FIVE ESSENTIALS TO BETTER INVESTING (AND INSURING)

How can you lose by learning to invest better?

Steadyhand Investment Funds sells no-load low-fee mutual funds directly to investors.
They've prepared an easy-to-read report called Five Essential Elements To Being A Better Investor (PDF). The focus is on sound, timeless basics rather than trendy quick-fix tips.

You'll find interpretations at

• My Own Advisor by Mark Seed
• Retire Happy by Jim Yih
• CPA Magazine (co-written by Steadyhand’s Tom Bradley)
• The Globe and Mail (by Tom Bradley again)

Watch

You can also watch my chat with David Toyne, their Toronto-based Director of Business Development on Tea At Taxevity (interview #20).

An Extension

The steps to becoming a better investor also apply to becoming better insurance buyer. The following list shows the Steadyhand recommendation in bold and my interpretation for health or life insurance in italics.

1. Be realistic: risk happens even if you’re optimistic and we have a knack for worrying about the wrong risks
2. Have a long-term plan: prepare for your financial risks during your working years (disability), retirement years (longevity), throughout (morbidity, mortality) and at death (taxes!)
3. Commit to a routine: if your insurance gets cancelled because you missed premium payments (e.g., cheques bounced during a long vacation), you lose your protection.
4. Prepare for extremes: that’s precisely what insurance does by transferring unpredictable financial risks from you
5. Act as the CEO of your portfolio: be proactive to make sure you get the service for which you're paying. Without regular checkups, you risk having the wrong amounts of insurance and perhaps the wrong types of insurance.

The Steadyhand report is well-worth reading. You might even want to invest with them.

Links

• Steadyhand website
• David Toyne: LinkedIn and @jdavidtoyne
• The two drawbacks of investing in life insurance
• The pros and cons of financial leveraging
• Losing ground: saving for retirement
• The CBC’s hidden camera investigation of investment advisors
• How an actuary invests

PS Invest in yourself too. Keep developing marketable skills.

DEALING WITH AN INEVITABLE COMPUTER BREAKDOWN

No matter which computer you buy, or how carefully you take care of it, you can’t prevent technical problems. Over the years, I've had machines from ALR, Compaq, Dell, IBM, Lenovo, NEC, Toshiba.  In addition, I've had high performance computers custom-made and even assembled two mini-towers.

In recent years, I switched to notebooks because they’re portable, quiet and sufficiently powerful.

The most problematic was a pricey customized Lenovo workstation notebook optimized for video editing. During the latest repairs, the technician said malfunctions are most likely with CTO. That means something like Customized To Order. When you get a computer specially made, there's less quality control and delivery takes longer.

Lesson learned: buy computers "off the shelf" with no customization.

Software

In addition, problems arise when updating operating systems. I no longer bother, preferring to using the computer with whatever was pre-installed. Replacing the whole machine is faster and less aggravating.

Saving Money

Price doesn’t ensure reliability and the technology keeps improving, That’s why I've started buying less expensive computers --- closer to $1,000 than $2,000. They last about two years before getting cascaded to secondary uses.

The Biggest Woes

The biggest problems occur with

• enhanced graphics cards: the standard video card in a notebook computer is weak for video editing (and gaming). I usually opt for an second more powerful graphics card. The computer switches between the two as required.
  
  A better and cheaper solution is to get a powerful desktop computer for video editing. You can then upgrade components and worry less about overheating. Either way, the big problem is with video drivers (software which communicates with the hardware). Count on more trouble if you're upgrading your operating system, since the new drivers may have bugs.
  
• hard drives: you need backups of your data. I use an external hard drive and online backup, both via CrashPlan. For additional safety, I put key files in the cloud with Dropbox, Google Drive or OneDrive. You may think SSD hard drives are better because they have no moving parts and cost much more. I've had two fail …

Extended warranties

I'm not a fan of extended warranties but with computers (especially laptops), they can be useful. Even then, repairs take time and you're stuck while waiting. That's why keeping an older computer as a backup is wise. For instance, I have three year next business day service but on Friday, that means Monday. You might have to spend hours on the phone with the help desk first.

Currently, my Dell isn't working. Windows 8 isn't starting. There are no hardware errors. The problem seems to be with the enhanced video card drivers. The recovery options in Windows 8 didn't work. I was sent DVDs to reinstall Windows but drivers for the hard drive couldn’t be found. I was then sent a USB key with Windows 8 and the drivers. The hard drive isn't being detected. Dell is sending a new hard drive which they want me to install under their guidance. Since it's currently the weekend, the shipment won't take place until Monday, which means delivery won’t be until Tuesday or Wednesday. That's nearly a week without a working computer.

While inconvenient, I've continued working with a two generation old Lenovo Windows tablet.
As with risks based on your health (disability, morbidity, mortality, longevity), you can't tell when problems will arise. You can take steps to reduce the financial harm.

Links

• Recovering from another computer breakdown
• What happens after your computer breaks down?
• Repairing your computer vs fixing your finances
• What happens when you donate your computer?
• How Lenovo put attention ahead of trust
• Avoid Windows 8 and avoid upgrading from Windows 8 to 8.1
• image courtesy of OpenClips

PS You can use other devices like tablets and smartphones while awaiting repairs.

LIFE-CHANGING: THE FREE SHRI AMBIKA YOGA KUTIR COURSE IN TORONTO

Related: Find out about the next course

This year, I’ve been focusing on my health by

• eating better
• sleeping earlier
• exercising more

The big challenge is exercise. Good intentions haven’t translated into ongoing habits,

Intentions vs Actions

Visiting a fitness club takes time, planning and waiting for equipment. Yoga looked like a good way to exercise at home before breakfast. Since pure yoga melds body, mind and soul, I wanted

• sevaks (teachers) who knew the ancient ways from India but taught in English
• an extended, structured course (rather than a workshop)
• personalized attention (rather than a student in a large class)

Is that asking too much?

The Solution

A fellow Toastmaster told us of a free 16 week course in West Toronto (Etobicoke near Kipling/Rexdale). My wife attended Shri Ambika Yoga Kutir and recommended I join. That’s a big commitment. The classes take place at 7:00:00 AM on Saturdays. I’m not a morning person and don’t like sleeping early on Friday nights. Would I have energy to travel and take a two hour class before breakfast?

I made a commitment and haven’t missed a single class despite the extreme winter. Since lessons build on each others, that’s important.

Benefits

Here the main benefits I’ve already achieved

• more energy all day: the breathing exercises help you get more oxygen into your blood  — especially via Kapal Bhati (shallow bellows breathing)
• better posture: you tone muscles which often get ignored (e.g. in your spine and neck)
• more flexibility: we don’t use positions like padmasana (lotus posture) in our daily lives

Perhaps the greatest benefit is the confidence that comes from persisting and not quitting. My life has changed and will continue to improve as I continue the yoga.

The Catch?

The course is free and that’s not a trick. You’re not put on a commercial mailing list. There are no attempts to upsell you (because there’s nothing to sell). The only way you can spend money is on the optional course materials. The best ways to repay the generosity of the volunteer sevaks is by

• continuing to practice yoga
• encouraging others to join (a goal of this post)

You attend to learn. Students (sadhaks) are discouraged from the usual networking and exchange of business cards.

The Format

Each class starts with all students on yoga mats facing a row of teachers at the front of the large room.

The week’s agenda is shown on a whiteboard. Different teachers explain the theory behind the new postures, the benefits and the precautions. There are demonstrations of the new postures.

Practice

We then go to one of four groups based on our age and gender. My group (males 45+) had about a dozen students and two teachers. That’s an excellent student-to-teacher ratio. As we practiced, we got personalized attention. That’s what I really appreciated since I wanted to do the exercises properly. You can’t get that from YouTube or a conventional show-up-if-you-want class.

Each student in my group had his own strengths and challenges. We weren’t competing, though. We were encouraged to do what we could. We weren’t pressured to do exercises for which we made us uncomfortable. Some exercises had variations for different needs.

Tips

For the best results in the Shri Ambika Yoga Kutir class

• take notes (photography and videography is discouraged; manuals aren’t available until near the end)
• practice daily (I averaged 5-6 days a week … only skipping mornings when travelling or having unusually early meetings)
• invest in a proper yoga mat (e.g., the well-cushioned, nonslip Manduka BM71 with a lifetime warranty)

After you graduate, you can return anytime you want to repeat the basics or take advanced classes. If you’re interested, get details about the next course.

It’s funny how our bodies respond when we take care of them. What better investment can you make?

Links

• Shri Ambika Yoga Kutir Toronto
• Is an executive physical worth the bother?
• Five sweet ways to cut back on sugar
• How your brain works … against you
• How to repay a nonfinancial debt
• Life lessons from a 50 year old
• Dad’s 75th birthday
• Fitness club options
• image courtesy of Yvonne Bogdanski

PS I’m thinking of redoing the beginner’s class to learn the basics better and stay on track.

IS YOUR CAR BUILT TO LAST?

Just like us, cars have survival rates. Some last longer, perhaps not 1 billion seconds but longer than many marriages (average of 14.2 years in Canada). As you might expect, more expensive brands tend to last longer. They're probably built better and maintained better. There are noteworthy differences among brands.

Survey Says

"All our cars are designed to have a long and useful life on the road. In an age of mass production that sometimes favours planned obsolescence, our products look to provide long-term value. And the numbers back that up." — Mercedes Benz Magazine

DesRosiers Automotive Consultants looked at vehicles sold 21-24 years ago (1985-1989) that are still on the road in 2010. Here are the survival rates:

• Mercedes-Benz: 63.7%
• Second Best German Brand: 34.9%
• Best Japanese Brand: 11.7%
• Industry Average: 6.4%

The results for Mercedes look impressive but can you trust them when they’re published in their own magazine?

Accurate?

Statistics can deceive. I wanted to know the identity of the unnamed brands. The omission made me curious. I figured the Second Best German Brand was BMW but where do Porsche and Audi fit in? A better comparison would look at Mercedes' real competitors, not the overall industry. You wouldn't compare a BMW with a Sonata, but Hyundai did.

Here’s what a Dec 2010 report (PDF) from DesRosiers shows. Compared with Mercedes

• Porsche is higher in every period (85.1% for 21-25 years old vs. 59.8% for Mercedes)
• BMW and Lexus are higher for the first 15 years
• Audi’s survival rate for 21-24 years is only 6.5%
• “Few Ladas and older Hyundais have survived the trip from 1985 to present due to an almost comical array of quality issues”

Wrong Measure?

Longevity may be the wrong measure. Wouldn't you like to know the cost of repairs too? What if Mercedes vehicles last long but  require triple the maintenance?

If Mercedes are so well-built, why is the warranty on used vehicles substandard? The BMW Certified Series Protection Plan warrants used vehicles for the earlier of 6 years and 160,000 km. The Mercedes Extended Limited Warranty is also 6 years but only 120,000 km. That’s 40,000 km less. If the cars are that great, why isn't the coverage for more years and more kilometres? Perhaps the maintenance costs get crazy after 120,000 km?

A warranty is insurance. Isn’t more protection better?

Worthwhile?

A nice vehicle, may last for ages but there are problems. Your vehicle may start reaching a point where the repair bills start piling up. Paying does not guarantee that your vehicle will last. If you're able to maintain your vehicle on your own, that's different.

Newer vehicles are safer. That's worth something, depending on the type of driving you do. Your survival rate is also important.

Links

• 25 years of vehicle longevity (DesRosiers, Dec 2010) [PDF]
• Ontario man hits 1 million kilometre mark in Mercedes (wheels.ca, Mar 2011)
• Small cars: Is “safer than ever” safe enough for you?
• The most dangerous part of driving
• Your life expectancy exceeds one billion seconds
• Hyundai Sonata vs. BMW 5-series: The rationale for irrational behaviour
• How to save on your next Audi, BMW or Mercedes-Benz
• Mercedes-Benz Magazine [not iPad friendly]

Podcast 132 (5:34)

direct download | Internet Archive page | iTunes

PS Beware of the most dangerous part of driving

PLANNING BEYOND THE WEDDING

"Would they ever look so happy again the handsome groom and his bride as they stepped into that long black limousine for their mystery ride?"
— Bruce Springsteen, Walk Like A Man

Watching might change an outcome because of the observer effect. That's bad news for scientists but helps with our futures. A wedding is an ideal time to look forward. What happens when you look back years later?

A recent Indian wedding was recorded by one videographer, three photographers and many amateurs. As you'd expect, the rolling video camera tripod had the best position — right at the front of the stage. The photographers moved about and the knack of picking the ideal point for a specific shot. One photographer stood watching when not taking photos. As a consequence, the audience's line of site was often obstructed.

What's more important

1. memorializing an event for future viewing?
2. maximizing the experience for the live audience?

Since a wedding has the most significance for the bride, groom and immediate family, their interests take precedence. That's fine. The sacrifice for the audience is minor. Besides, you see enough weddings in Bollywood movies.

Opposites Distract

A newborn quickly teaches parents the importance of now with their intense, immediate demands. They aren't patient. A child continues these lessons. Still impatient. Other priorities drop in importance because they aren't urgent. We tend to put off what we can. For example, preparing for contingencies such as the four financial risks. They seem unlikely or so far away. Until they're not. Objects may be closer than we think — even if obstructed or in a blind spot.

Opposites may attract but combine a spender with a saver and expect conflicts. Planning is tough even if you and your spouse agree on priorities.

Looking Back

We can replay events but we can't change the past. Professional events have multiple video cameras watching from a distance. This keeps the views unobstructed and provides additional perspectives.

You're better able to build a past you'll want to remember, if you consider the experience of others.  Dr. John Izzo compiled the shared wisdom of those age 60-105 in  The Five Secrets You Must Discover Before You Die (don't let the title put you off).

Looking Forward

When you do what you ought to do, when you ought to do it, the day will come when you will be able to do what you want to do when you want to do it. 
— Zig Ziglar

What aren't you doing that you know would help you? Make a list. You needn't prioritize, act or schedule right away. The process still helps free your mind. As a bonus, you'll save time when you're preparing your New Year's Resolutions.

Links

• Should your wedding be recorded on video? (helium.com)
• The four financial risks
• The six financial fears of Canadians (probably true in other countries too)
• Prescription for Canada's ailing pension system
• Are you saving too much for retirement?
• The superhero who saved Leslie Bibb wasn't Iron Man
• image courtesy of Ted Ollikkala (Singapore)

Podcast Episode 93 (3:59)

direct download | Internet Archive page

PS How often do couples re-watch their wedding videos?

THREE WAYS FOR HOCKEY PLAYERS (and you) TO SAVE FOR RETIREMENT

Did you read about the financial woes of former hockey players? No, I'm not asking you to bail out NHLers. Top athletes get paid well but usually have short careers. They may not prepare financially for unexpected costs during retirement. If you scan the comments, you won't find much sympathy for the players.

Let's look beyond hockey to the problem of longevity: the risk of outliving your savings. There are three ways we can protect ourselves.

1. save more money now
2. reduce the risk of unexpected expenses
3. find ways to earn more money

Save More Money Now

There's not much to say about this boring but essential option. Saving more is one of the three practical ways to increase your net worth.

Why sacrifice today when nothing bad may happen? Optimism beats pessimism. Yet that's no guarantee that we'll be spared from a major financial setback in the future.

Reduce The Risk Of Unexpected Expenses

We can't tell what's going to happen to us. Our lives can change in an instant no matter what precautions we take. Think of an accident. We could be at the wrong place at the wrong time. We can't tell. That's why they're called accidents.

The cheapest way to prepare for some risks is with safe leverage: insurance. That's a great option for the costs of disability,  premature death or a critical illness. You could get a payout that's much larger than your investment. That's because your money is pooled and invested to pay the few claims that occur. You benefit from the combined magic of leveraging, compound interest and probabilities. If you think the insurers make too much in the transaction, buy their shares.

If you're among the majority who don't make a claim, it's easy to think that you "wasted" your money when you look back. In a sense you did, but you had peace of mind. Some forms of coverage refund your premiums if you don't make a claim. That gives you a form of retirement savings. You don't get that option with your car or home insurance.

It's sad to see people spending more to insure their cars than themselves. Priorities …

Find Ways To Earn More Money

Ah, the lure of get-rich-quick schemes. Why use the first two options when we might make a fortune by investing in the popular investments of the day? The choices of previous years didn't meet our expectations but this time is different, right? It's easy to forget that risk accompanies reward, and that past performance isn't a floor for future performance.

Finding ways to earn more income is a safer strategy. There are ways to bulletproof your career and insure against the risk of  losing your livelihood. It's tougher for athletes to stay employable when switching to a field for which they have no real training. Tim Horton was an exception.

We can fall on ice without warning. We're more resilient when we're younger and invest in protection.

Links

• The painful truth about the NHL and its pensions (Globe & Mail, Oct 2010)
• Three practical ways to increase your net worth
• The pros and cons of financial leveraging
• Dumb money 2009: what went wrong
• Tips to bulletproof your career
• Employable: Three lessons from a popcorn farm
• Insuring against the risk of losing your livelihood
• 13 questions to evaluate an investment that's "too good to be true"
• image courtesy of Oliver Weinitschke (Finland)

Podcast Episode 89 (4:05)

direct download | Internet Archive page

PS Don't forget about lottery tickets. Somebody's going to win and it could be you …

DONATION GUIDELINES FROM WARREN BUFFETT, BILL GATES AND MELINDA GATES

A philanthropic family on balance is going to feel better about themselves and their progeny than a family that has been hanging on to every single penny. --- Warren Buffett

What we give depends on what we have and how much we care.

We often become more philanthropic as we age. What if figured out our plans for giving now? This doesn't mean you must give now (though you could).

If you don't have the amount you want to give, you then have an opportunity to save. You can also look at nonfinancial gifts.

Financial Gifts

Let's start with these. What's a reasonable amount to give? The answers will vary.

Bill, Melinda and Warren want other US billionaires to donate at least 50% of their net worth while alive or upon death. That amounts to $600 billion dollars. A billionaire can easily donate 50% today and still live in comfort since they'd have at least $500 million left. Setting this relatively low bar helps encourage participation. Later, the amounts donated could increase.

My hope for this is that it takes on this momentum not only with the billionaires but that it expands out.  I do think there's a crowd mentality. It becomes the right thing to do. And so, more will because others are doing it. --- Melinda Gates

The pledges will show on the Giving Pledge website but there's no binding legal commitment to follow through. Here's a video summary. You'll find links to more details at the bottom of this post.

Watch CBS News Videos Online

Warren is donating 99% of his net worth. Bill and Melinda are donating 95%. We're not billionaires but can also be philanthropic.

A Simple Formula

No one ever said to me, 'We gave more than we should have.'
--- Bill Gates

How do you figure out how much to give? This formula has three steps

1. Figure out how much you and your spouse need for the rest of your lives.
2. Figure out how much you want to leave to your heirs. ("A very rich person should leave his kids enough to do anything, but not enough to do nothing." --- Warren Buffett)
3. Donate the rest.

Anyone can use this formula. The challenge is figuring out the amounts in the first two steps. What if you live another billion seconds? If your donation takes place through your estate after both you and your spouse have died, you won't have much worry over running out of money. That's the biggest fear that Napoleon Hill identified in 1937.

Nonfinancial Gifts

You don't have to give money. You can donate something more personal and precious your time and attention. You have as much as any billionaire.

Links

• The $600 Billion Challenge (Fortune, June 16, 2010)
• Billionaire peer pressure: behind the Buffett-Gates challenge (Fortune, June 16, 2010)
• Charlie Rose interview with Bill, Melinda, Warren (June 16, 2010, 54 minute video)
• My Philanthropic Pledge by Warren Buffett (June 16, 2010)
• Warren Buffett gives it away (Fortune, July 13, 2006)
• The Giving Pledge website for billionaires (givingpledge.org)
• The three key questions for your charitable giving
• Donating: do the reasons matter?
• The four steps in wealth management
• Give your greatest gift
• Your life expectancy exceeds 1 billion seconds
• Should you leave it all to the children (Fortune, September 1986)
• How to leverage your philanthropic giving

Podcast 72 (3:38)

direct download | Internet Archive page

PS Leveraging lets you donate more. We'll look at how next time.

ARE YOU SAVING TOO MUCH FOR RETIREMENT?

When you think of  a rose, do you marvel at the beauty of the flower or think about the prickly thorns?  You get both.

Retirement is like a rose. We're lured by the beauty, but continually reminded of the high price. We face many obstacles. Investment returns are volatile. Company pension plans are disappearing. We're living longer. Medicine does ever-more but costs more and more. Governments face financial crunches because of the aging population. So we personally need to save more more more.

What if the math is wrong?

What if we're actually saving too much? Maybe we don't need 70% of our pre-retirement income when we stop working. That's the discussion in Living on less and loving it in Ellen Roseman’s blog.

Before you start spending your retirement dollars today, consider these two questions:

1. who benefits if you save too much?
2. who loses if you save too little?

You do in both cases.

Saving Too Much

If you think you’re saving too much, you may have more than you need. You’ll never know because the final tally takes place when both you and your spouse have died. The remaining value of your estate, can go to your heirs, causes you support and taxes.

You can't predict the future. We couldn’t have predicted the past.

We are living longer than ever. Even if you’re frugal, you could easily face unexpected expenses. Suppose you require a wheelchair. Could you get into your home without a ramp? Would you need a different vehicle? How do you use your kitchen? Is your bathroom accessible by wheelchair? How do you get into the tub? Maybe you need to move to a nursing home. They aren’t cheap.

Even if you’re healthy, your retirement savings could expire before you do. That’s the risk of longevity. Imagine losing financially by living longer. How horrible.

Saving more than you think you need gives peace of mind. You immunize yourself from economic downturns on the route to retirement too.

You might still run out of money but you’re taking extra precautions to reduce that likelihood.

Saving Too Little

Do you really want to imagine the scenario of running out of money after decades of hard work? Even if you want to start working again, what kind of employment could you find? McJobs might get replaced by cheap, reliable robots. You might not have the physical stamina to work.

The government is there to help as a last resort but how much money do you think they'll have as the population ages?

Maybe you've got children and grandchildren. Maybe they can and will support you. Will they resent you too? How will your dignity be affected?

Under saving increases your financial risks and makes you vulnerable to adversity. As with exercise and diet, the savings habit takes time and persistence to show results. Starter sooner gives more time for the magic of compounding growth.

How Much Is Enough?

Suppose you think you you can retire in comfort on 50% of your current income. Do you know how much capital you'll need? There are many unknowns. We're living longer. Investment returns are volatile. Inflation could return. If your real returns drop 1% below your projections, what does that do to you?

There's a book called The Number by Lee Eisenberg. It's readable but the title is misleading. You won’t find simple formulas to estimate how much money you need to retire. Instead, you how retirement money actually gets spent. That could be an eye-opener, especially if you haven’t save much money to date.

If you haven't read The Millionaire Next Door by Thomas Stanley and William Danko, do. You'll come away with a much different understanding of the self-made wealthy. They live below their means and save save save. This prepares them for adversity and opportunity now and for the rest of their lives. How's that for a plan?

Would you rather accumulate more than you need or end your life financially dependent?

Links

• Living on less and loving it (Ellen Roseman)
• Three practical ways to increase your net worth
• Prescription for Canada’s ailing pension system
• image courtesy of Peter Suneson (Sweden)

Podcast Episode 63 (5:06)

direct download | Internet Archive page

PS Prepare to enjoy the retirement rose but pay heed lest the thorns prick you and draw blood.

HAPPY ANNIVERSARY: THREE YEARS OF BLOGGING

To succeed, jump as quickly at opportunities as you do at conclusions.

--- Benjamin Franklin

Riscario Insider is already three years old. The opportunity to write has resulted in this, the 156th post. That's about one per week. Hard to believe.

When you start, you don't know where blogging will take you or if you'll stick with it. I certainly didn't. I started as an experiment and then kept going. Habits form and so do reader expectations. This virtuous circle helps keep you going. You transform from a sprinter to a long distance runner.

Will you run out of ideas? Probably not. If you're passionate about your topic, writing de-clutters your mind and makes room for fresh thoughts. Just today, I jotted down how to pick a mentor and how to spot tricks that sales people use. Maybe those kernels will become blog posts.

It's easy to keep going if you love your topic and care about your audience. You'll then find the time and motivation to write. You'll find the right frequency for you. For me, it's once a week.

Successful?

Whoever says it doesn't matter if you win or lose, lost.

--- Unknown

There are different ways to measure success. In the beginning I thought I'd make a fortune from ads. I soon realized that a niche blog won't draw enough traffic to generate much revenue. So I went commercial-free. After all, you already pay generously with such valuable currency: your priceless attention.

I restarted ads a few months ago to help cover the costs of my online activities. Did you notice? The revenue may not warrant the aggravation to visitors. I'm not a fan of affiliate links either because they can taint your credibility. QRS is an amazing product. Click here to buy.

Your success in blogging comes in three intangible ways

1. generosity improves you: you become a better person when you're helping others
2. you learn: you look for clear, concise and memorable to communicate your messages
3. honing your skills: how can you lose by learning to write better?

What's New
I started podcasting on January 11, 2009 for the convenience of visitors who'd rather listen than read. You'll see the podcast embedded at the bottom of each post and all episodes on the Internet Archive. I also started using Twitter on February 19, 2009 (@riscario). There's usually a tweet or two a day.

The content continues to shift towards the wealthy. I wanted to write about risks facing average people (e.g., stagnant family incomes was the second post) but can't because I work primarily with the wealthy. Why write about what you don't know about? The insincerity would show. This blog is fact not fiction. Since writing about financial risks would bore readers (and me), there are detours. Some of the most read posts are technically off-topic.

Book
I keep getting asked whether I'm planning to write a book. There's certainly enough content that could be organized and expanded. A paper book is quite unlikely. I might prepare short free ebooks on selected topics.


Disappointments
I wish there were more reader comments. I know there are readers but for reasons I can't figure out, you aren't enticed to share your thoughts. That means there is no dialogue.

What's Coming
Riscario Insider is continuing as before. I'm planning to introduce more video for those of you who would rather watch than read or listen. Video would not be part of each post would be used to augment selected content. My goal is not to be on camera but to narrate PowerPoint slides. Video is the toughest medium for me because I don't have experience in editing but can learn the basics.

Bloggers really should have a series of posts written in advance. I have dozens of drafts on paper but they're not ready to publish. The consequence is that I generally write the post the day you see it. That allows the inclusion of latebreaking events but creates unnecessary time pressure. During my December sabbatical in India, posts were pre-written and published at scheduled times. This felt good.

Thanks for reading or listening.

PS What changes would you like to see? Your suggestions are always welcome.

Links

• your favourite posts of 2009 and 2008
• What's in a name? (the first post from Feb 18, 2007)
• The pulse of content (Mitch Joel)
• image courtesy of Helmut Gevert, Germany

Podcast Episode 56 (5:48)

Direct download | Internet Archive page

"The Snowball" rolls into Warren Buffett

How much do you know about Warren Buffett's life? My family knew primarily of his staggering wealth. We knew little about his older business partner, Charlie Munger, or Astrid, the companion his wife Susie found for him.

In The Snowball: Warren Buffett and the Business of Life, Alice Schroeder paints a captivating, detailed portrait of the man and key people in his life. The audiobook read by Kirsten Potter runs 37 hours and took three months to finish. This extended listening enhanced the experience and made Warren feel like a part of our lives.

Biographies provide valuable insights into interesting lives. Warren authorized this one and participated. Does that mean the whole story is rosy? No. If there were two conflicting views of a happening, he asked that the less flattering version be used. Alice reveals many blemishes in her quest to help us understand him.

Much of Warren's appeal comes from his wealth. As a person, he's unusual. He brought Moody's manuals on his honeymoon. He doesn't eat a balanced diet and doesn't like to try new food. He neglected his family. He doesn't live a lavish life.

He made investment mistakes over the years. For example, he bought shares in waning textile company Berkshire Hathaway and had an agreement to sell them for $11.50. When the deal got changed to $11.375, he bought the company in retaliation and to his detriment.

Born At An Early Age

Warren focused on making money during childhood. At age 6, he started selling chewing gum. He got inspired by a book called A Thousand Ways To Make $1,000. That's $1,000,000. While in high school, he earned more than his teachers by delivering newspapers. He understood that a dollar today multiplies over the years through the magic of compound interest. This made him reluctant to spend. This made him reluctant to donate until his death, since he wanted to leave a larger sum.

Warren recognized the role luck played. He knew his life would have been very different if he were born at another time or in another country. He wanted to help others who were not as lucky at the Ovarian Lottery. He preferred giving advice over money.

Warren improved over the years. He made the world better for small investors. He supported Main St over Wall St. His actions encouraged better corporate governance. He stuck to his principles for decades.

Legacy

Warren helped make the world better. What more can you ask? He's changed the world of philanthropy. He doesn't want his name on buildings or scholarships the way many others do. He's happy to donate to The Bill and Melinda Gates Foundation with the stipulation that his annual contributions be spent that year.

The Snowball won't make you a billionaire but you will be richer. Highly recommended (especially the unabridged audiobook).

Links

• Warren Buffett's Tough Career Choice: Actuary or Billionaire?
• A Thousand Ways To Make $1,000 (Motley Fool)
• How Warren Buffett Made His First Dime (Parade, Alice Schroeder)
• Does Warren Buffett "Buy Term and Invest the Difference"? (most read post of 2008)
• Does billionaire Seymour Schulich help you "Get Smarter"?
• Richard Branson: When Your Servant is Your Master

Podcast (13:04)

Bonus: includes interviews with Jeevan and Sharmila, who also listened to the full 37 hour audiobook.

direct MP3 download | Internet Archive page

Warren Buffett's Tough Career Choice: Actuary or Billionaire?

You only have to do a very few things right in your life so long as you don't do too many things wrong. --- Warren Buffett

We're currently listening to The Snowball: Warren Buffett and the Business of Life. We didn't know much about Warren's background. Alice Schroeder weaves an intricate, intriguing portrait. Melt the snowball and you'll find the mind of an actuary wrapped in lots of money.

Warren an Actuary?

Here's an excerpt from Chapter 15: Strike One, page 137. While a student at Columbia in 1951, Warren learned about insurance during an unannounced Saturday visit to GEICO headquarters in Washington, DC where he managed to meet a vice-president. 

Warren had even considered actuarial science --- the mathematics of insurance --- as a career. He could have spent decades toiling over tables of mortality statistics, handicapping people's life expectancies. Besides the obvious ways this suited his personality --- which tended toward specialization, collecting, and manipulating numbers; and preferred solitude --- working as a life actuary would have let him spend his time pondering one of his two favourite preoccupations: life expectancy.

However, his other favorite, collecting money, had won out.

I was a life actuary before switching to my current nontraditional role as a marketing actuary. I remain fascinated with life expectancy which deals with two key financial risks

• mortality: dying too soon (before your life expectancy with financial obligations remaining)
• longevity: living too long (beyond your life expectancy and outliving your savings)

Longevity is often the larger concern. Since we're living longer, we need more money to maintain our lifestyles and to prepare for the extra financial costs of poor health. In turn, accumulating more money means working longer or making riskier investments in hopes of getting higher returns. Neither is appealing. 

Warren needn't worry about the financial consequences of life expectancy.

The Excitement of Insurance

While you may think insurance is boring, Warren saw opportunity.

He also learned that insurance companies take their customer's premiums and invest them long before claims are paid. That sounded like getting to use somebody else's money for free, just the kind of idea that appealed to him.

If you feel that insurance companies mint money, consider getting shares. The investment earnings get reflected in the insurance premiums. GEICO sold automobile insurance via direct marketing to preferred risks (mainly government employees). This resulted in a winning combination: lower expenses and lower claims. 

GEICO seemed to Warren a no-lose proposition.

That Monday, less than 48 hours after he arrived back in New York, Warren dumped stocks worth three-quarters of his growing portfolio and used the csh to buy 350 shares of GEICO. It was an extraordinary move for the normally cautious young man.

Berkshire Hathaway owns GEICO. 

There are sure to be other insights in The Snowball. The book runs 838 pages (960 including the notes and index). 

While Warren Buffett could have become an actuary, he instead ended up as billionaire. Such is life.

Links

• Does Warren Buffett "Buy Term and Invest the Difference"?
• The Four Financial Risks
• Alice Schroeder: The Snowball: Warren Buffett and the Business of Life (hardcover or 
• audiobook)

Podcast (includes excerpts from the audiobook)

 

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