Dumplings & Dragons

February 19th, 2018 by Potato

Inspired by a hilarious misunderstanding as Blueberry was trying to get her friend to play D&D, we made up a game called Dumplings and Dragons today and played a quick round.

Scenario: a hungry dragon comes to town and demands to be fed a variety of novel dumplings. The players work together to make dumplings.

There are three phases: recipe creation, cooking, feeding.

First, a player has to invent a kind of dumpling, then roll a d20 modified by INT or WIS to determine if the new recipe is any good. This determines the “damage/satiation” dice to be rolled later: fumble = recipe failure, dragon will reject all dumplings of this type; 0-9, roll d4; 10-13, roll d6; 14-18 roll d8; 19+ roll d10.

Next, a player has to cook the dumplings. Roll a d20 modified by STR or CON. 0-4 and the dumplings are cooked poorly and put on a -2 modifier to the satiation roll (it is possible to make the dragon more hungry this way). 5-9 gets a -1; 10-12 a +0; 13-16 a +1; 17+ a +2.

Then, a player has to throw the dumplings into the dragon’s mouth, a d20 modified by DEX. The dragon starts at a difficulty threshold (AC) of 11, and increases with each recipe or fumble. With a hit, roll the satiation dice, modified by the recipe and cooking results. Each recipe makes enough dumplings for 3 attempts.

The dragon is content after 20 HP/satiation points and will fly away and leave the town. If the players can get 30 satiation points in 3 rounds, the dragon is impressed and will become an ally for a later game. If the players can’t do it in 7 rounds, the dragon flies off in a huff and burns down a building in town.

It’s intended to be easy and quick to play (our players today were both 5-and-three-quarters years old).

The Market Can Go Down?

February 6th, 2018 by Potato

Panic!

The US market was down about 4% today, following a ~2% decline on Friday. Everyone on the news and social media and forewords in their books seems to be reminding investors not to panic.

Forget that, let’s PANIC!

Look at your portfolio, and that loss. How many up days did it wipe out?1 Now is this it? Or could we have another week, another month of days like this? Where’s the bottom???

Now, with that fear feeling very real and sitting quite uncomfortably in the pit of your stomach, how comfortable are you with the way your portfolio is? Are you ready to ride out whatever the uncertain future has in store for us?

If you’re not feeling so good after today’s loss, well the reality is that this is what markets do sometimes. This is normal. If you’re having trouble handling this, then a few things may be at play:

  • You could have too much risk in your portfolio. Changing that to something more appropriate for the long term may be a good thing to do when the loss is still minor (just don’t time the market – don’t change it back “when things are more settled” – if you can’t handle risk now, you can’t handle risk).
  • You could be untested. This is your first test, there will be more – start getting used to it. Feel the fear and discomfort, then remind yourself that this is what all those books and articles were talking about, and learn to suppress it.
  • You may be paying too much attention to minor day-to-day moves – when it makes the front page it’s hard to tune out completely, but you may want to stop checking in on your portfolio if there’s nothing to be done.

There are various things you can do to try to handle the uncertainty, which I know is not easy, especially if this is your first real experience with volatility.

  • First, try talking yourself through it. This is normal, it’s happened before, it’ll happen again. Etc.
  • Second, try reminding yourself that stocks going down while you still have money to save and put to work is a good thing for you.
  • Third, try using it as a lesson to check in less often.
  • And finally, go watch Bridge of Spies and ask yourself “would it help?”

gif from the Bridge of Spies – ‘You don’t seem alarmed.’ ‘Would it help?’

So yes, ultimately I’m giving the same “Don’t Panic” message as everyone else, but if you are feeling emotional about the markets then try to use that fear to learn something — either about your risk tolerance, or how to manage fear when markets are erasing years of gains instead of weeks.

1. Not that many, actually – this only took us back to ~mid-Dec.

DIY vs Robo Quick Challenge

January 11th, 2018 by Potato

I was challenged a while ago to figure out if DIY investing is really worth it for regular people when you factor in the value of the time and effort spent — should I even be putting time into things like the book and course to help people learn to invest when robo-advisors are the future?

And of course the first defense is that even if a robo-advisor is doing the work, you still need to do some reading so you’re prepared for the risks and uncertainties inherent in investing, etc. But the point is still there: are the savings of DIY worth the extra time it takes now that robo-advisors exist?

I decided to do a quick back-of-the-envelope comparison. Though there’s no way to know for sure that I didn’t tweak the assumptions to get an answer I liked, I assure you that these are the first reasonable estimates that came to me as I was trying to be fair — we are “doing it live” so to speak.

So do-it-yourself investing requires a bit of time and effort, and the question is how do you value that time and effort to figure out when it makes sense to DIY vs. just pay a robo-advisor? For this I’m going to assume that we’re only talking registered accounts, so no ACB and other tax reporting headaches of a non-registered account (and besides, if the robos aren’t tracking it for you then a more complex robo portfolio may be more work than a simple DIY one).

First, you have to learn about your risk tolerance to make sure you’re ready to invest at all, come up with a rough plan, figure out whether to prioritize your TFSA or RRSP, etc. But that’s a wash as even if a robo-advisor is handling the day-to-day aspects of your investing, you still have to deal with that.

There will be more up-front costs to learn how to invest as a DIY-er. You’ll have a bit more learning to do for DIY investing, like the mechanics of making trades and rebalancing, choosing a model portfolio to follow, as well as some investment in learning to control bad investor behaviour. The Practical Index Investing Course is $299 $169 and a one-stop resource, with another ~15 hr required to work through it — so the total cost depends on what you value your time at. Let’s use $25/hr and call it $544 in up-front investment (more if you’re going to go with the library card and time method – the course will save you lots of research time, which is the point of it /self-promote).

Then on-going effort is small but not nil. For the TD e-series route you may have to spend 2 hours/year or so on tweaking your automatic contributions and rebalancing; for ETFs it might be more like 4 hours/year. Plus the ongoing MERs of the funds (and the robo-advisor’s fee for that option).

Element DIY e-series DIY ETFs Robo-advisor
Time: learning about risk tolerance, planning Same – this is table stakes for investing Same – this is table stakes for investing Same – this is table stakes for investing
Learning how to trade and manage portfolio $544 (one-time) $544 (one-time) 0
Annual cost of funds 0.45% 0.2% ~0.7%
Annual effort to maintain $50 $200 0
Total cost for $10,000 for 5 years $1,019 $1,644 $355 (*)
Total cost for $100,000 for 5 years $3,044 $2,544 $3,275 (*)

* – includes “first $5k managed free for a year” offer calculated with real all-in costs.

Now I am a fan of robo-advisors and they do have their place — lots of people will be well-served by going to one and not everyone wants to be a DIY investor. That’s important so I’ll repeat it: regardless of the potential savings of DIY, not everyone will want to (or should) do it all on their own. Plus there are other potential benefits, for instance a robo-advisor may help prevent bad investor behaviour (and read Michael James’ comment to further reinforce that — any savings can be swamped by bad investor behaviour).

But it looks like even if you give a decent value to your time ($25/hr here) and assume that there’s a big up-front commitment required to learn it, that DIYing can still make sense and be worth the time and effort for moderate-sized portfolios. I picked 5 years out of the air as a reasonable amount of time to amortize those up-front costs — the longer you think that’s good for, the more DIY will pull ahead (at least where the portfolio is large enough to make sense in the first place). For smaller portfolios, the time might not be wisely spent on DIY efforts, though small portfolios do grow into large ones and there is some value to just sticking with one method.

Note that putting a value to your time also reinforces the traditional wisdom that you need a ~5-figure portfolio for ETFs to make sense over TD e-series — even with commission-free purchases, the MER savings may not outweigh the effort with smaller portfolios.

Never Weight — 4th Quarter Update

December 31st, 2017 by Potato

I have a bad habit of powering my way through tough projects and tight deadlines by eating at my desk — a bio-hack I picked up ages ago (undergrad for sure, and I think I used it a few times even in high school). I thus tend to gain some weight with many major projects, and it never quite goes away. For years I didn’t really do much about it — too busy on the next thing — but during grad school I set a “never weight” for myself, a point where I’d give myself a mental slap in the face and re-prioritize my health over whatever project was consuming me at the time. I hit that never weight near the end of 2016.

I actually made some decent progress in the first three months of 2017 after resolving to lose the weight. But then I backslid, and backslid, until by the fall I was over where I started.

So to make it real, I committed to dropping the price of the course and the book if I couldn’t lose the weight.

Here we are at the end of the year, and in the 4th quarter I’ve managed to lose a hair over 12 pounds, which is pretty impressive considering this is the quarter with Halloween, my birthday, and Potatomas. That also brings me back under my never weight so I can finish the year down from where I was this time last year… but it’s not quite good enough as I’m still not back to where I was in February, just barely erasing the gains that happened in the third quarter (and to be fair, half that was dropped almost instantly after the bloating from the Sept all-nighter season passed — it’s been about 2 lbs/mo of real progress).

For Potatomas, my parents got me a fitbit, I’ve got a new android phone that can do apps the BlackBerry couldn’t (like Carrots), so I’m more hopeful heading into 2018 that I’ll be able to keep up that ~2 lbs/mo improvement.

But for now, my failure to undo the damage of Q3-17 means a discount!
The course is down from $299 to $169 now!
The ebook version of the Value of Simple will be going down to $6.99 (this will take a few weeks as I’ll synchronize it with the 2nd edition release).

Otherwise, it’s been one of the longest-ever hiatuses here in the 19 years of BbtP. I don’t have much of a public update: things are busy in RL, and I’m trying not to stay up late blogging after everything else is done (and my brain is too broken to write anyway, whereas before it was broken in a way that I had to). I’m taking the next week off work, so hopefully I can get a few draft posts out to published status (as well as pushing the 2nd edition of VoS out the door).

FLM and the Wonder Bread Abomination

November 1st, 2017 by Potato

Financial literacy month is upon us, and I have another stretched metaphor for you.

Bitches Get Riches had this post in the summer on learning to cook for yourself, which will help kick this off. Even if you don’t become good at cooking or build a large repertoire, out of necessity most people are going to learn to cook a few things at some point in their lives. Parents will teach kids what is and is is not food – often one of the first things they teach them after “hey, I’m Daddy. Say ‘Daddy’.”

So then you’re well prepared for when this horrific ad appears in your feed:

An ad for Wonder Bread suggesting the reader put pizza sauce (or ketchup) on a piece of bread, lay down strips of -- quote unquote -- white cheese, and toast until barely melted to make what they term is a Mummy pizza.

You’ll just know, because you have some measure of food literacy, that this is not a recipe you should attempt. And that any smiles you’ll be enjoying will be at your own expense for attempting to pass this off as food. Or you’d just know that if, for shits and giggles, you did make it to throw up on your Instagram, that you’d never give it to a kid as “food” and never, ever, ever give it to a kid calling it “pizza”. That ketchup and barely melted cheese on a piece of bread is an abomination and is in no way a pizza, let alone one deserving of a made up -acular adjective, and that even if you used pizza sauce a) you wouldn’t put it on a piece of wonder bread and b) you’d at least leave it in there long enough for the cheese to bubble you monster. (Wayfare notes that ketchup and cheese is kind of like a grilled cheese sandwich and this might not be so horrific if they passed if off as that instead of pizza, which I would still not eat)

Anyway, this is pretty clearly the sort of ad you would instantly know is just a bad idea because of food literacy. If you never really bothered to learn about what makes food good (or what makes pizza the High Food of the Special Day rather than something other than a slice of bread with sauce and barely melted “white cheese”), you might get taken in by this perfectly legal ad. And indeed, though all would instantly recognize the moral repugnancy of the act, there is no actual law against calling a piece of bread with ketchup on it “pizza”. Though perhaps there should be, consumers are completely unprotected against predatory recipes such as this, and attempting to protect them would be a big regulatory hassle1

And of course, so it is for financial matters. Except that’s not something we all learn proficiency with. If you saw an ad for a monstrous mash-up product like a market-linked GIC, it might look neat, the ad copy might even sway you into putting some of that in your children’s portfolios. And you might even call it a “good investment”, never knowing what true pizza, I mean investments, taste like without developing your financial literacy.

Looking for a place to start? I’ve got a reading list here.

1. And even then, you might end up with protections such as nutrition labels and ingredient lists that help protect against some form of abuses but will not solve all the problems and sometimes require their own, different form of literacy to parse.