This web site advocates an approach to money management that helped me save a lot of money in a short amount of time. I know a good number of other middle-class workers who used at least some of the ideas described here and who also saved far more than what most workers following the conventional approach to money management save. I strongly believe that the ideas discussed here can help you become financially free early in life.
All that said, I do not want you to rely on only this web site in making plans for your financial future. It is a mistake to rely too heavily on any one person’s views in deciding what to do with your money. Please do not take anything I say on faith. Work the numbers for yourself to see if what I am saying really makes sense for someone in your particular circumstances. Ask trusted friends what they think. Read books by authors who present alternative viewpoints. I very much want you to explore these ideas. I very much do not want you to act on them without thinking through all possible consequences carefully.
Be especially careful when it comes to taking steps that could affect your financial picture in a significant way. I thought through the pros and cons of handing in my resignation from my corporate job hundreds of times before taking that fateful step. You need to do the same before leaving a job, or changing your investment strategy, or moving, or whatever.
If you need advice from a lawyer or accountant or some other type of professional advisor, please seek one out. Those providing professional services are generally able to take your personal circumstances into account, and there are times when that is a critical step. Please do not use this web site as a substitute for paying for professional services.
December 2007 Addendum: The investing advice offered at this site is not mainstream advice. Many take comfort in knowing that the strategies they are following have been widely endorsed. My view is that that’s a dangerous practice in the investing area.
My view is that the mainstream advice on investing is almost always wrong. When prices are high, the majority of investors wants to hear that prices are okay. When prices are low, the majority of investors wants to hear that prices are not okay. Our human emotions (which generally have a short-term focus) cause us to seek rationalizations for following wrong-headed strategies and many of the big-name “experts” are reluctant to cross us by stating the realities in clear and understandable and bold and direct terms.
I see great value in the investing articles posted here. Many of them explore aspects of the investing puzzle not explored anywhere else. There’s a downside to presenting a minority take, however. The downside is that it is harder to get people to offer constructive criticism of your ideas when the ideas are unconventional. That means that you need to be especially careful not to place excessive confidence in what I say in the investing area just because I say it.
I ask that after reading the investing articles at this site you spend some time thinking about the arguments advanced. Try to identify flaws in the logic. In the event that you are not able to do so, check out the historical stock-return data that supplies the primary support for most of my investing ideas. Assure yourself that it really says what I say it says before taking my ideas seriously. Then seek out other investing “experts” and see what they have to say, what sorts of challenges they present to my take. Only after taking all these steps should you even consider changing your investing strategies.
Is my purpose in saying all this to discourage you from suing me? That’s part of it. It goes deeper than that, however. My argument is that the now-dominant model for understanding how investing works (The Efficient Market Disease — er, I mean Theory) is an excessively rational model. I say that it is excessively rational because it ignores the effect of investor emotions (it ignores the effect of valuations and changes in valuations are caused by shifts in investor emotions). The excessively rational model is an insufficiently caring model. The Efficient Market Theory is the work product of our sinful propensity to at times want to know too much and to care too little. It is reason transformed into rationalization, an intelligence so full of itself and so disdainful of anything outside itself that it has gone mad.
I care about you. That’s why I say the harsh things that I say about the now-dominant model. I believe that the now-dominant model is likely going to do you great harm in time. I want to replace the now-dominant model with a model that encourages a healthy mix of knowing and caring (I call the new model the Investing for Humans model). A key precept of the new model (one that distinguishes those of us who follow it from those following the old model in an extremely important way) is that those of us who follow the new model must be willing to acknowledge mistakes when they are brought to our attention. We appreciate that our mistakes can hurt our fellow humans. That’s our driver. That’s more important to us than concerns about potential lawsuits.
I believe that my investing claims are generally on the mark. I do not know this with absolute certainty. No human ever knows anything with absolute certainty. Given how important I believe these investing claims to be and how much damage I believe will be done to people like you as a result of uncritical acceptance of the old model, I feel obliged to criticize the old model in strong and uncompromising terms. That’s my job. Given that I am human and cannot be certain that I understand things properly, I also feel obliged to urge you to check out everything I say carefully before putting your trust in it. That’s another of my job responsibilities.
I like to think that you think of me as a friend. But there’s money at stake in our consideration of the topics discussed at this site. So I want you to be both warm-hearted and tough-minded. As your friend, I implore you to check out what I say two times, three times, four times, whatever it takes. You will not hurt my feelings by doing so and you will enhance your confidence in your investment choices (regardless of what path you take) by doing so. The harder you think about this stuff, the more respect I will feel for you and the more pride I will feel for the work we do together here.
If you become aware of weaknesses in my claims, please let me know. That’s what you would want me to do for you if this were your web site, is it not? I ask that you please do for me what you would want me to do for you. That permits us all to move forward together as a community.