Herman Ye

Self-driving cars, NFTs, AI, SPACs - what a time to be alive. With so much excitement and promise, investors are jumping in to invest in seemingly world-changing projects. It's a fun time to trade. Endless options, big gains, compelling stories. Even I've been tempted to join the fun.  The lack of fun is the cost of admission when you choose to index. Speculation is taken off the table. You'll never get rich quick. Volatility will be limited. Never will you double your money overnight. Swings of about 10% is as exciting as it gets and these days are few and far between. You'll never have amazing stories about how you were able to successfully buy the dip of a EV stock that has since tripled. You'll never be able to brag about buying Amazon at 10 bucks. You'll never play visionary by yoloing into Bitcoin because you knew it was the future.  Active and concentrated portfolios lead to great stories (good and bad). Passive and diversified ones lead to snores. No one...

If you want to get in shape, turn to the fittest person you know. Do exactly as they do and you're on your way, right? Caution, I know some really fit people where pizza is half their diet. Following their footsteps will gain you nothing but pounds. We're all different (genetics and such). Them being in shape doesn't mean they know how to get you in shape. The same holds true for wealth. The media loves to interview billionaires. Where are we in the cycle? Where are we going? What should we do with our money?  There are definitely smart folks in the bunch we can learn a lot from. Warren Buffet is particularly quotable. But being rich in and of itself doesn't mean you have all the answers. Most folks become successful through a combination of skill and luck. The spectrum goes from hard work and smarts (skill) all the way to being born rich (luck). Skill is often overstated while luck is ignored. Luck can't be taught. This is why lottery winners don't give TED Ta...

Newcomers rushed to open a brokerage account last month. Fuelled by the craziness of GameStop, folks jumped into the markets head first. A get-rich-quick scheme paired with a David Vs. Goliath story, this brought investing to the mainstream. Retail investors turned thousands into millions, all while hurting hedge funds in the process. Make money and tackle inequality? How could anyone resist? Driven by emotions and momentum, this was a speculative bubble that was destined to snap back to reality ( oh there goes gravity ). A lot of people are now losing money and are screaming foul at the rich for rigging the game.  A terrible first impression. Why invest when they can change the just rules? This is the wrong lesson. Does the stock market favour the rich? Yes. They have faster computers and better information. But if you put down your broad brush you'll see the stock market is a great way for everyone to build wealth. Pros might have advantages but they don't have complete contr...

Core and explore. A popular approach to investing that allows for a sensible portfolio with a hint of recklessness. The strategy is simple. Keep most of your holdings in a risk-appropriate portfolio and reserve a small portion (up to 10%) to go nuts. Whether that be mushroom stocks, Bitcoin or GameStop. Your cheat meal to an otherwise healthy diet.  Trading is tempting. The thought of finding hidden gems or leveraging up your returns is exhilarating. It's the skydiving to indexing's drying paint. Having some "play money" is a good way to scratch this itch without putting your entire financial well-being at stake. The downside is the cost of entry. It's entirely possible you'll hit a few home runs. However, odds are you'll come up short over time. These losses compound and become a huge drag on your lifetime returns.  Trading is addicting and time consuming. You'll be constantly checking your account and stressing over your next moves. It's a toll o...

There's nothing like finding a good deal. You feel like an absolute winner tracking one down. Purchases feel more special as they're paired with a sense of accomplishment. Food tastes better. Clothes look sharper.  The opposite is also true. A bad deal feels foolish and taints all that's associated. No one wants to get ripped off. As investors, this aversion can make us hesitant to invest during a bull market.  Today's market feels frothy. The market is constantly rising and bubble talks dominate the airwaves. To invest right before a market crash would be devastating. The ultimate rip-off.   "I'll wait for things to settle down" is a common sentiment. The problem is, no knows when that will be. Meaningful pull backs are few and far between. Unlike retail, deals don't happen on a schedule. Waiting on the sidelines means risking significant growth. All time highs are typically followed by more all time highs. Missing the best market days can be costly. ...

As the year comes to a close, the S&P 500 finishes up 16%. A solid return all things considered. 2020 was a decade in a year - we had market euphoria, panic, then euphoria again. March was the standout month of a standout year. It was peak panic and the market showed it by crashing 30%. The drawdown was agony but as with all pain, there's a lesson to be gain. Most millennials have only known a bull market. Never experiencing anything close to a crash. March was the perfect stress test of what we thought our risk tolerance was.  For me, March stung. No one likes to lose money. But I was largely unbothered. I had no plans to abandon ship. I didn't lose sleep. I was fine. Part of me was actually happy buying cheap. My demeanour was confirmation that I was in the right portfolio - for me.  On the other hand, if you sold, it's a sign your portfolio might be too risky for your tolerance.  Conventional risk assessments center predominantly on timeline. The later you ne...

Financial Independence, Retire Early (FIRE) is a lifestyle centered around frugal living and aggressive saving. As the name suggests, the goal is to stop working as soon as possible, most aiming by their 30s. The movement has a lot of fanfare with millennials. And as with anything popular with Gen Y, criticism has been prominent.  The math is simple. Figure out your annual spend, divide it by your safe withdrawal rate (most use 4%) and you have your FIRE number - a portfolio balance big enough to generate returns that can cover your expenses. Say you spend $20K a year. With a 4% withdrawal rate, you'll need $500K to retire. Easy.  This is usually where the criticism kicks in. The math is fixed, too clean. Returns and expenses are not. The markets are a mystery and life even more so. An extended downturn or a large medical bill can easily throw off your plan.  The second tier of criticism is more personal. Why work a job you hate? Why deprive yourself? Why aim to sit ...

2020 is one for the record books. As the year wraps up, it's still hard to comprehend how weird it's been. For investors, what a journey. We entered the year riding a decade-strong bull, poised to only get stronger. Then COVID entered the chat and along came the big bad bear. The market fell off the cliff and all looked dire. Then in an unprecedented snapback, we hit all time highs a few short months later. I was fortunate enough to have stayed invested and continued investing throughout the year. Buying all the way down and all the way up. All things considered, it's been a solid year of returns. Much better than I expected. I should be very happy. But I'm human, and FOMO is real. Stories of investors making a fortune betting on stocks make my returns look like peanuts. The pandemic-induced volatility has stocks doubling and tripling in a matter of weeks. I can't help but to be tempted to join in.  Airlines are still down 50%. These stocks are due to recover and I...

A single workout won't do much for your health. Reading a few pages won't make you much smarter. Meaningful results are a product of consistency over time. Today's reps are not today's results. True change comes from compounded effort. 

  When Roger Bannister first ran the 4 minute mile, it changed running forever. Broken records shake up preconceive notions and challenge our limits. Bannister's performance, a feat once considered impossible is now commonplace for runners.  If you pay attention to financial news, it'll appear that records are being broken everyday. The S&P 500 hitting a new high. The Dow suffering its largest drop. These headlines are dramatic but are they meaningful? In markets, things that never happened before ironically happen all the time. The novel is routine and nothing to fret about.  There's a lot of moving pieces in finance and endless combinations can occur to form a record-breaking narrative. These are largely cosmetic. The markets are rich with data, data that can be sliced and diced until you find something "historic". Timeframes, sectors, factors - tweak the parameters enough and you'll find something everyday. You can do the same in your life. When you had...

  I consume an embarrassing amount of financial media. I'm working on cutting back. If my avid consumption has taught me anything, most is just noise. Genuine insights are rare to come by and little is gained by paying such close attention. 

  Would it be a smart to take all my money and bet on a hot IPO? Probably not. Too many eggs, too few baskets. I'll likely lose it all and look like a fool. What if the stock skyrockets 300%? Now all of a sudden I'm a genius and people are asking me for advice. If things don't work out - bad decision, if they do - great decision. But it was the same decision!  Judging the quality of a decision based on the outcome is known as outcome bias .  When making a decision we can only predict the likelihood of possible outcomes . The outcome itself is always unknowable so we can't judge a decision based on it. A good decision is one that is most likely to achieve a desired outcome. No guarantees, bad outcomes can still happen. No matter how much analysis you do, there will always be a degree of luck/risk.  To improve your health, exercise is a good idea. You could also seriously hurt yourself - a risk you can manage with proper training but a risk nonetheless. This doe...

Scroll through your newsfeed and 9 out of 10 stories will tell you the world is ending. Negativity has a monopoly on headlines. Pessimism sells. It captures your interest and your clicks.

My investment strategy is simple, I buy few index ETFs and hold them forever. Happy with market returns, I forgo any attempts at outperformance. I've written a fair amount about my liking for a low-effort, low-fee, passive strategy. Despite this, I am not at all against active investing.  You can be very successful picking the right investments. I know those who've made a lot doing so. I also know those who've lost a lot. These groups are not mutually exclusive.  Active investing is hard, and it very well should be. If everyone could do it, all profits would vanish. Only a few outliners will ever do well. This applies across all fields. Only a few players will make it to the NBA, even fewer will win a ring. Only a few authors will get a publishing deal, even fewer will make the best-sellers list. It takes a lot of effort ( plus some luck ) to become elite. If you're able to rise above, tremendous fortunes await.  With great rewards come great risk. The risk of wasted ef...

  In 2020 the global economy shut down. Even with the financial consequences, the S&P 500 is up 2% for the year. A year ago, no one saw a pandemic coming and a few months ago no one saw stocks recovering.  The world is unpredictable. The stock market, fuelled by the emotions of unpredictable people about our unpredictable world is many times more so.  Stock returns are volatile. This holds true for individual holdings and as well as diversified portfolios. Since inception, the S&P 500 has averaged a 10% annualized return. In its near 100 year history, there's only been a handful of times where it returned 10%. The average is nothing to count on.  You never know where stocks going. The smartest minds have tried, putting together sophisticated models to play fortune teller. Many have been burned doing so. Models are built with massive amounts of past data. Unfortunately, things that's never happened before happen all the time. Events like Black Monday...

Every investor daydreams about going back in time and getting in on the ground floor of a super successful company. Amazon went public at $18 and now trades above $3000 . That's a whopping return of 17,000%! Being an early investor would've made you filthy rich - if you were able to hold on. Staying invested is much easier said than done. Hindsight is 20/20. We have the privilege of knowing things worked out for Amazon, but it was a bumpy ride. While there were many years of amazing returns, there were also tense moments where all seemed lost. To endure these drawdowns you would've needed an iron stomach.  Year Annual Return 1998 966.39% 1999 42.18% 2000 -79.56% 2001 -30.47% 2002 74.58% 2003 178.56% 2004 -15.83% 2005 6.46% 2006 -16.31% 2007 134.77% 2008 -44.65% 2009 162.32% 2010 33.81% 2011 -3.83% 2012 44.93% 2013 58.96% 2014 -22.18% 2015 117.78% 2016 10.95% 2017 55.96% 2018 28.43% 2019 23.03% Would you've been able to hol...

On March 23, the stock market bottomed. Down a whopping 30% for the year in one of the most dramatic declines in history. Interesting enough, take a look at the market today and you'd think everything was fine. What happened?

Lemonade, a fast growing insurtech company recently took its stock public. Listed on July 2, it sprinted out the gates. In only a few days, the price soared 200%. Rocketing from $29 to $90. Lemonade is a breath of fresh air in the insurance industry. An old-school, high-margin industry ripe for disruption. This is a compelling story, one that made me pay attention pre-IPO. When the IPO happened, I couldn't help but to regret not investing.  I could have tripled my money! IPOs are naturally tempting. The potential leaves investors salivating. The chance to get in on the ground floor of a future Amazon? Sign me up. As exciting as they seem, their historical performance leaves a lot to be desired. IPOs are just stocks, and like most individual stocks, they underperform the market. Even if we just look at first year performance, where interest is highest, underperformance is prevalent. A DFA  study  analyzed the first year performance of over 6000 IPOs from...

Buy low, sell high. The oldest mantra in investing. Simple enough, right? Not quite. 

The Great Depression, Big Mistakes, and The Algebra of Happiness. I really enjoy reading and want to start sharing some of my favourites.