Exploring the relationship between people and their money.
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I have been involved in a number of discussions about the best way to invest money. In most of these discussions, many of the arguments that people make seemed to be informed by a fundamental belief in the efficient market hypothesis or modern portfolio theory. The entire debate reminded me of a story that I [...]
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Plans are of little importance, but planning is essential. — Winston Churchill
Plans are nothing; planning is everything. — Dwight D. Eisenhower
Everyone has a plan until they get punched in the face. –Mike Tyson
It is time that we recognize that Churchill and Eisenhower [and even Mike Tyson] were right.
We place way too much weight in plans; [...]
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A few days ago, I introduced The Assumer. Behind the curtain in every traditional financial plan there has to be someone making a long list of assumptions. These are nothing more than guesses about things like inflation, your date of death, and returns on international small cap stocks.
Unknowable things.
One of the interesting things about the [...]
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The software used by most financial planners involves a number of variables.
When you have variables, you have to make assumptions.
So the question is: Who is the assumer?
Someone is going to have to make some assumptions about all those variables including:
What is inflation going to be?
What rate of return will you assume for stocks, bonds, and [...]
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