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Weekend reading: Shopping or investing?

Weekend reading

Some great money reads from around the web.

I have written before on Monevator about my in-built thrifty disposition, and how it probably veers towards tightness.

For this reason I was thrilled to see The Accumulator explaining how he saves money this week. It’s vitally useful information that I just can’t share from experience.

My problem is spending it!

I have a soft spot for occasional black cabs after midnight and good food. Otherwise, the only thing I find easy to buy are equities.

Perhaps I’m like Warren Buffett in that regard – he used to refuse his wife a new sofa on the grounds that it would cost $1 million, after taking compound interest into account. (Alas I don’t share his prodigious mental abilities, and I can’t quite match his track record. At least not yet…)

This week I was reminded why equities are worth splashing out on through a short Forbes article. In it we learn that if you’d:

…skipped the purchase of a $5,700 Apple PowerBook G3 250 in 1997 and put the money into Apple stock, and your shares would now be worth $330,563.

Even relatively new customers can find reasons for regret. If you’d skipped the purchase of an Apple Xserve G5 in 2005 for $3,999 and bought Apple stock instead, your investment would now be worth $33,877.

The data is based on Kyle Conroy’s clever table of Apple products versus stock gains. It’s been around for a while, but now that Apple is the second most valuable company in the world, the numbers are becoming crazy. As someone who only ever buys Apple-made computers, I can relate.

Obviously few investments will do as well as Apple. Index investors don’t even try to catch the best ones, but instead sensibly settle for market returns. Either way, over time buying equities will make you richer, not poorer.

I’m getting a little better at spending money as I get older. One of the scant consolations of seeing a close family member becoming mentally disabled overnight is it puts everything into perspective.

But I’m not throwing money at toys for boys, and I’m not convinced by the spend it on experiences argument, either.

I’d have failed as a human being if the only thing that gave me pleasure was receiving my dividend cheques, as J.D. Rockefeller famously quipped.

But on a relative basis, I’m happy to save my buyer’s remorse for consumables, and my retail therapy for my stock broking account.

From the money blogs

Mainstream money and investing articles

  • Why rich people do stupid things – Motley Fool
  • Forbes has updated its list of 1,210 billionaires – Forbes
  • Regional income inequality: UK most divided – The Economist
  • Don’t pump up the oil bandwagon – Wall Street Journal
  • Roundup of the various new retail-friendly corporate bonds – FT
  • Commission surges ahead of ban [Gotta love financial advisers] FT
  • [Some] fund managers slash fees for private investors – FT
  • UK mortgage lending falls 29% in January – Telegraph
  • Public sector pension reforms: Who’ll lose out? – Telegraph
  • In praise of Nick Train [a fund manager I much admire] Independent
  • Barclays’ 3.25% cash ISA is current market leader – Independent
  • How to save money on motoring – The Guardian

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{ 11 comments… add one }
  • 1 The Accumulator March 12, 2011, 11:59 am

    The ‘Why Rich People Do Stupid Things’ is a rollicking read. And hearty comfort food for us mere mortals who take refuge in the adage ‘money can’t buy you happiness’. Here’s a quote:

    In the field of positive psychology, the study of what motivates people and makes us happy, researchers are mostly in agreement: Money isn’t the key to happiness. What really gives people meaning and happiness is a combination of four things: Control over what they’re doing, progress in what they’re pursuing, being connected with others, and being part of something they enjoy that’s bigger than themselves.

  • 2 ermine March 12, 2011, 6:39 pm

    How on earth do you do it?

    > My problem is spending it!
    > I have a soft spot for occasional black cabs after midnight and good food. Otherwise, the only thing I find easy to buy are equities.

    In London, for heaven’s sake, spending is both a way of life and a necessity. After all, if you need black cabs after midnight you’ve probably been out on the town, and there is the odd reference to the fruit of the vine. And Apple make a fair few boys’ toys 😉

    However you do it, good for you. I’m almost with the guy ERE cited recently:

    “It takes the self-discipline of a celibate monk living in a brothel to survive on 20-30% of what most people earn in our current culture.”

    Doing that in London with all the temptations around must be worth a post on what’s different about how you live to those around you…

  • 3 Salis Grano March 12, 2011, 7:21 pm

    My solution to avoiding such temptation is simple: try getting older. To anyone who hasn’t tried it, I would recommend the many advantages. Now, if only I could remember what they are . . . 🙂

  • 4 The Investor March 13, 2011, 11:36 am

    @Accumulator – Indeed, although perversely I also think those principles show why these rich people gambled it all in a seemingly crazy way for a few more million. They weren’t really doing it for the money at all, but to pursue their own somewhat warped value/happiness system, whereby the vast money they’d previously made was almost a very agreeable by-product, or a way of keeping score.

    What they’d done previously was game/beat/win against ‘the system’: now they were doing it with crooked cards.

    For those who want more, here’s a quick post on salaries and happiness, and another on money and memories.

  • 5 The Investor March 13, 2011, 11:55 am

    @Ermine – It’s a long story, and one of the reasons why I don’t focus on saving money so much as investing it, and am so glad to see The Accumulator picking up that particular cudgel.

    I don’t know if it comes across in the blog, but I’m a pretty particular person. I’m not a superficially weird one – if someone spends a day working with me or at a picnic you’d (I think!) consider me pretty personable, interesting, well-presented, knowledgeable, etc.

    But as I reach the thick end of my 30s, it’s becoming clearer to me that I don’t really think like other people, at least not consciously.

    For instance, for most of my life I’ve either not cared what others think or do, or else I’ve cared but consciously reacted against it. Some of this comes from my father, I think, as per this post I wrote on Frugal Dad. Some of it is my mental wiring.

    Now, I’ve latterly begun to suspect that in fact I do care more than I think about some of this stuff (I mean more family/career/house stuff then pure money) but that I deeply repress it (with unhappy mental consequences) but that’s by-the-by for this discussion – the fact is it’s made it trivially easy for me to ignore peer pressure, and I think that’s huge.

    Beyond that as I’ve alluded before I really played to the advantages of my life arc. I am probably the last of the students who left University with savings, having done a modest bit of work at the same time, enjoyed everything free or subsidized I could (without even realizing that was what I was doing – e.g. Seeing endless theater, art and music writing reviews for the college newspaper) and basically enjoying the benefits of being young.

    For most of my 20s my not lucrative but hugely fun media career took me to a fancy restaurant at least once a week, drinks as often as I wanted, press trips around the world a dozen or so times a year, and utterly blurred the line between work and friendship (memorably summed up when I was having dinner with some work-related friends for my birthday at Nobu on Park Lane when I was around 30, and three different individuals put me down as their client for their share of the bill!) And as for parties, we’re talking 300 people in a room listening to The White Stripes (live!) and eating sushi swankiness. Jay McInerney eat your heart out, etc.

    The bill for actually doing all this on my own coin, I don’t want to think about.

    In my late 20s I shifted away from that (age – Salis!) and began one of two c. 5 year long relationships where I discovered the joys of domesticity with a lovely woman. But in both cases, it was a studenty sort of fun domesticity – buying the ingredients to attempt to make our first Mexican mole, say, rather than buying a sofa (and I didn’t live with them most of the time, but rather in a huge house with friends in West London).

    At the same time I continued nurturing my house deposit turned personal hedge fund… see the rest of this blog!

    I’ve been single for about a year, and I have spent far more money than I usually would, but then my income has risen too, and also for a big chunk of the middle of it I got into a hump with the world and didn’t really spend much at all but stayed in reading neuro-psychology and eating M&S breaded chicken washed down with a gorgeous white they do and watching Annie Hall. So that was a bit of a time out.

    I think latterly in fact it’s been mainly the combination of having a 30-something London income yet still not having bought a house so wearing and tearing someone else’s fixtures and fittings, and finally and crucially not having kids, which saves multiple tens of thousands a year.

    I still regret buying my lovely Nikon D40x which I bought three years ago with a bag of lenses, because I don’t use it enough. Anyone who regrets buying something three years later doesn’t buy a lot of expensive stuff.

    Probably more information than you needed!

  • 6 The Investor March 13, 2011, 11:56 am

    @Salis – Perhaps you’re right, though most of my friends doing the house and kids thing seem to be pounding their credit cards, and now on one salary instead of two. Perhaps it’s the decade or two after that?

    @Ermine – Oh, and I don’t drive. Together with not smoking and not having kids, I think this is a HUGE win. (I’ve had a post drafted on that for 2 years that I should try and finish!)

  • 7 The Accumulator March 13, 2011, 7:31 pm

    @ The Investor – Excellent point! Although I think the warp occurs precisely when you start measuring your ‘happiness’ in Earthly tallies like money or power. I suspect they become goals in and of themselves that subsume all rational consideration of other values. Like Mr Hyde gradually overpowering Dr Jekyll.

    I’m minded of some articles penned by ex-City employees. They described the culture at the big investment banks as one where an individuals only measure of self-worth was the amount they earned.

    In other words, if control, progress, connection etc are only measured in terms of your salary and bonus then in reality you’ve lost all contact with the root meaning of those original values.

  • 8 Salis Grano March 13, 2011, 7:36 pm

    Yes, kids are costly but there are also financial benefits! My two were badly travel sick when young and without doses of projectile vomiting on the motorway I probably would never have got rid of the car and saved 15 years of depreciation, fuel, insurance and maintenance.

  • 9 The Investor March 13, 2011, 10:36 pm

    @Salis G – Touché 😉

  • 10 ermine March 13, 2011, 11:20 pm

    That’s awesome, and worthy of an inspirational post in itself IMO – thank you for sharing! Saving heady amounts, enough to achieve finacial independence in <40 years is definitely taking a different path from most people. You have to either be very highly motivated or be very internally referenced to values different to most people.

    It is fascinating that you probably fall into the latter category, which is unusual. Most of the PF blogs have some running narrative on the continuous battle to rein in spending, and Monevator and ERE are probably the only ones I can think of that don't have that – well, with a quick nod to TA for filling in the gap 😉

    Not having children and not having a car are financial wins, but the latter is probably cancelled out by London prices.

  • 11 The Investor March 13, 2011, 11:49 pm

    @Ermine – Thanks. Just to be clear, I certainly wouldn’t say I’m financially independent yet, certainly not close to South East England financially independent! I could possibly do a Jacob in West Wales / Scotland / the North, but it’d be a stretch. And as you know, if I plonked it all into a London property, it’d swallow it up like a black hole. 😉

    But yes, you’re right saving is easier for me. I’m genuinely very glad to have The Accumulator writing a bit about saving and budgeting, I hope it doesn’t seem arrogant or what have you to say that. And I genuinely do think I am too much the other way!

    Thanks for the nods on your post.

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