Micro investing
Greetings readers, I want to gear this entry with a simple overview of what I think of as micro investing. Before getting involved with this project, I was generally skeptical of the stock market. This perception is largely a result of being a survivor of the great recession of 2008. That is the year I graduated from college and commissioned as a second lieutenant in the U.S. Army field artillery.
In that regard, I was more fortunate than others. At the very least, being in the military during that period guaranteed my family and I a steady income when others were being laid off and bearing the brunt of years of poor macroeconomic management from our country’s leadership. Now that I’ve had some time to build a small financial safety cushion through austerity, and understand how markets work a little better, my perception has changed.
Yes, there are still a ton of risks in the financial markets. This is partly due to social media influence and the public’s general tendency to only focus on the latest headline, or something Elon Musk tweets about. Nevertheless, in general, an informed investor should be able to navigate murky waters if they focus on the data. The numbers are more objective than an expert opinion. With the internet, data is not the challenge. The real challenge is determining which data to follow and place more weight in.
Once you have a good data set to base your decisions on, you still have to practice a great deal of skepticism with interpretation and the accuracy of its contents, since bad actors have made it through financial reporting and transparency laws, and caused great harm to many. Think of Enron and Bernie Madoff. The financial brains behind those frauds were likely some of the brightest, but instead of using those talents for the common good, they used it to cheat and steal from unsuspecting and uninformed investors.
For my recent dabble into investing, I chose to take a more strategic and long term approach, and to sort of micro invest in a sense. The bulk of our family savings are in a high yield savings account, behind an FDIC shield. A small portion is invested in my wife’s ROTH IRA, and another small chunk is in a joint brokerage account. Yet another portion is tied up in a rolling batch of high yield CDs, which are also FDIC insured. By identifying stocks which pay a healthy quarterly and annual dividend, and are also reasonably priced, I’ve been able to achieve a nice rate of return.
I write this also with a small grain of cynicism, as stocks are notoriously volatile, and their value is largely subjective and only a matter of how much someone else is willing to pay for them. Take a look at any company’s section 10K SEC report, and you can see the stock’s par value to be cents or sometimes even fractions of a cent. Furthermore, large actors such as Warren Buffett’s Berkshire Hathaway and the largest hedge funds purposefully manipulate the markets to their own ends. It is a matter of pure volume and shear wealth. The concentration of wealth leads to only one outcome; abuse. That returns to the commonly quoted statement; “absolute power, corrupts absolutely”. For the time being, I am comfortable with my small investment book, and plan on holding, and generating income on dividends, instead of purely trading stocks. I also plan to continue investing based on what the data indicates.
It's simply a matter of patterns. Like in computer coding, patterns are like syntax, and matter very much. Historical trends are a key indicator of what the future holds, not something ephemeral a commentator such as Jim Cramer makes. Those type of public personas are typically paid promoters for one thing or another. One only has to refer to the case of FTX in order to get a peek into how social media influence can be used to harm others. There are plenty of celebrities such as Shaq who are finding their role with FTX called into question, and brought to court for liability and damages. Hopefully some of the charts and tools we will roll out, will be able to assist others in not following the next shiny object like WeWork, or NFTs.
Written by:
1. Ron Stephenson
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