Saturday, 26 January 2013

Less Work, More Holidays

Whenever I speak to people, I make no secret about the fact that I hate my job. It is not really the work that bothers me. Rather, it is the fact that I have to work for a boss. I have to report to a boss, update him on what I'm doing, and endure his speeches on how I should be doing my job. Because my dissatisfaction comes from being averse to being subjugated, I simply cannot go back to university and study a different course, as my father has suggested to me. I need to do something different. If I want to be my own boss, one option is to start my own business, but this option has its challenges. Will I have enough to money to start my own business? How much does it cost to run a business? What sort of tax and compliance processes do I need to follow, and are they burdensome?

The more I think about it, the more I realise that I probably need to start taking more holidays. Less than a month ago, I turned 29. I am almost thirty, almost sort of reaching the middle of my life, and I when I think back on my life, I realise that I really have not done much. I have been overseas but only twice. Most people go on a foreign vacation ever year. I have been reluctant to go on holidays because of the costs. I believed it was more sensible to save the money.

Given how stressful my job is, I believe it is best if I start taking holidays. It is not just my career where I am facing crisis. There is also chaos in my family life. Going to a different place and leaving your old life behind is a great way to clear the mind.

I will still continue to save money, mainly because I want to invest the money to make more money. One day I may be able to save up enough money to be able to be on holidays for, say, six-month periods at a time. When I come back to Australia, I can work part-time, and when I feel like it, I can just get back on the plane and get out. I am starting to realise that one of the greatest freedoms is the ability to just get out. I pity those who have committed too much into wage slavery, the people who have a mortgage, two children, and a car loan to fund. I have none of these, but pressure from friends and family to be normal is really starting to ramp up. It's as if all of society is trying to set a trap for me. I've reaches a point in my life where I need to make a fundamental decision about whether I want to embrace the culture of wage slavery or the culture of freedom. What is most cruel about life is that the price of freedom is a decade of wage slavery.

Too much holidaying can be unhealthy. I could get bored. I just don't know. I need to give myself the flexibility to move in and out of holiday mode and work mode.

Saturday, 19 January 2013

The Importance of Global Diversification

"Invest in seven ventures, yes, in eight; you do not know what disaster may come upon the land."
Ecclesiastes 11:2 (TNIV)
I have great respect of John Bogle, the founder of the Vanguard Group. I believe that if you are unsure how to invest your money, just do what John Bogle says. That being said, there are few issues I have with him. The first relates to his aversion to foreign (i.e. non-American) investments. According to John Bogle, if you invest in a mutual index fund that replicates the S&P500 index, given that most S&P500 companies are multinationals with operations all around the world, you are getting foreign diversification anyway.

This is wrong.

What Bogle completely ignores is the fact that, by investing in only American equities, you are limited to companies that list on a small and undiversified number of stock exchanges. Every stock exchange around the world has different listing requirements. Some stock exchanges have very strict listing requirements, demanding that companies meet demanding disclosure requirements. Other stock exchanges may have lax disclosure requirements. Furthermore, some governments or stock exchanges (or both) may be more corrupt than others. You simply don't know, and it is for these reasons that you need to diversify across stock exchanges and countries. It is not enough to invest in an index fund that replicates the S&P500. You need to invest in European shares, Asian shares, Australian shares, and so forth. And that is only looking at shares. You should invest in other asset classes as well, such as REITs, bonds, and commodities.

One good argument against diversification if it's just too difficult. For example, in my opinion it makes sense to invest in commodities like gold for the sake of diversification, but investing in gold is not simple. You can't walk into a bank and just ask for gold, and storage of the gold becomes another difficulty. However, diversifying your equity investments across different countries is easy. There are many mutual funds out there that automatically diversify across multiple countries.

Hide and Diversify Your Wealth

If I could give two pieces of advice on investing, it would be the following: 
  1. hide your wealth
  2. diversify your wealth.

The first piece of advice is due to safety. If you save up money and go around telling people how great you are at saving money, the risk of theft only increases. I don't even recommend you tell family or friends about money you're saving. If you spouse knows, the payoffs from divorce are so much higher, which would tempt him or her. Just keep it to yourself and, better yet, pretend that you are poor. If snobs don't want to be friends with you because they don't want to associate with poor people, it's probably better that you didn't know them anyway.

The second rule of investment is you must diversify. In fact, when I think about it, the first and second rule are similar in that they exist due to lack of trust. If you hide your wealth, it is because you cannot trust people who will tempted to steal. If you diversify your wealth, it is because you cannot trust those people who hold your money to destroy your wealth either due to corruption or incompetence.

The two rules above help protect your wealth.