The Plateau

I am quite bad with dates, as remembering the day something happened…not a date like going out with my wife, in that I am pretty good at that, just look at my wife! To be more precise I am bad regarding past dates, 75% of my daily job is planning for future events, investment maturities, payments, hedges, etc and I am doing fine with that. All of this to say that I do not remember when I started writing this blog, must be two (maybe three???) years ago; I had several periods of “writer block”, the most recent one just a few weeks ago. At that time I also read this post on Monevator, written by a novice in the personal finance world.

In a way, I was envying him because he has all the journey in front of him…and a place where to share it. In hindsight, it was just an excuse I was giving myself on the reason why I could not find any interesting topic to write about, which is twice wrong.

The first mistake

Just because I know everything on how to create a family budget, buy an ETF or minimise taxes and transaction costs, does not mean I can not write about it. The fact is, since I learned these things so long ago, in my mind everyone already knows these; I assume everyone finds these topics as boring as I do…so why should I bother?

I learned how to use a trading platform by myself but the truth is that 93% of the things I know, I learned from someone else; things I figured it out by myself are only few and far between. And again, this does not make my “well, then you can figure it out too” any more reasonable.

I do not want only to write about things that I find interesting, ideally I want to write about stuff that would create excitement in the reader, a ‘wow’ effect. This would be impossible even if I was Michael Lewis…and I am doing it as a very part-part-time gig. The positive aspect is that I realised all of this BECAUSE I forced myself to think and write about it. The process is working 😉

The second mistake

I have to do my homework. I write about topics that I find interesting but this requires research; I especially like to write about topics that can add value to my current investments and, as I said, all the low hanging fruits are gone since a while. Multiple potentially-good ideas turn out to have zero, if not negative, value compared to my portfolio. Sometimes those rabbit holes are easy to explore, sometimes…I feel lazy. Or I simply feel discouraged by the previous disappointments.

The Long Term

Once you have your financial house in order, it is all about patiently waiting for the long term to become the present; as Morgan Housel puts it, even staying cross legged is not that easy. And it does not provided good content neither, unless you need a script for a whiskey commercial:

In this specific regard, trying to find good content might even be dangerous: to stay in the beverage world, you risk to go a great length to find a “new COKE” while the old recipe was good enough. The need for action is one of the main reason why people overtrade, chase the latest big-return fund and ultimately underperform the market.

From time to time some colleagues approach me because I am ‘the market guy with the weird keyboard’ (it is just the Bloomberg one, it stands out simply because of the coloured keys) and you can guess the topic, the latest investment fad: Tesla, crypto, meme stocks. Extend it to two decades and you can understand why my reaction at best is “been there, done that”. It’s the Groundhog Day, for them is a new world, a new conversation while I already tried in the past all the possible ways to dissuade them and realised that it is impossible to change their mind…so, depending on how busy I am, I try to match their enthusiasm and let it go. To tell you what are the real chances of becoming rich riding one of these waves, I never met a single person who got away with a different life. It is like the Lottery, you read an article about that guy who won and in your mind the odds of winning change because suddenly the winner has a face and a name; and for each mania, you read a similar article about a guy that became millionaire going all-in. Your chances are still close to zero.

The English Tax System

According to official statistics, the median annual earnings for full-time employees in the United Kingdom in 2020 was bit less than 32k; once per year, I take a train and go on a trip with my wife to see these mythological creatures. London is officially part of UK and still a world apart, the only way you can live in London with that salary is if you do not have kids (and it is still quite bad). If you earn the median salary, the UK tax rate is not that bad; if you live in London and you are not a billionaire, your tax rate is…absurd. I also do not see any reason why a person with two opposing thumbs would choose to live in UK but not in London (and by London I probably think up to Zone 3) but this is according to my personal taste (seriously, why?? Do you like perennial winter BUT you despise snow and winter sports?).

If you are in the top tax bracket, which again does not mean you are by any stretch rich, the only way to limit your tax bill in UK is to invest as much as you can in your private pension plan; yes, no deductions if you have kids, nothing on the mortgage interest, nothing on insurances, nothing. My current employer offers me a decent plan with reasonable costs (very important!) and the process to invest is smooth. Even too smooth. Everything is automatized: transfers, investments, rebalancing; everything happens so behind the scene that you can almost forget you are sacrificing part of your salary to invest in your future. While this is the financial behaviour nirvana, sometimes I think that if I had the possibility to do some of the ‘manual’ work I would appreciate more the journey. Next time I change job I will probably start to play with a SIPP…

Little aside on the above plan. The UK is the fourth country where I lived, so it comes natural to me not only to optimise for the local laws but also to compare to other regimes I experienced. As in other countries, you cannot touch any fund you invested in a pension plan until a certain age, 55 in UK; the problem is that in Switzerland and Luxembourg you get very high unemployment benefits if you are fired, while in UK you get almost zero. Before going all-in on your pension contributions, you have to set aside a quite chunky emergency fund…or otherwise risk to be set for your 60s while you die of hunger in your 40s.

Conclusion

This has turned out like a self-motivational post. I have to nurture my curiosity and do not get frustrated if I hit multiple roads leading to nowhere. A big behavioural mistake is to forget that big breakthrough comes out of small but constant improvements, like compounding. Writing this blog helps me testing and clarifying my ideas…and sometimes have a place where to rant. The good part of the plateau is that you have a lot of free time to enjoy other things: hot summer outside, the NBA playoffs and a good book.

What I am reading now:

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