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On Finance and Investing

These are couple of write ups I shared recently with friends. This is no financial advice. If anything, the only insinuation in this post is to urge you to read books and figure out the truth yourself.


Alright here is something to think about your retirement fund. Do you use an advisor? Do you know much how much fees you are paying? And how do you know they are good? Turns out only 3% of them are good if you consider a period of 15 years. Shocked?

This is no financial advice. If anything, my only advice is that you read books and figure out if what you are doing and what you are assuming are the right things.

  1. Risk and return are two sides of the same coin. But that doesn’t mean you have to take unwarranted risk. You can easily estimate the average which is just the market average. For convenience, we use the return of the index called S&P 500 (which is very roughly the five hundred biggest publicly traded companies in the US). Turns out this is a solid 10+% historically.

  2. Never underestimate the power of compound interest. Go to your friendly “compound returns” calculator and try a few numbers. The moment the no. of years goes beyond 10, 15, 20, or more .. you will see. As the saying goes, “Those who know compound interest, earn it. Those who don’t, pay it”.

  3. No one can predict the market in the short term. In the long term, it is positive. [requires long more explaining, but ask me, I can point you to some books]. Here is the interesting thing, no one else can predict it either. Time in the market beats timing the market.

  4. Okay, so where are we so far? Taking abnormal risks is unwarranted. Market average returns are awesome and when let to compound uninterrupted, it could lead to big returns / numbers. And finally no one can predict the return or time the market. Now you will see that giving an advisor your money just means that you have paid unnecessary fees that could’ve just been in your compound calculations. And to top that, they got it from you for nothing. Don’t believe me? Check this out.

  5. If you say that you earned market returns in one year, you are already ahead of 70% of all investors. That includes those who do investing for a living. The ones who breathe the markets, the ones in Wall st., the ones with super computers, advanced algorithms and artificial intelligence and machine learning. How cool is that?

  6. Now if you continue to keep making market returns, and the other investors keep trying their own active picking, timing strategies … in 5 years, your odds of success keeps going up -you rise up above 80%. In 10 years, you are above 90%. In 15 years of continuous market returns, you would’ve outdone 97% of all investors. [that includes survivorship bias too - which means only the hedge funds and advisors who survived this long. Lot more funds/managers close down].

  7. By doing active investing, or by picking an actively managed fund or an advisor who actively manages your money, you are essentially betting that they will beat the S&P 500. And not just that you are betting that over 15 years, that you are in the top 3% of all investors in the world. [this is almost like how 80% of all drivers believe they are above average drivers - but just even more preposterous].

As Taylor Larimore poignantly put it, “To get an A+ in investing, just make market average returns”.

  1. I am sure you are wondering what to do about this awesome finding? Glad you asked. Take a day off and read one of these books - this is one of the greatest ROI you will ever get.

  2. Here are some books: I would suggest, “Bogleheads guide to investing”. If you are more on the “can you just tell me what to do?” kind, then read “Bogleheads guide to three fund portfolio”. If you want something on the entertaining side (of the exact same concepts), you can’t go wrong with “Second grader beats Wall St” or “The Coffeehouse Investor”.

If you search youtube with “bogleheads” or “3 fund portfolio”, you will get lots of videos - if you lean towards video-learning.

The nice thing about investing in an extremely low-cost passive index-fund is that you own a piece of every public company. From MAGA (I mean, Microsoft, Apple, Google, Amazon) to the FANGS to even GME and AMC and with Square and Tesla, you have a foot in the bitcoin world too. You are not rooting for any one particular company or sector .. you just want everyone to grow and be productive and be happy. How cool is that?

  1. Now you are probably wondering that either I am selling a new system or the Bogleheads are selling one. Or they are (and consequently, I am too), ignorant of this radical market average beating system. So I urge you to read at least one of the listed books. Investigate the returns. Ask around. Post in forums. Verify yourself. It is after all your money and no one cares more about it than you do. If you believe they do care, then you have an even bigger problem (we need to hit a different help section of books for that). But joking aside, please please look around. [Should you find the magical radical system or advisor, you will tell me too, right? Maybe I will verify and if it checks out, I will join you! ;-)]. Happy reading!

If you are serious about investing (and not trading), definitely consider these books that I call the Bogleheads Trilogy. They started as a group on a Morningstar website’s forum with a maniacal passion to pursue a low-cost indexing fund based portfolio. They were big fans of Vanguard and its founder Jack Bogle. They were made fun of as “Bogleheads” but they wore it as a badge of honor. Eventually followed it up with their own web site and a few books proselytizing their philosophy of investing. The concept is super simple: Just invest in the whole market. Don’t try to pick winners or time the market. Have a decent allocation between stocks and bonds based on your age, goals and risk tolerance. Stay the course. That’s it.

[2-4 funds or ETFs is all you need]. Turns out history agrees with them. If you make market average returns, you will have come out ahead of 70% of all investors (including and especially the professional investors). If you stick with this for 5+ years, your odds go up. If you continue your boring market average returns for 10+ years, you are now better than 90% of all investors and if you go beyond 15+ years, you are now in the top 3%.

As one of the authors funnily and poignantly puts it, “To get an A in investing, just be average”. Can’t say it any better.

I recommend these three books in this order:

https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore-ebook/dp/B00JUV01RW/

https://www.amazon.com/Bogleheads-Guide-Three-Fund-Portfolio-Outperforms-ebook/dp/B07DH1QYJK/

https://www.amazon.com/Bogleheads-Guide-Retirement-Planning-ebook/dp/B002QX44IS/

If you want the same philosophy but with a more entertaining read:

https://www.amazon.com/Second-Grader-Beats-Wall-Street-ebook/dp/B0023SDQXA/

https://www.amazon.com/Coffeehouse-Investor-Wealth-Ignore-Street-ebook/dp/B0024CEZQC/

Finally, if you feel you can’t get enough of this and you want it all and give me some serious dose .. then go for:

https://www.amazon.com/Four-Pillars-Investing-Building-Portfolio-ebook/dp/B0041842TW/

https://www.amazon.com/All-About-Asset-Allocation-Second-ebook/dp/B003ZUXQBW/

I thoroughly enjoyed all these and learnt a lot (and unlearnt just as much). Hope you’ll like it too! And may the odds ever be in your …. never mind - just bet that the world will be happy and productive and you will get good returns. If that is not the case, you will have bigger problems to worry about.

Happy reading (and investing)!


Here is another interesting book that is a must read along with the above.

Thoroughly enjoyed reading this book “Why Smart People Make Big Money Mistakes” by Gary Belsky and Thomas Gilovich. This book builds on Behavioral Economics. Fundamentally the findings of Nobel Laureate Richard Thaler (Author of the books Misbehaving and Nudge) and Nobel Laureate Daniel Kahneman (Author of Thinking Fast and Slow) (the work he did with his long time collaborator Amos Tversky who passed away due to Cancer before the Nobel was awarded).

The two biggest behavioral economics breakthroughs are:

These two in turn lead to:

Even though nowadays with enough books and apps and articles that we may be aware of all such concepts (I was), we are still absolutely prone to making these very mistakes (I was, I am). An eye opening book.

As opposed to a few other books that take just one or two concepts and then expand what should’ve been a kindle single to a 250+ page book, this book very nicely picks one to three related concepts at a time per chapter and nails them in a nice way. The researchers who identified this, the original experiment, what it means in day to day terms, and a financial example which exemplifies the concept. Finally, each chapter ends with what are the steps you can take to catch yourself before you take an irrational decision in the spur of the moment. This is an eye-opening read for me. And I am glad I read this now!

https://www.amazon.com/Smart-People-Money-Mistakes-Correct-ebook/dp/B00321OR9E/

Happy Reading!