How Passive Investing Saved My Life

Passive investing saved my life in many ways, but not in the way you think. It didn’t swing from the trees like Tarzan and snatch me away from a charging Rhino nor did it give me a Flu shot. It did it in two main ways: Saving my time and avoiding costly mistakes. How? Read on my friend, read on.

I know many people that lived through the Real Estate boom and implosion in 2008. My wife and I bought our first home and first rental property back in 2004 and 2005. Prices and values were going up and up and we managed to swing these two properties financially. I was also trading ‘machine-learned’ market models to help my trend trade Forex and some stocks. I thought I had found the means to a quick retirement and wealth. Everyone thought they did.

I was wrong.

First the Boom, then the Bust

When the Real Estate bust happened, it wiped out friends and colleagues. Luckily we had the rental property rented out and it was generating enough income to cover all expenses, so we operated at break even. A friend of mine blew out spectacularly. He nearly lost everything and is now – 10 years later – finally recovering.

After all the injection of money from the Federal Reserve and the backstopping of the financial institutions, the markets stabilized. Not until after trillions of dollars of wealth evaporated. I don’t need to go into a history lesson here, but it was the closest this generation ever got to a Great Depression.

My 401K shrank, my Forex models blew up, my stock models stopped working, my office was close to shutting down. It was horrible but it was the best thing to ever happen to this us and this generation.

Cynicism and Clarity

I hear it all the time, the Millennials aren’t investing in the stock market. How are they going to save for their retirement? Why aren’t they stock trading like their parents? They’re just passive investing and it’s costing us money!

The Millennials are cynically, and rightfully so. This generation of people apply logic and well thoughtful arguments to cut through the bullshit. They see Wall Street’s game and don’t want to play it UNLESS it’s on their terms. That’s clarity and good for them. They know the system is rigged.

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Rigged System – Long Term Investing

It is rigged. The entire stock market is rigged. Howard said it best here:

The markets rarely frustrate me but the players do. I invest and trade assuming the markets are rigged…because they are.

The markets are one big reflection of a hidden shit-show run by shit people. Ok, I’m generalizing here and there are some good people in the markets but for the most part, it’s one big scam meant to separate you from your money. Usually via fees but often through bad investment decisions.

Here’s a few off the top of my head:

-Brokerage Fees

-Trading Fees

-Expense Ratios (Fees)

-Management Fees

-Hot Stock Tips

Like Howard, I don’t hate the markets at all, I just want to outsmart the masses. I didn’t know how until I read this book, “A Random Walk Down Wall Street.”

The gist of the book? Long-term investing always wins.

Long Term / Passive Investing

A Random Walk Down Wall Street takes a data-driven approach to the markets and shines a light on all the ‘hocus pocus market participants believe in. Elliot Wave, Technical Analysis, Day Trading, etc. Can you make money using Technical Analysis, sure. It might work now but won’t work at some point in the future. How about Elliot Wave? Of course, a broken watch is right twice a day.

Investors get tripped up when they do stuff like Day Trade. They churn up fees, make some money, have to pay taxes, etc. Then one day the market turns against them and they give back a lot of the gains. I’ve seen many a ‘day trader’ blow up and this one is a classic. Yes, there are ways to limit your exposure by stops or risk size positioning but sometimes you need a blowout to reevaluate your choices.

Markets are great teachers if you only listen and learn.

I switched from active trading to passive trading around 2010. I stopped chasing stocks and forex markets after my models blew up. I realized that I was just being lucky. A rising tide lifts all ships and I mistook luck for brains.

Instead, we started maxing out my 401K’s and IRAs. We saved up more money in our accounts, paid off debt where applicable, and remodeled our kitchens and bathrooms.

The Advice

I took the advice of the book and started to do the following:

  • Invest in index funds
  • Buy funds with low-cost fees
  • Don’t market time
  • Dollar-cost average (easy to do in a 401k)
  • Assemble a portfolio that is diversified across many assets
  • Adjust my portfolio based on my risk tolerance and age
  • Sit on my hands
  • Turn off the screens and focus on my hobbies

Well, number 8 isn’t in the book but the first seven are. Once I started doing 1 through 7, I started doing better. I sat on my hands because I realized that I suffer from market panic just like everyone else. I wanted to time the market and look like a hero but that’s just luck. Like right now, there’s a Wall of Worry in the markets, I call it the Trump Trade. No one knows which way the market will go in the short term but in the long run, it goes up.

Do I own a few individual stocks? Sure but that’s really mad money for me. I barely trade and I save money from not creating taxable events and commissions via my retirement accounts. I have more time to spend with my family and invest my time with them, instead of staring at a screen and building models that may or may not work. If the market goes down? So what? I’ll just buy more shares in my funds when my 401k contribution hits.

So what if the Markets are rigged? People have such a short attention span with everything that they can’t see that long-term and passive investing is the way to success. It has been for me. I can sleep at night knowing that I’ve saved time, money, and stressing about the future.

The Sages at Reddit

I’ve been updating my Python Forex Trading Bot tutorial with new trading classes for my readers to try out. No matter what I code and try, my bot keeps losing money. These results reinforce my beliefs on passive investing.

Then I stumbled across a post in r/AlgoTrading

I find that passive investing does just that, especially if you’re diversified. You don’t know which stock will do well but a basket of them will probably do well in the long run.

This sentiment is what Jim Simon alludes to in his ‘fallow ground’ comment toward the end of the TED Talk. His hedge fund has pretty much cracked the Wall Street code through mathematics and simulations. If I had another lifetime, I’d become a mathematician and try this.

Work From Home is Here to Stay

Work from home (WFH) is here to stay if you’re lucky and fight for it. I keep hearing from my customers that more and more companies are starting to reopen and call back employees to the office, except many are not coming back!

That’s music to my ears!

After dealing with the sudden pandemic shutdowns, juggling work-home duties, and dealing with the isolation, the majority of American workers powered through this hell. We did it. We kept our companies afloat and not just survived, but thrived. I don’t know about your work environment, but we accelerated our productivity over the last year.

As companies open up, they’re making demands for workers to come back to the office. They’re asking employees to prove to them why they should keep the privilege of work from home.

Say what?

We kept your asses afloat during the pandemic and you want US to prove to you that we should be able to continue WFH?

SLAM! That was the door closing on the employee exodus. Workers are not tolerating this bullshit and it’s leading to a massive talent shuffle.

Boomers Love Control

I recently shared a Bloomberg article on my LinkedIn wall and added some commentary.

I wrote:

Seven years ago I left the Civil Engineering industry where Work From Home (WFH) was frowned on. The people in charge of the companies assumed that you’d be goofing off if you did WFH. Then the Covid19 pandemic hit and those Engineering companies HAD TO ADAPT and allow WFH, after all, there was always a deadline to meet.

This Bloomberg article really nails the feeling of many professionals that are forced to come into work when a WFH scenario is in everyone’s best interest.

“…there’s also the notion that some bosses, particularly those of a generation less familiar to remote work, are eager to regain tight control of their minions.”

“They feel like we’re not working if they can’t see us,” she said. “It’s a boomer power-play.”

This article is a shot across the bow to all industries. WFH is here to stay and if you want to attract and keep key talent you’re going to have to evolve AND fast. #careers #engineering #workfromhome

Technology has allowed a massive swath of workers to WFH, except those in charge refused to let us do it. Because they were afraid we’d be sleeping on the couch.

Do you know what we did with WFH instead? We saved at least 2 hours of commuting every day. We were able to pick up our kids at school without rushing out the door of the office. We got to spend more time with our families or friends. We had a life in that fucked up work-life balance platitude we keep hearing.

And we were more productive than we ever.

Fight for Work From Home

The Boomer tyrants are going to work hard to get you to come back to the office, fight for your right to have a flexible arrangement.

I get it, some people like the office interaction and seeing their colleagues – I do too – but do you need to go to the office 5 days a week? Why not do a 2 day in the office / 3 day WFH, or so another arrangement that makes sense for you.

Whatever is the optimal arrangement is for you, the main premise is this: a flexible work schedule makes a lot of sense from cultivating happy workers AND productivity.

Hell, you might not need so much office space anymore and cut back on leasing costs. This might lead to less development of commercial real estate, which is OK in my book.

My First Week In Startup World

It was 5PM on a Friday and my first week at my first startup was over. Our small office was clearing out hitting a local bar for happy hour. I slumped in my seat, exhausted.

“What a week, it’s so frantic here,” I muttered under my breath as the CEO walked by.

He chuckled and said, “Well Tom, you asked for it. This is what you wanted.” He put in his coat and headed to the elevator.

Poof! Bad Tom whispered, “Fuck that you party pooper…

When I finally pulled myself up, I closed my laptop and packed up. I walked over to the elevator and thought about what I was going to do tonight. My Acela train was scheduled for Saturday morning and my Best Western hotel room had a lumpy bed.

At 43 years old I was debating just going to my hotel room to recover but the devil in me wanted to go hang out with the “youngsters.”

Poof! Good Tom whispered in my ear, “Just go get some take-out and chill out in your room. You’re too old.

Poof! Bad Tom whispered, “Fuck that you party pooper, go out and have fun with your team. It’s what you do in the startup world, you sissy!

There I sat pondering my dilemma. It didn’t take long, maybe 5 nanoseconds of thinking but Bad Tom won.

The waitress places a beer in front of me, I watch the foam spill over the sides.

Fast forward an Uber ride to a “hip” bar in Porter Square where I meet up with my coworkers.

“Hey!” The scream from across a table, the new AE raises his beer glass so I can see him.

I grab a chair at the end of the table as the appetizers arrive. I look at one of the beer menu cards and motion for the waitress to come over to take my order.

The AE looks over to me, catches my eye.

“Hey! I hate to tell you this but we’re going in a new direction for that account as of 3 PM today.”

The waitress places a beer in front of me, I watch the foam spill over the sides. He’s speaking words but they’re not registering in my mind right now.

“So all the stuff I worked on for the account is toast?”

He nods, “Let’s circle up Monday morning. Great job though, you wowed them at the presentation!” He slaps me on my back and goes back to a smaller group of guys.

All guys, a lot of young ones, and only a few old fucks like me.

I note it’s all salesmen and no saleswomen.

I take a long pull from my beer and munched on a quesadilla. We’re in a standard Boston bar, kind of darkish but modern with an open floor plan. It’s cool enough to attract the hipsters but too loud to have a good conversation.

I realize I’m that old, I’m more interested in having a conversation at a quieter bar. This place was built for one thing, to get you and your buddies stone-faced drunk, Boston style.

Things get loud throughout the evening as two distinct groups form. One is a group of introverted software developer types and the other is a small group of loud extroverted salesmen types.

I note it’s all salesmen and no saleswomen.

I sit there lost in thought, taking in the moment. Just over a week ago I was saying goodbye to my coworkers. They all thought I was nuts to quit my 20-year career as a civil engineer. To quit and join a startup that they didn’t understand. Machine learning? What is that? Is that like the Terminator?

…did I make the right choice?

I made one of the largest leaps in my entire life, I switched careers midstream in what would make a normal person faint.

I take another drink from my beer. I think about my partner, how she encouraged me to take the risk. She was my support, the one person who believed in my dreams and helped sail the ship when I couldn’t.

But this all made sense. I knew I was destined to break out of the chains that held me down. I knew I had to shed my anchor and get out of a job I hated.

Now I was a freshly minted Sales Engineer and a Data Scientist. A whatever you want me to be guy to help close a sale. I was always a nerd, an Engineer, a tinkerer.

I would’ve never in a million years thought that I would end up in Sales.

Never.

I looked around the table at my coworkers laughing and drinking the night away and I could help but wonder, did I make the right choice?


A lot of events have been changed to protect the “innocent”, even if they deserved it.