The monthly roundup highlights some of the most interesting and informative articles published over the last month within the financial independence and investing communities.
This article highlights how much of an impact the best performing days in the stock market have over long term returns.
Considering the recent market decline we've experienced as a result of Covid-19, you might be tempted to take your money out the market or try to time the bottom. Well, not only is timing the market exceptionally difficult, but if you happen to miss out on some of the best days in the stock market your portfolio will be negatively impacted for decades to come.
Keep in mind, the stock market often experiences its best positive returns following a market decline.
The Volcker recession was a purposeful economic slow down caused by policy. The slow down didn't happen naturally but was rather forced into play through policy. This was a difficult decision at the time but what followed was one of the longest economic expansions and bull markets in US history.
This post has some interesting insights into how forced economic slow downs (such as the one we're currently experiencing due to lock downs related to Covid-19) tend to be followed by strong positive growth. This is partly because labour which were temporarily laid off during the forced slow down are rehired shortly after.
In a nutshell, hyperbolic discounting is the tendency for people to impulsively prefer smaller but sooner rewards over larger but further away rewards.
This article ties in really well with the financial independence and investing communities. People tend to favour smaller rewards that come sooner rather than putting in the work and holding off for larger rewards in the future.
Being aware of hyperbolic discounting will help keep us on track for the ultimate long term reward,...financial independence.
As a result of the corona virus pandemic, some are wondering how the FIRE (financial independence, retire early) community is holding up.
The first thing to keep in mind is that those of us who achieve financial independence don't do so by luck or with a simplistic understanding of our finances. The FIRE community are laser focused on personal finance and investing while creating plans ahead of time for market crashes.
The financial independence (and FIRE) communities are arguably going to grow even larger as we make our way through this pandemic with more people realising the importance of being financially independent, having multiple sources of income and not being in debt.
Article by Brendon @ Money FI