Spend less than I make
For my whole working life, starting as soon as I was above basic subsistence, I’ve spent less than I earned every year, usually saving between 20% and 50% of what I take home.
I’ve lived very frugally, in support of this: living in a small, inexpensive room in an old house, rarely eating out, rarely traveling for leisure, etc.
I’ve mostly invested those savings in
- A wealthfront managed portfolio
- A personally managed portfolio of broad based ETFs, allocated according to this distribution.
- An account of hand-picked stocks (mostly in information technology companies, and companies in the AI supply chain)
- Crypto
Any time I make an investment move, write a one-pager
My firmest financial rule: every time I make an investment decision (I move money to increase my financial gains or avoid losses), I write a one-pager describing what I’m doing and why.
If nothing else, this forces me to articulate my motivations, which sometimes reveals that they’re dumb. Writing a one-pager is a forcing function that causes me to notice that I’m pulling out of an investment “because I saw some headlines of news articles and got scared”, and to notice that that’s a dumb reason to change my strategy.
In practice, I’ll write out the argument for why a move seems like a good idea to me, often which triggers my TAPs for using quantitative reasoning. I’ll quickly do out some simple arithmetic on a spreadsheet and look up some reference prices for comparison, and maybe make a fatebook prediction. This often changes my beliefs.
I’ll get ideas in my head like “Nvidia might 5x again in the next year”, and when I check, I find that 5xing would bring its market cap well past that of the current most valuable company in the world. Which certainly isn’t impossible, but it does contextualize how likely I think another 5x-ing soon is.
Additionally, this policy means that I have a non-hindsight biased record of why I made the investment decisions that I made, so that I can review them later when I know how they turned out, and update my heuristics. Doing this, I can learn what kinds of thinking I should trust.
The worst financial decision I ever made—the one in which I lost the most money, by doing exactly the wrong thing at exactly the wrong time—was one of the few times when I wasn’t adhering to this rule. So I’ve learned my lesson: always write a one-pager.
Some additional Heuristics
Stocks
- Buy and hold stocks with a time horizon of forever.
Crypto
- Any time a crypto investment 5x’s from the original amount that I invested, take out the original amount that I invested. Following this rule, I’ll always at least break even from crypto booms, even if I mistime the top.
- “The best time to buy crypto is when no one is talking about crypto.” Set up an automation to buy a few hundred dollars of crypto every month between the big booms, starting as soon as the crash.