Ever since I started Mindfully Investing, I’ve managed to post roughly twice a month without a break.  My perfect attendance record included months when I suffered and then recovered from a heart attack, some long vacations, and several other time-consuming life events.  Through all of this, I somehow found the time and energy to research, develop graphics for, write, edit and publish a post that, on average, was somewhere in the 2000-word range.

But I now find that I need to take a break from the relentless posting cycle.  Given my last post, you might reasonably think that the hiatus is because I’m going through a divorce, and I don’t have the emotional bandwidth for blogging.  But that’s not exactly right.  In fact, I’ve been separated for nearly a year.  And even in the early days of the separation, when my emotions were running their hottest, I managed to put together some decent posts.  But now I’m officially divorced, and emotionally speaking, things have calmed down considerably.

A more accurate description of my current situation is summed up by an inside joke from my relentlessly busy old job: “I’m paralyzed with workload.”  The joke refers to that uncomfortable condition where you find yourself with too many high-priority deadlines.  If you work on A, then B and C will be late.  If you work on B, then A and C will be of poor quality, etc.  Paralysis sets in as you try to come up with some magic way to tackle all the tasks, while in the meantime, the deadlines creep ever closer.  The joke is funny to observers but not to those suffering the paralysis—like a friend slipping on a banana peel.

My divorce process is mostly over, but now I find myself tending an endless to-do list with categories like cleaning out the house I’ve lived in for 15 years, getting it ready to sell, selling the darn thing, buying a new house, moving to the new house, family commitments this spring and summer, and the usual everyday stuff that never stops.

If you work full time, such complaints from a fully retired person may seem ridiculous to you.  And to some extent, your right.  I somehow previously managed to move eight times while holding down a full-time job.  If I really wanted to, I could work on posts late into the night after I’m physically worn out from yard work and packing up rooms.  But that option would feel a lot like my old professional life and reminds me of the main reason that I decided to retire early.  I hated being paralyzed by workload.

So, I always told myself that if blogging ever felt like work instead of an enjoyable hobby, I’d have to stop or at least take a break.  That’s exactly where I am right now.  Now as I work on my endless to-do list, I find that the thought of my next blog post is becoming just another chore on the list.  Instead of looking forward to the mental change of scenery offered by writing, I’m instead worrying about where to find the time for blogging.  Ideas for new posts that normally just pop into my head have dried up, or when they do arise, they seem too trivial for a quality post.

So, when will I start posting regularly again?  I wish I could say for sure, but putting a deadline on it feels too much like the deadlines from my previous work life.  Instead, I’ll just say that, when things calm down and the idea of blogging feels appealing again, I will get back to writing.  I don’t think it’s a matter of if, but when.

Apologies to anyone who recently subscribed to my post notifications.  It must feel like the rug was pulled out from under you.  On the other hand, if you are new to Mindfully Investing, there are more than a hundred past posts and articles that have extremely relevant content for anyone who’s trying to navigate the world of individual investing.  Just because one of my posts was published in the past doesn’t make it outdated information, although you’ll find occasional exceptions.  So, I urge new readers to keep clicking that “older posts” link to find some still topical content.

Until next time.

Over the years I’ve kept the focus of Mindfully Investing on the principles of successful investing, and as a result, I’ve written very little about my personal life.  Although there seems to be a big audience for blogs about personal financial journeys, I don’t think my plain vanilla life and finances make for particularly compelling reading.

However, I’ve made a few exceptions over the years.  I wrote an up close and personal post about my heart attack almost exactly five years ago.  I’ve also written a post or two that included some aspects of my personal investing and retirement plan and some actions I considered during the March 2020 market crash.  But those were mainly presented as real-life examples of investing concepts that could apply to anyone.

However, now I find myself at another of life’s major crossroads.  I’m in the process of getting divorced.  And that means splitting up assets, which means that I need to convert our retirement and investing plan into my retirement and investing plan.

In the U.S., almost 50% of all marriages end in divorce, and the divorce rate for couples over 50 (like me) has doubled since 1990.  So, my newfound knowledge of divorce finances is potentially relevant to a large swath of investors and retirees out there.  Today’s post contains a grab bag of my observations about divorce finances in the hopes that at least some of them will be useful to others who may be facing divorce now or in the future.

Divorce Changes Everything

At first glance, divorce would seem to change almost everything about an investing and retirement plan.  (You can read more about investing plans in Article 10 of Mindfully Investing and you can read more about retirement plan considerations in Articles 8.2, 8.3, and 8.4.)

To illustrate, here’s a list of some items contained in a basic investing plan and examples of how divorce may change them:

• Investing Goals – If your goal was to accumulate $X million for retirement, any progress you were making toward that has been set back.  Also, the goal itself may need to change when you consider the cost of living alone rather than as a couple.
• Existing Investments – Divorce can cause the tally of investments to change drastically.  Most commonly, the total value of investments is cut in half.
• Asset Allocations – The splitting process may drastically alter your asset allocations and may require you to consider rebalancing assets to be consistent with your revised goals.
• Savings/Contribution Rate – Most likely you will have a lower total income and a different monthly budget after divorce, which will alter the trajectory toward your ultimate investing goal.
• Tax Minimization – A decent investing plan should try to minimize taxes over a lifetime, with particular attention to the handling of tax-advantaged versus taxable accounts.  A divorce will likely alter your account holdings and tax situation, which may require some restructuring to avoid unnecessary taxes.
• Market Events – Although mindful investing generally advocates for ignoring market movements, a prudent plan may include preplanned actions when certain market conditions occur.¹  And those planned actions could need to change after divorce.

Many of the above changes also apply to a retirement plan.  Additional changes that are relevant to a retirement plan include:

• Glide Path – A “glide path” describes how asset allocations should change as you approach, enter, and age through retirement to minimize sequence of return risks.²  Splitting of assets may knock you way off your projected glide path, and you’ll need a new path that is compatible with your new situation and long-term goals.
• Withdrawals –  A retirement plan should include a dynamic³ withdrawal rate to fund living expenses that minimizes the chances of running out of money too soon.  Divorce changes both living expenses and the size of the nest egg that funds the withdrawals.  In essence, safe withdrawal rates must be completely recalculated based on post-divorce asset allocations and values as well as your new budget.

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I have to apologize to the younger readers of Mindfully Investing because I’ve probably focused my posts too much on long-term investing for retirement.  For the most part, I haven’t written much about mindful investing for more short-term goals like a downpayment on a house, a business enterprise, or a child’s college education.  So, today I’m going to correct that omission and describe a mindful approach to short-term investing.

What Is Short-Term Investing?

It’s pretty well established that stocks have historically outperformed the other major asset classes of bonds and cash over most multi-year timespans.  And historical data suggest that, if held for a decade or more, broad stock index funds have only a negligible chance of losing money.  That’s why long-term mindful investing emphasizes a heavy or even exclusive allocation to stocks.

Using that information, we can define short-term investing as when you expect to spend your invested money less than 10 years in the future.  With a timeframe of less than a decade, relatively poor performing but less volatile bonds and cash start to show their merits.  For example, if you plan to invest in stocks for five years and the stock market crashes in year four, you could be in real danger of having less money available to spend than you originally invested.  That sort of volatility rodeo rarely happens with bonds and never happens with cash.

I thought about some short-term investment goals that typically take less than a decade, and I came up with these examples:

• Marriage and/or wedding expenses
• A big toy purchase (cars, boats, RVs, home furnishings, home improvements, dream travel, etc.)
• Higher education expenses for yourself
• Supporting elderly relatives (reverse inheritance)
• Downpayment on a house, vacation property, or rental property
• Starting or investing in a business
• Health expenses or funding a health savings account (HSA)
• Higher education expenses for children.

Because these near-term life goals don’t offer us the luxury of time, saving and investing for them can be more complicated than just investing in low-cost stock index funds.

Measuring Short-Term Risks

To start simply, let’s examine the chances of losing inflation-adjusted money on each of the three major asset classes as shown in this graph using historical data from 1928 through 2020¹.

These historical data support my earlier statement that the chances of losing inflation-adjusted money with stocks over a 10-year timeframe are pretty low (about 10%).  But the chances of a loss with bonds and cash are higher, almost regardless of how long you hold them.  That’s because the relatively poor returns of bonds, and particularly cash, have a difficult time keeping pace with long-term erosive effects of inflation.

This graph also shows that bonds and cash perform relatively similarly over time; they both exhibit low volatility and relatively low returns.  Further, right now the likely returns from intermediate-term bonds (5-10 year maturities) and cash are remarkably similar.  For example, the current yield on a 7-year bond is only 1.24%² and the interest on a 5-year bank certificate of deposit (CD) is 0.95%.  So, we can simplify the analysis of short-term investing by considering bonds and cash one asset class that I sometimes refer to as “ballast”.  Ballast steadies your portfolio, but it rarely boosts its performance.

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I used to regularly peruse several websites that offered free investing and finance news.  But most of those once-free sites have become increasingly hidden behind paywalls.  I’ve opted to not pay for content that I once got for free because, as a rule, I’m a pretty stingy bastard.

However, many of these sites continually advertise that their new content is worth more than ever before.  I suppose that these news operations could be spending their new subscription money on better journalists and more in-depth reporting, which could conceivably increase the value of their content.

So, I’ve found myself wondering what if anything I’m missing by not paying for investing news.

A Trial Run

Accordingly, I just signed up for a one-month-for-$1-dollar offer from Marketwatch, which also gave me access to some additional Barron’s content.

Once my free month is up, they want $23 per month for continued access!  To a stingy guy like me, that seems pretty steep.  I regularly pay for and watch entertainment content from Netflix and Hulu at about half that price.  So, as a value proposition, am I likely to spend twice the amount of time surfing Marketwatch as watching Netflix?  I’ll come back to this question at the end of this post.

With my temporary access to this pricey content, I thought I’d review it from the perspective of mindful investing.  In other words, will this news help me with my long-term investing and retirement plan, which is built on a foundation of rationality, empiricism (evidence-based), humility, and patience?  Or perhaps more to the point, will access to breaking news help me with the few regular short-term decisions that are part of a mindful investing plan such as rebalancing, re-investing, and adjusting withdrawal rates now that I’m in retirement?

Testing the Waters

With these questions in mind, I browsed Marketwatch and Barrons over a few days to support my review of investing news in today’s post.  I should note that my intent is not to scrutinize or criticize Marketwatch in particular but to use it as one obvious example of subscription investing news.  I’m pretty sure that Marketwatch’s content is superior to some sites and worse than some others.  But it’s a site that I’ve known for many years, and I’ve found at least a few nuggets of useful information there as some of my past links to Marketwatch would suggest.

For each article that attracted my eye¹, I’ll give you the headline, a very brief summary of the key concepts from the body of the article, and my brief assessment of its usefulness from a mindful investing perspective.  Generally, I ignored articles that appeared to be only distantly related to the issues of finance, investing, markets, or the economy.  I also passed over the popular “Moneyist” column, which seems to be a Dear Abby column for personal finance disasters.

The Articles

HEADLINE 1: The biggest risk facing investors this earnings season is lurking just beneath the surface.

Key Concepts: Data from the “sensitive” travel and leisure sector imply that the economy, in general, is weaker than it otherwise seems.

Usefulness: The article contains some relatively detailed data on the health of many companies in the sector as compared to recent stock price changes.  Here’s an example chart from the article.

Beyond knowledge for knowledge’s sake, there’s nothing actionable or particularly helpful about this information from a mindful investing perspective.  That’s because mindful investors know that picking individual stocks is usually a loser’s game, whether we’re talking about the specific companies listed in this article or those that were left out.

Further, we know that trying to predict the stock market, much less individual stocks, based on the apparent direction of the economy is pretty impossible.  A good example is my annual update of stock market forecasts, which for four years running have hugely underpredicted actual stock market performance.  Usefulness grade for this article: C.

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I keep running across new versions of the debate about “Luck versus Hard Work“.  My first awareness of this topic came from Malcolm Gladwell’s book Outliers, which I read about 10 years ago, but I’m sure it goes much further back in history.  The basic question behind the luck-versus-hard-work debate is whether a person’s success is determined more by random chance events (luck) or the willingness and ability to put in prolonged and concerted effort (hard work).

Advocates for the luck side of the argument argue that successful people were often born into better economic and social conditions.  America’s favorite investing Uncle, Warren Buffett, called this the “ovarian lottery”.  He counts most of his own success to being born a white male in the U.S.  And I’d add that because his father was a successful businessman, investor, and congressman, young Warren was raised in extremely privileged circumstances.

But the advocates for hard work counter that without a foundation of hard work, most lucky opportunities will pass you by.  Let’s say you randomly meet someone new at a party, who offers you the easiest, high-paying job in the world—as long as you meet some minimal educational requirements.  But if you never put in the hard work to get a decent education, you can’t take the job, regardless of any prior privileges you may have enjoyed.  The same argument applies to my lucky eggplant pictured above.

Conceding the Debate

I won’t try to settle the work-versus-luck debate in today’s post.  For one reason, it’s easy to mangle words to win either side of the argument.  For example, hard work advocates can argue that “luck” doesn’t really exist.  And luck advocates can ask the same questions about the true meaning of “hard work”.  And how do you define “success”?  Is it relative, like being the highest-paid ditch digger in the entire State of Nebraska?  Or is it more absolute, like becoming the CEO of a Fortune 500 company?

However, I think the whole debate is fundamentally flawed because it assumes a false dichotomy.  It’s like asking whether obesity is mostly caused by carbs or fats.  The answer to most false dichotomies is that both factors are at play and both can be determinative under particular circumstances.  I can get fat eating too much bread or too much butter or too much of both.

Even so, the luck-versus-hard-work debate illustrates some key aspects of successful investing. It seems obvious that luck won’t consistently lead to investing success, while hard work probably will.  But in this case, the obvious is misleading because it falls into the same old dichotomy trap.

Does Hard Work Apply to Investing?

Uncle Warren is also credited with saying, “Investing is simple but not easy.”  But when he says “not easy”, he’s not referring to hard work.  He’s talking about how hard it is for most people to manage their unproductive emotions.  For example, you might intend to buy and hold stocks for 10 years.  But if the stock market plummets a few months after you bought in, fear will urge you to sell everything before it’s too late.  Similarly, it’s been hard this year to resist that greedy urge to jump into Tesla stock or Bitcoin.

Further, Mindfully Investing is dedicated to the idea that because successful investing is relatively simple, once you understand the fundamentals, additional hard work won’t help much.  In fact, evidence strongly indicates that hard work to gain more knowledge, information, and analysis usually causes inferior returns.  Specifically, 80% to 90% of actively managed funds fail to beat their relevant indices!  And most actively managed funds are run by well-educated experts, who presumably work very hard gathering the latest information and devising innovative analyses to find the very best investments.

So, for investing, the flip side of luck is better described as “discipline” rather than “hard work”.  The more disciplined and unemotional you are, the greater your chances for investing success.  More specifically, mindful discipline means recognizing and feeling those emotions without rashly acting upon them.

Does Luck Apply to Investing?

Now let’s look at the luck side of the equation.  Without slipping into the semantics debate, it’s common sense to say that some aspects of investing involve luck, particularly given that it’s so often compared to gambling.

At the simplest level, it’s obvious that no one knows with any consistency whether the stock market will go up or down tomorrow.  Another debate has raged for decades about the randomness of the stock market.  But for our purposes, I think it’s common sense to say that the direction of the market over the next few days is mostly about luck.

Similarly, no one knows whether next year’s markets are going to be impacted by a global pandemic, world war, economic turmoil from infinite sources, or meteor strikes and massive solar flares for that matter.  So, if we can’t predict the direction of entire markets, I think it’s reasonable to say that predicting the movements of individual stocks is even more difficult.  One of the many examples of the difficulty of stock picking is when even Uncle Warren couldn’t predict the on-rushing failure of Kraft Heinz, which now seems entirely obvious in hindsight.

So, it seems that both discipline and luck apply to investing, but which is more important?

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