Tenacity And Faith – Do You Have It?

Stone HengeI’m not sure if it’s by coincidence or because I’m spending more time listening, but I’ve noticed more people sharing with me how they lost a lot during the 2008-2010 financial crisis, and how they’re doing everything possible to get back on track.

I was at Bed, Bath & Beyond the other day when I met a sales clerk in the home decor section. He was probably around 65-70 years old with withered skin and dark patches all over his arms and head. He looked quite ill and smelled like he had been hitting the bottle the night before. His name was “Bob” and he was full of smiles as he sought to help me find the perfect barstool.

I selected a set of four handsome barstools from the choices he showed me for my kitchen. I didn’t have the famous 20% off coupon BBB sends in the mail, but Bob gave me a wink and told me, “I got you, don’t worry.”

He asked me whether I had recently bought a new home, and I told him that I did. “I finally found that room with a view I’ve been searching for all this time,” I replied.

“I used to have a view, but then I lost my business of 20 years and then I lost my partner. It was just me in this old house for a couple years until I realized I could no longer afford the rent, so I moved. I have a small place now with the view of the street and another apartment’s window, but it will do,” Bob lamented.

I gave Bob my condolences and tried to cheer him up by continuing on the conversation, “Hopefully your new place is comfortable and at least much cheaper yeah?”

“Oh, yes, much cheaper,” Bob responded with a smile. “I miss the view, but I’m just thankful to have found an affordable place to live in the city.”

To lose money is one thing. I did that spectacularly well during the downturn. To lose love and money at the same time is unbearable.

But Bob showed an incredibly positive attitude during our time together, and he made me a very happy customer that evening. I even ended up doing some research on BBB and bought some of their stock. Fingers crossed their debt offering will help their financials and they can compete effectively with the likes of Amazon and other online retailers.

Maybe all Bob wanted was for someone to listen to his sorrows. Unless we die first, we might also one day end up alone. 

How To Pick A Robo-Advisor In The Digital Wealth Management Era

Old Coins by Financial SamuraiOne of the reasons why I’m an Apple user is because I appreciate good service. When I dropped my Macbook one evening and my hard drive stopped working, it was incredibly easy to schedule an appointment with the Genius Bar at my local Apple store. They fixed my hard drive and recovered my data within 30 minutes and away I went. Peace of mind is worth the premium, which is why I’m a fan of technology-assisted financial advisory firms with human financial advisors.

But what if you have time and know how to upgrade your RAM, swap out your hard drive, and do your own diagnostics? (I remember doing all that as a teenager.) Then going the robo-advisor route may very well be a good option because their fees are even lower. There’s just no person to guide you through life’s myriad changes.

Robo-advisors, aka algorithmic advisors deploy sophisticated investment algorithms to help invest your money in the best risk-adjusted way possible. You essentially fill out a profile about yourself and the algorithm will go to work to recommend and implement their recommendations for you.

I used to have a hard time trusting computers to do anything for me. But after spending 13 years covering some of the largest mutual funds and hedge funds in America, it’s clear that algorithmic investing, or more commonly known as quantitative investing or scientific investing have done extremely well. For example, Bridgewater Associates run by Ray Dalio is the largest hedge fund in the world with over $120 billion dollars and it’s a macro quantitative fund with tremendous performance. Famous hedge funds run by George Soros, David Tepper, and Steve A. Cohen can’t even compare.

A good quant fund or algorithmic advisor is all about having good people. At the end of the day, the investment variables are created by people and continuously tested for maximum returns. Spending time understanding people’s backgrounds and then trusting them to do the right thing is a huge part of letting other people run your money. After all, the reason why you want someone else investing your money is because your expertise lies elsewhere, and you’ve got more interesting things to do with your time.

In this article, I’d like to provide a brief primer on the three main robo-advisors that exist today: FutureAdvisor, Betterment, and Wealthfront. Because I’ve personally met Bo Lu, Founder of FutureAdvisor, I’m going to compare and contrast FutureAdvisor to the other two. They are all based here in San Francisco.

Financial Samurai Passive Income Update 2014-2015

Financial Freedom Through Passive IncomeWelcome to my annual passive income update. I don’t do these updates more often because nothing changes too much on a month-to-month or quarter-to-quarter basis. Do you really want to see that I increased or decreased my passive income by $1,000 from the month before? I think not.

Here are some immediate reasons I can think of for why building passive income is a good idea:

1) You likely won’t want to work forever, no matter how much of an eager beaver you now are.

2) Unfortunately bad things happen all the time e.g. layoffs, financial meltdowns, theft, etc.

3) It’s nice to provide as solid a financial foundation as possible for your family and loved ones.

4) You broaden your knowledge and expertise across various topics so you can seem erudite but remain a little dumb.

5) You’ll reduce financial stress and feel happier that not all your income is tied to one main source.

6) You will decrease your chances, your spouse’s chances, and your children’s chances of ever having to depend on the government to survive.

7) You will have more freedom to do things you truly want to do. This feeling becomes more intense as you grow older given you become more aware of the finality of life.

8) You can push yourself financially beyond what you think could ever be possible. Who doesn’t love a good challenge except for the people who have everything handed to them?

This is my third annual passive income report where I have a goal of making $200,000 in relatively passive income by mid-2015 after leaving my job in early 2012. I started off with roughly $78,000 a year and I’m currently up to a projected ~$150,000 a year if all goes well after renting out my old primary residence. Life is uncertain, and I’m sure things will change.

To clarify the meaning of passive income, I do not include income from consulting, freelancing, asset sales (stocks, bonds, real estate, baseball cards etc), and business income. I’ve got other targets for these revenue streams that I might discuss in a future post, but probably not. The goal of passive income is to have the income largely come in without doing much work at all. But in order to not do much work for money, we’ve first got to work very hard for our money!

One thing to note is that I started my passive income journey before writing about Stealth Wealth. $78,000 a year is roughly the median income in SF, so it wasn’t a big deal. But I promise that if I ever breach $200,000, I will go dark and never write any specific figures again. If I do, you’ll know that I’m lying to blend in because that’s what Stealth Wealth is all about. 

Why Women Earn Less Than Men – A Woman’s Perspective

The following post is from Holly of Club Thrifty. The article was originally suppose to be posted on a corporate blog I’m managing, but it was deemed too risqué so I’ve decided to publish it here. It’s always good to hear a woman’s perspective on this touchy subject. Never let good words go to waste I say! 

Experts use the term “gender wage gap” to describe the ongoing disparity between men and women’s average annual earnings. According to recent government data, women earned just 80.9 percent of what men brought home in 2012. That’s certainly disappointing, but what’s more disconcerting is the fact that it may actually be getting worse. According to Bureau of Labor Statistics, women earned approximately 82 percent what men did in 2011- just one year before.

Several other studies claim that the gender wage gap rests at various percentages, although most studies tend to agree that women of color and women older than 35 often earn the least. These statistics become even more troubling when you consider the fact that women were the sole or primary earner in 40 percent of households in the U.S. in 2011.  The gender wage gap also appears to be somewhat elastic, with varying levels of intensity from industry to industry:

ECON NEW

*Economist, 2012

But, are salaries really impacted that that much by gender alone? While a quick glance at the statistics might lead us to believe that the gender wage gap is caused entirely by gender discrimination and crotchety old women-hating bosses, many believe there is much more to the story than the raw data can possibly portray.

Let me give you an example, “Real Housewives” style.

If You Produce Nothing How Can You Expect To Make Any Money?

Produce nothing? Have a double bagel

Produce nothing? Have a double bagel

Every time I walk into a coffee shop, I see guys fiendishly coding on their laptops. Although the chances are slim to ever make it big as an entrepreneur, thousands of predominantly 20-something year old men try their luck anyway. Huge respect for anybody who tries.

100% of the non-family tenant applicants for my previous house were males in tech, internet, finance, or consulting. No wonder why fellas complain that San Francisco is turning into a sausage town. At the same time, women also complain there are no good men in San Francisco either. Such a conundrum!

The title of this post may seem obvious, but I don’t think it’s obvious for the folks who 1) complain on the bus why their life sucks, 2) complain on message boards why what someone else wrote is terrible, or 3) complain on here why it’s too hard to save money or spend less. There has to be action, otherwise you’re just wasting everyone’s time.

Every single company we know of today started with someone who had a vision and a determination to produce something new. If you’re working 40 hours a week or less and wondering why you aren’t getting ahead, you might as well move to Europe where life is good and everybody makes roughly the same. A 40 hour work-week is an arbitrary amount to work given we have 168 hours a week.