize the playing field. Specifically, Gladwell looks at basketball and why the full-court press isn’t used more in the sport. A fantastic read.
• Brain Games by John Colapinto: The full article isn’t available online, but see if you can find the technology issue of the New Yorker, because this long article is really a fantastic read. Maybe it’s just me, but I find visual cognition theory and neurology fascinating. This article profiles Vilayanur S. Ramachandran, who came up with mirror therapy as a way to help relieve phantom-limb pain. This reminded me of why I love reading Oliver Sacks so much, especially his The Man Who Mistook His Wife for a Hat. This may sound too scienc-y to some, but it’s a fantastic look at how our brain adapts to things like losing a limb.
  
• Bill Simmons and Malcolm Gladwell Have a Tete a Tete:A fun read that spans several topics. Enjoy reading two great writers talking shop about stuff they’re both passionate about. Oh and they even drop a mention of Michael Lewis. What a trifecta!
  
• Plate Discipline So Important Nowadays by Jerry Crasnick: As I’ve said before, I’m a huge fan of Moneyball and OBP as a measure of how productive a baseball player is. This article takes a closer look at what being patient at the plate actually means and what it’s like for a player like Jeff Francoeur, who is a born hacker. Especially since his teammate, Chipper Jones, is one of the best/most patient hitters in the game. If you loved Moneyball, you’ll enjoy this.

Managing your own budget is pretty straightforward once you get the basics down: make more than you spend and go from there.

But managing your own investments is a little trickier, especially once you’ve amassed a big chunk of money. At what point to you throw your arms up and say, “OK, this is too much money, I want someone else to do this for me”?

Apparently, J.D. from Get Rich Slowly has reached that point. His post on developing an investment policy includes one line that got me thinking:

Because I have so much to invest, I’ve begun to speak with financial advisors.

Note: It’s not certain that I will work with a financial advisor. I may decide to do this on my own. But I want to explore my options, and I want to experience the process so that I know what it’s like.

So he may not follow through on it, but he’s at least considering it. Since J.D. is one of the most respected and recognized personal-finance bloggers out there, I was surprised that he was considering making this move. If he can’t do it on his own, what hope do the rest of us have?

So why does someone who know all this stuff so well need to pay someone else to do it for him?

I’ll tell you why: managing a lot of money is stressful. If I had a million bucks, would I continue to invest in the same funds I invest in now? Probably not, I’d take half of it and put it in a savings account, then take the rest and probably hand if off to an “expert.” It’s scary to think of having all that money under your command…

Last week I caught an article on Yahoo Finance titled Seven Ways to Simplify Your Investment Life. My favorite tip was #5: Jot Down Why You Own Each Investment.

When it comes to picking individual stocks, I love hearing the “why” behind a specific choice. I like hearing these rationalizations and the thinking that went before the trigger was pulled. Writing them down creates a little time capsule that you can’t argue with: that’s why you bought it at the time. If you don’t write it down, you can always change your story.

Being a writer, I can appreciate the value of writing things down—it’s a great way of reminding yourself of why you did something and thinking an idea through a little bit. And I’m not alone here—other bloggers also know the power of writing things down.

The Mock Portfolio

I used to have a Word document that I used as a paper-trading terminal. If I saw a stock I was interested in, I’d “buy” it by entering the date, the price, and the ticker symbol in the document. And then came the important part: the reason why I was buying it. Sometimes it was as simple as “read an article about it.” Other times, it was far nuanced. Stuff like “if things keep going the way they’re going, this company should hypothetically see an uptick in customers.”

Justifying the picks had a very interesting effect on my pretend investing—I felt like I had to have a good enough reason to virtually buy them. I had to answer to the mock portfolio for all these fake decisions.

Going back to check out the picks from my mock portfolio was fun back when the whole market wasn’t down on its knees begging for forgiveness. And taking a look back now is pretty interesting because most of my picks are underwater. Except for Goldcorp (GG), which I bought because:

Read about the CEO, had a competition to see who could find more gold, an open source type deal, pretty cool, was very successful. They’ve been acquiring left and right. It’s a commodity and they’re in Canada. But whatever, I’m in at 27.18.

That was back in January of ’07. Today, the stock is at $32.

But the most interesting entry to look back on is the very last one I ever wrote:

May 16, 2007
Watch List: BAC, C, JNJ, and PG
All this talk of impending doom makes me want to get ready. These are proven stocks, winners. All have a dividend too (for the Roth). So if and when this goes down, I’ll put my money into these companies when the downturn forces them down. Then I’ll hold them for the long run, obviously. I may have to pick one from BAC (MOS is less than half, not as good as C) and C (MOS is half of actual price) and another from JNJ (around half) and PG (actually pretty close, best one), since they are in similar industries. (spreadsheet numbers)

This is where the value of writing things down becomes obvious: it’s hard to think back on what we were all feeling in 2007, but it’s pretty clear there was some unease in the market. Investors were scared that something really bad was coming. They were right, and it looks like I was partially right too. The banks got killed but so did stalwart companies like JNJ and PG, which are now trading at a “discount” from their 2007 price.

It looks like it’s time to fire up the ol’ mock portfolio again and see what JNJ and PG can do for me in the future.

Photo by Star Dust