At DQYDJ, tax season has us recently rolling out our annual savings rate. The personal finance blogosphere constantly emphasizes its importance and demonstrates its impact on your ability to increase your net worth. It also helps show what you might reasonably expect to need to spend if you choose to retire. What’s My Savings Rate? […]
My 2018 Asset Allocation
In honor of tax season, we at DQYDJ annually post savings rate and asset allocation summaries. Unfortunately, I find mine particularly boring. I am young enough and have enough time left in the market that it has pretty much become throw it all in stocks and wait. Because of that (and that I’ve been at […]
Why a Linear Scale is Misleading When Researching Investments
As we write this, the S&P 500 remains at (or near) an all-time high. When viewed on a linear scale over a long enough time period, the graph even begins to look vertical. Drops look crazily steep. The 1987 crash is nearly a blip on the map while the 2008 crash appears (correctly) to be […]
Where Does 2018 Rank in Annual S&P 500 Returns?
The S&P 500 and the broader equity markets continue to outperform and have seen annual inflation-adjusted 15.8% returns from March 2009 through the end of December 2017. More recently, from November 2016 to January 2017, the S&P 500 has returned 22.3% in total. Annual S&P 500 Returns Vary Wildly I started with each year’s inflation […]
Hurricane Harvey and Gas Prices: What is Price Gouging?
Hurricane Harvey made landfall in Texas last Wednesday, dumping more than forty inches of rain on much of Southern Texas. Our hearts go out to those affected by the disaster and recommend donating to the Houston Food bank. In the aftermath of Harvey, we have seen great displays of courage and compassion as the humanitarian […]
Clustering Illusion and Anchoring to Outliers
This is part of a series on cognitive biases. Click to read more about how bad humans are at reading and understanding We are all incentivized to recognize patterns. If we know that a certain traffic stop backs up at the same time of the day, you can save a significant amount of time searching for […]
Anchoring and Adjusting to Numbers
Anchoring or the Anchoring Bias is the human tendency to evaluate or “anchor” numbers based on their presentation. Observers and participants will usually be swayed by the availability or recency of a number. Human tendency towards anchoring bias is often exploited to make subsequent facts or numbers appear in a certain light. Beware the Anchoring […]
7 Tricks and Cognitive Biases to Fool Your Audience!
We all make mistakes. We all hold false opinions. And we all perform mental gymnastics to hold onto false facts and reject true facts. Why does this happen? (Sorry for the headline, hopefully you will forgive me as this is an introduction to a series on cognitive biases!) The human brain has carried mankind to […]
An Authoritative Take on the Dunning-Kruger Effect
“One of the painful things about our time is that those who feel certainty are stupid, and those with any imagination and understanding are filled with doubt and indecision.” – Bertrand Russell The Dunning-Kruger effect refers to the phenomena where people of low ability have a higher self-perception of their abilities than those of high […]
Price Weighting Doesn’t Make Sense for Stock Indices
The Dow Jones Industrial Average is composed of 30 stocks meant to “represent” the industrial health of American companies. Some of the companies included on the list are household consumables, such as McDonalds, Nike and Coca-Cola. Other sectors include technology companies such as Microsoft and Apple and financial services, including American Express, JPMorgan, Visa and Goldman […]