First Failure as Unofficial Financial Coach

Hi friends,

I know, I have other things to write about. I’m working on them, stay tuned! Time is a malevolent dictator these days. Working full time, parenting, theater acting, handling grandparents visiting, lifelong learning (it’s philosophy time!), and meeting so many people for one reason or another, thanks to my blog.

As a consequence I’m cutting on writing time, and I feel out of balance due to that.

While working in a highly time fragmented regime on longer and deeper blog posts, life happens. Things happen. Some of them ask me to be documented in writing, as if the words flow on their own, and I can’t help but put everything else on hold and throw them out, here, on my blog.

Like I’m doing today.

I’m not a Financial Coach (not officially, not yet, maybe one day), and I’m definitely not a Financial Advisor. But apparently people who know me as Mr RIP think that I know things about finance, investing, becoming millionaire, unbecoming millionaire, etc etc. The range of people asking for some sort of recommendations is incredibly wide. It goes from 70 years old relatives (or friend’s relatives) telling me stories about how their financial advisor made them lose all their money with Argentinian Bonds and Tech stocks back in year 2000 (and asking me what to invest on), to financial savvy readers who ask for my help on their early retirement plan.

To be honest, I think I’m way better in offering my help to those who are able to help themselves. I think I can add value if you and me are both 90% close in term of basic investing principles. When a financially illiterate person comes to me asking “oh, RIP, you’re the investing guru! What should I invest on today? Is this stock good? Bad? Of course Tech companies are going to double their value in 3 years! Look at this stock value, it’s raising! Oh shit, the market is surely going to crash next year!” I usually switch to philosophical, starting from “what are you investing for?“, “what’s your time horizon?“, “what do you think I know about a stock being good or bad that the market doesn’t?” and so on.

Sorry, I don’t have a crystal ball!

I perceive their disappointment when they discover I don’t have the secret deal that will double their money in 3 months. But most importantly, I perceive my disappointment in not being much helpful to financially illiterate folks. I want to get better at it, but like everything valuable in this world, it takes time. Both for me to learn how to be useful to the average person, and for them to understand that there’s no magic bullet, that they should not take anyone’s advice on specific investments without putting in the time to understand the investment itself, that without a clear goal investing for the sake of investing is a logical fallacy and so on.

But what made me close tor rage-quit my not-born-yet career as financial coach?

The answer is Mr WTF.

Who’s Mr WTF? Mr WTF is a friend of mine. We act in theater together. He’s smart, very smart. And a damn good actor! Acting together is a pleasure, my Wednesday nights wouldn’t be the same without him! He’s an amazing theater partner and a good friend.

But he’s my biggest failure so far.

It’s a funny story, and I think there’s a lot to learn for you too, my dear readers. At least you can empathise with me, with Mr WTF, and maybe you can suggest me how to improve my approach with those like him, which I realize they are more than I thought.

Reality is: people, even smart people, suck with money. It’s incredible how little attention is devoted in growing one’s wealth compared to energy spent in accumulating it. People work their asses off 12 hours per day for a little bit more money and then squander a decade of savings on bad investments, usually recommended by financial advisors with explicit conflicts of interest.

I wonder if Mr WTF will find himself here, since he knows my blog. He knows I blog and I blog about investing. I shared with him my blog url ten times, but he didn’t read anything: “it’s too long, too complicated!“. He won’t find himself here, I bet on it 🙂

Anyway, let’s get started.

Once upon a time, during a rehearsal evening in the far away fall of 2017..

RIP, was it last year?

Uh, yeah, ok, last year. Let’s be succinct 🙂

Last year, I don’t remember the exact circumstance though, another theater friend that I’ll call Mr Curious was opening his bag of worms. We’re theater folks, Italians, warm-hearted… we went personal and deep almost immediately. Work dissatisfaction, life goals, money, family, dreams… “Hey Rico Pelli, you work at Hooli! How cool is that?“. I tried to play stealth wealth and “fine, thanks” for a while, but it didn’t last. We’re theater folks, Italians, warm-hearted… I ended up telling Mr Curious about FI, about my plans, about my blog. He was sincerely interested. He read some of my posts, wanted to follow up and talk about investments. He still asks me questions with genuine curiosity and willingness to follow some of my steps. He will find himself (and Mr WTF) out after reading this post, because Mr Curious will read this post.

Few days after our initial chat I and Mr Curious were lightheartedly discussing about the stock market during a rehearsal Wednesday. We were speaking out loud and that captured the attention of Mr WTF.

WTF: “Are you guys investing? I have some money to invest… Who knows how it works?

We’re theater folks, Italians, warm-hearted… and big mouths!

Mr Curious threw it out: “WTF, do you know Rico (a.k.a. RIP) is an expert in investing? Just read his blog, it’s full of nice advices!

WTF: “Really? Coool, I need you bro! Send me your blog url, I’m going to devour it tonight!

That evening I shared my blog with Mr WTF, sure than next Wednesday he would have read at least some of the basics. For example, the start here page would have been more than enough. I explicitly pointed it out to him.

Few Wednesdays passed, and Mr WTF didn’t mention investments. Nor my blog. I thought it was just a passing thought. I’m not 100% ok with sharing my blog with people I know in real life if they aren’t really “looking for something”, so I was almost regretting having shared my blog with him.

Until one day:

WTF: “Hey Rico, I want to invest some money! I met an advisor from my bank, Sredit Cuisse [RIP note: I can’t tell you the real name so I anagrammed it. I’m sure you can’t reconstruct it], they told me I should buy their funds. It’s zero costs! What should I do?

Me: “Wait, did you read some of the articles from my blog? I sent you the link last month…

WTF: “Yeah, well, they’re toooo loooong and complicated! Don’t you have something simpler? I don’t have time to read all that stuff. Btw, I’ve lost the link to your blog, can you send it to me again?

I already knew that it wasn’t going to end well…

Me: “Ok, never mind. I – by default – strongly recommend against banksters advised funds. They’re the worst on the market. Worst performing and most expensive

WTF: “no no no I tell you this is really free! Zero costs! I’ve seen it on the prospect! It’s a fund that invests in stocks, and bonds, and real estates…

Me: “Please send me the link to the fund factsheet

Few days later I pinged again my friend and he sent me a picture of the papers the banksters gave to him about the fund, taken from his smartphone. Not even a link to some sort of universal truth on the internet… Of course the fund had ZERO trade fees, but a 1.75% TER and the whole e-trading account had other shitty custody fees that I don’t remember. Not even clear what was the fund investing on.

I screamed. I told WTF to really really take a day off from work and invest time in understanding what he was doing.

WTF: “Too late, I already signed and invested [a five digit amount] with them. They said that special conditions of zero costs were only valid until [few days after meeting the banksters]. I think it’s better than keep the money sitting on my saving account, isn’t it? The market is going up now!

Me: “(holy shit, dumb money is coming) Holy shit WTF, please sell those shares NOW. It’s a shitty fund, there are so many – really, soooo many – better alternatives.

Few days later.

WTF: “I called Sredit Cuisse and they told me that if I cancel the fund today I’d have to pay the trade fees and custody fees and commissions [TER] for the first year… it’s not worth. I’ll stick with it.

That would have been the end of the story. I tried to help a smart friend (because trust me, he’s a smart guy) but failed. Need to try harder next time, maybe speak easier language and have a low entry barrier “how to invest” for busy/lazy people.

Anyway, life went on. We never spoke again about investments and/or my blog.

Until last summer.

It was an amazing and sad day of September, somewhere around the end of the second week. I was relaxing on the beach, sipping my drink, and contemplating the coming end of my paternity leave, the best 2 months and half of my life so far.

I dropped my book, preparing myself for a bath in the Adriatic sea. I Instinctively checked my phone for notifications (shitty habit, really) and saw something like 10 lost calls and few Whatsapp messages from WTF. I always keep my phone silent, so don’t complain if I don’t reply quickly to you.

The messages said something along the line: “Rico, how can I open TODAY a brokerage account. As fast as possible? Please help!

Me: “Wtf is happening, WTF? Why do you need to open a brokerage account today?

WTF: “Those assholes of Sredit Cuisse don’t allow me to invest in securities other then their funds, and I need to buy a stock TODAY! Weren’t you suggesting that thing… Interactive Browser? How do I open an account as quick as possible??

Me: “Ok, calm. First of all it’s called InteractiveBrokers. A browser is that Chrome, Firefox, Safari thing ok? Second: didn’t I tell you that you should have not invested with Sredit Cuisse? Didn’t I tell you to close the account as soon as possible and do something else with your money? Are you still paying 1.75% TER?

WTF: “The fund is losing money right now, it’s stupid to sell it now. I’ll wait until it becomes positive and then I’ll cancel. Hopefully the day before I have to pay commissions he he he

Me: “It doesn’t make sense! Waiting for an asset to reach a certain value before doing X is plainly stupid. You could already sell it (even for a loss) and buy shares of another fund that invests on the same underlying assets with lower TER and no custody fees. You only have something to lose if you stay in this situation. And you really think that commissions are paid as discrete events? Anyway, back to your original question. Third: I’ve written extensively about IB on my blog. Why the fock didn’t you read a single post on my blog, given you needed the information it provides?? Ok, calm myself now. Fourth: opening a brokerage account usually takes some time. With IB you need to fill several forms, print things, sign things, send documents to them, have a human accept your application, wire some money and then you’re able to operate. It takes few days, but still you won’t be able to buy your stock today. Finally, and most importantly, fifth: why the hell do you need to buy a stock today? What do you know that Warren Buffet and all other billionaire investing firms don’t?

WTF: “Rico, it’s a bargain, it’s a stock that’s raising like crazy! It’s a successfully startup who went public in March. Quoted at 40 it’s now worth 70! Almost double in few months! I have a friend who works there and he said that the stock will reach 100 for sure! i need to buy it soon, before it raises even more!

Me: “Ok, let’s relax a bit. First of all, congrats to your friend who had a successful exit! He probably has a lot of shares that was worthless since March and now he wants to realize. Yes, buying those shares is amazing. For him though, not guaranteed to be amazing for you! Can you tell me which company is this one?

WTF: “Sensirion. Now please thank me for the deal 🙂

Me: “Do not worry, I’m not going to buy stocks because someone told me it’s a deal. I’m not even buying individual stocks now. As you should know if you read my blog, I prefer index fund investing. Less risky, more diversification and blah blah blah. Anyway, let’s take a look at this Sensirion thing

Me: “Ok, they went public at ~45 CHF per share. After a couple of anonymous months the stock grew by a timid +10%, then after another couple of months it started ramping up from 50 to 70 (+40%) in last 2 months. Overall it grew ~55% since IPO. Congrats to them!”

WTF: “Told you it’s growing! So? Isn’t it a bargain? How do I open this Inoperative Brothel account??

Me: “Calm. I said that the stock grew, not that it’s growing. There’s no such a thing of ‘growing’ in finance. You only look at the past. [yes, ok, the entire FIRE thing is based on extrapolating from the past, which is also a precondition of the end of a financial cycle according to Ray Dalio (link) but hey… I’m only human, after all]

WTF: “Do you think it’s going to crash?

Me: “I don’t know. But it’s not the point. The point is that it’s just gambling. You won’t be right if the stock would raise again, and at the same time you won’t be wrong if the stock plummeted tomorrow. It’s gambling. Unless you really – really – have some insider information, something explosive like ‘they are secretly developing a cheap solar fusion engine and the world doesn’t know it’. Are they? And how – and why – do you know about it? Are you sure Warren Buffet doesn’t know about it too? Do you think you – and even your friend who works there – have really a better view than the market?

WTF: “I want to buy it anyway, I want to invest in something else other than the Sredit Cuisse fund. I want to diversify. You said that once, I remember!

Me: “Yes, of course diversification is good. But are you really diversifying just by adding a single stock to your portfolio, and actually opening another brokerage account, with its associated costs? Or is this the beginning of an actively trading gig of yours? I don’t buy individual stocks, as I said. I prefer to diversify by investing in more markets, as broadly as possible [yes, even though apparently today the market is globally more correlated than it has ever been in the past]. Investing in individual stocks is gambling. And it’s ok if you know it, you’re in control of it and you only invest money you’re willing to lose. A company can go broke, having you lose 100% of the money invested. An S&P500 fund, even during the dotCom bubble or the recent financial crisis where so many companies failed, only lost 40-50% of its peak value and recovered the loss during the following few years

WTF: “Yeah yeah, I will only invest 1k, maybe 2k. I know it, I’m not going to get ruined by that. And as a plus if it doubles or triples I’l sell my shares and… easy money 🙂

Me: “I wish you good luck with your investment 🙂

WTF: “Thanks 🙂 Now, how do I open the account on Insensible Brainstormers?

Me: “I sincerely wish you lose your money 🙂

WTF: “WTF are you saying?? Are you jealous?? Oh shit, I shouldn’t have told you about it! What’s wrong with you??

Me: “Bro, it’s gambling! And I perceive your feelings. I perceive you want to feel smart. The most unwanted effect in this situation is that you gain a lot. Then you become confident on your skills and double down next time. It’s called greed, and it is your worst enemy (along with fear). It will bring you into a reverse martingale system that’s going to be expensive the day you fail. Let’s bet that day is today. I sincerely hope that you buy your shares and that the company sinks the day after. It would be a small priced humility lesson that you’re going to value a lot in the future. Now you understand me?

WTF: “Hahaha ok, do not worry, I know what I’m doing 😉 I’m just playing with peanuts, not real money. Now, let’s open this account on Intervertebral Broadcasters!

Of course after he made me spend hours on guiding him thru IB, he didn’t open the account. I discovered a month later he opened a Degiro account. I didn’t even know if he actually purchased the stock, until last Wednesday.

But wait, we’re not done yet.

Over the following days I monitored his stock, just for fun. The stock started heading brutally south. Even though it proves nothing on my side, at least it proves (to him) that it was not guaranteed that the stock would have kept raising. The stock wasn’t raising: it had raised.

Anyway, for fun and for pure joy of mocking my dear WTF friend I kept sending him daily screenshots of the stock price for a while.

I kept saying “you should thank the good old RIP for pushing back on your purchase idea 🙂

image source: www.freedomsphoenix.com

Sometimes he replied with a:

haha thank you, you were right!

But on the days the stock dead cat bounced:

Nooo today it went up by 4%, I should have bought it yesterday!! 🙁

Exhibiting so many common pitfalls at once: trying to time the market, thinking short term, thinking he would have been able to buy at the bottom and then sell at the top (while his plan would have only achieved the opposite!) and so on.

After a while, in mid October I guess, I stopped bullying WTF and I though “Lesson learned! I proudly saved a dumb investor from his inevitable fate 🙂 Good job RIP, here have a beer 🙂

Until last Wednesday.

We were rehearsing our next theater play (going on stage in mid March 2019, come watching us!), and he came to me complaining that – as you’ve probably noticed – October is being a shitty month for stocks.

WTF: “RIP, holy shit! I’m losing a lot of money! When do you think the market will recover?

To make it short:

  • He opened a Degiro account, invested ~5k CHF
  • He invested in 7-8 individual companies (500-1000 CHF on each one), mainly Pharmaceutical because “Pharma can easily double their price“. Based on what?
  • 1k of which on Sensirion (!!).
  • Each buy/sell action costs 5-10 CHF in Degiro trade fees (1-2% of invested capital)
  • He fat fingered on a buy order: he only purchased 1 stock (don’t remember the company) worth 13 CHF (plus 5 CHF fee). He’s keeping the stock, waiting for it to go on positive terrain, and then sell it. For another 5 CHF fee. Essentially the stock has to double its price to break even 😀
  • He’s down by ~1k in October, -20%, way worse than the global stock market that’s down 10% this month.

Me: “You’re down 1k? Well, don’t tell me: I’m down 50k 🙁

WTF: “yeah, but you’re super rich, (friendly) fuck you! You shouldn’t complain!“.

Yeah, like it makes sense.

Me: “You should actually be happy that the market is sinking right now. You just started investing, you invested peanuts. Stocks are (maybe?) on sale now, your future investments will be at a lower price. You’re working, accumulating money, you should celebrate a market crash today! CAPE is going down, since company earnings are still looking good, like other macroeconomics metrics, while prices are down 10%! That’s good news! Because you’re aiming long term, aren’t you?

WTF: “No, no, no, I don’t want to invest more. I’ll wait until the market recovers, and when I’ll be up by 10% I sell everything and I’m done!

Me: “Done with what? I mean, you won’t invest ever again in the future? You’re fucking 30 years old, bro, what the hell are you saying? And was that all? Did you do all this noise because you wanted to win 500 CHF and then leave the table? 500 CHF that you more than paid in fees so far?

WTF: “I’m not an expert like you, I have no idea if this is going to work out in the long term. I’m not good at predicting the future!

Me: “Neither am I!”

The problem is that people think that someone who’s expert in economy / finance / investing (which I don’t claim to be, btw) is able to predict the future. Maybe that’s because they’re used to listen to self proclaimed financial experts or journalists talking about future in TV, which btw nobody future-fact-check them.

Me: “That’s not how it works. I don’t know a thing. I can help you setting long term goals, I can help you assessing and controlling your portfolio risks/performances, I can help you diversify, I can help you find a good ETF that tracks your desired index, I can help you reducing investment costs and improving your saving rate… but I can’t predict the future! The most useful piece of advice I can give to you is ‘learn how to control greed and fear‘, which it seems you’re naively disregarding. Look at me, I’m relaxed. I’ve lost 50k and a comma this month, and I’m ok. The 10% test passed. I don’t know how it would feel to be hit by a 20%, 30%, 50%, 99% punch in the face, but I’m proud that the 10% test passed 🙂 Man, you can’t focus on short term, you need a plan!

That’s the story so far.

Of course there will be further developments that I might document here or not, let’s see.

Anyway, please, don’t be like WTF.

How?

  • Have a long term plan.
  • Save more: earn more, spend less.
  • Have an investment plan.
  • Diversify.
  • Reduce costs.
  • Control Greed and Fear.
  • Aim to achieve freedom one day.

Have a nice weekend 🙂

20 comments

  1. I laughed a lot reading this article – I know a lot of people like Mr WTF and it pains my heart to talk to them. So this is what I do now: stay away.
    The minute someone like Mr WTF start asking me questions and advice, I say: read x, y, z blog. If they can’t do that, then I won’t bother with them. Of course, easier said than done, but the more you do it the easier it gets 😉

  2. Thank you for sharing – I was super intrigued to see what happened with Mr. WTF and how you wrote about the situation was hilarious. I’m with Araminta: I sadly know many Mr. WTFs and if they’re not willing to put in the effort after I send them (short!) blog posts to read, I move on. In fact, I have a friend that I helped invest in Vanguard index funds for the first time and now every time the market is down she texts me in a panic. I remind her of what we agreed at the beginning (if you can’t handle it – don’t look) and I tell her I’m not talking about it anymore.

    Good job with how you helped Mr. WTF – I don’t think you failed. You had a lot more patience than I would have had in the same situation. I also don’t think you need to create a “low entry barrier ‘how to invest’ for busy/lazy people” source of info. The barrier to entry is already super low and if someone isn’t willing to even try (e.g. go to your blog, Google it, read a short post I send them etc) and are looking to make quick money or just not interested in learning they’re self-selecting themselves out of the situation. Hopefully with time they’ll change their tune.

    1. Oh crap, that’s my nightmare… having someone holding me accountable because the market is sinking!
      Before recommending anybody to invest, I try to spend a lot of time in probabilistic thinking and emotional control.
      If they don’t get it, bye bye keep your money under the mattress and good luck 🙂

  3. You can only help the ones that are willing to be helped…
    It’s the same as trying to teach something (math, programming, anything) to someone that is not willing to invest his time & energy to learn.
    Look at the bright side, even if you fail to save someone, there are still plenty of people that you will manage to get through and potentially change their lives!
    Finding your blog and getting to know about FIRE has been a great discovery for me, and hopefully I will do better than Mr. WTF 🙂

  4. WTF failed (to listen), you didn’t fail! Thanks for sharing this, a great read.

    My friends aren’t as bad as WTF, but they won’t invest at all because they are afraid they will ‘lose all their money’. The recent headlines won’t have helped and I’m sure they will feel glad they haven’t invested.

    Hard to get them to look longterm.

    1. Thank you Weenie,
      those scared by “losing all their money” are usually the first who go directly to banksters and lose all their money sooner or later.
      Again, better to focus on trying to help them understanding the basis of emotions at play and some math/probability basis.
      And common sense.

  5. This is so relatable. It seems that about half of my friends are WTFs. The other half doesn’t even care. Maybe 1% is interested and can understand the long term thinking.

    I have the tendency to just refer people to blogs (usually not my own, they’ll end up there anyway if they’re really digging into other people’s blogs and find the entire FI community), a good podcast or two, or reddit. After that, there is not much I can do. I will not waste a friendship on arguing with people that don’t want to learn. It’s not worth it to me.

  6. Strange is how people do not read. Many people around me have graduated from college but are unable to read a single page.

    Eventually, they will pay the price of their decisions, but they will always blame others for their problems.

    1. What I find strange is that understanding investment is the activity with highest return in your life, and still people don’t do it.
      people would rather work 500 extra hours for 10k, while spending 10 hours in learning how to invest is worth much more over a lifetime and still they don’t do it.

    1. Hahaha, it’s a Personally Identifiable Information I don’t like to share publicly.
      If you are curious send me an email 🙂
      … but if you are Curious (with capital C) see you next Wednesday 😀

  7. I’m sorry for your friend, but I have to admit that I enjoyed reading his financial adventures.

    WTF did the opposite of what it should have done… that’s incredible!

    I think that certain people there is nothing to do, unfortunately.

    PS: I’m following all the points you have listed at the end. Wow!

  8. I have exactly the same problem, either I am faced with a WTF or someone who just keeps the money on their bank account and does not invest. Both drive me crazy but it seems difficult to convince them to change. Would be great to know financial coaches work with these type of people. Anyone around?

    1. It’s a long way to go. It’s a mental shift that takes time, and usually hits loss aversion walls pretty soon.
      I don’t know if I want to walk that way 🙂

Leave a Reply

Your email address will not be published. Required fields are marked *