the boring portfolio that lets me sleep

i need to start with some bona fides - i have a degree in stock picking - yep, a whole undergraduate degree (look at me!). discount cash flow models, reading 10-Q's, options trading strategies, geometric brownian model prediction models, portfolio design and optimization - all the tools you need to invest in equity.

and i used to think investing was supposed to be exciting. my friends all have stories about buying nVidia at the right time, or day trading oil or the latest IPO. i was missing out by not day trading! during the gamestop memestock era of 2021, one of the junior folks on our team made $3m. profit. not a typo - someone making less than six figures day traded all day (and no, didn't do their job) until it built to $3M.

so it's possible! but my friends were JUST like my grandpa... telling stories.

let me tell you about my grandpa - Lindley Steward (the mortal enemy to 7 year old me, and an inspiration of growing beyond your younger self's limitation to adult me). my grandpa went the local casino once a week, and he and I always talked about it. it was one of our "things." slots was usually his game, but often times he'd pop in for roulette or blackjack or craps. whenever i caught up with him, he'd tell me about the $70 he won that week, the six winning blackjack streak he went on, the whatever you do to win in craps - it was so exciting!! i dreamed of going to my local casino and making easy money. i was smarter then my grandpa who had a 4th grade education, right?

one evening i hung up with my grandpa and told my mom about this $200 roulette win he had. and he bet like $10! i couldn't believe it! i was grabbing my wallet and headed out to the casino, until my mom said something.

"jarad - did you know your grandpa goes to the casino almost every day?"

"no he doesn't," i argued back calmly (it's fun to tell stories when you're the narrator). "he goes once a week and almost always wins."

"no, he goes a few days a week. and even on the days he wins, he doesn't usually walk away a winner. he wins some, but then loses it back. just like anyone who goes to casinos. he only tells you about the wins - not the loses or overall total. i think he's probably a little worse then break even this year."

it was like a truck hit me. this was a life alertering revelation for a 25 year old (not a typo, i wasn't a gullible 10 year old who believed my grandpa's stories. full grown adult. yep).

and that's what investing in indivdaul stocks is - gambling. investing is absolutely NOT gambing. having money invested in assets like real estate and equities is the ONLY WAY to protect yourself from the decay caused by inflation. investing in the assets is the difference between the haves and have nots - who can weather a bad economy and who can't.

but investing in individual stock is a bad idea. it's something called idiosyncratic risk - idiosyncratic risk is risk associated with a single company or asset class (like gold - do you own gold as an investment? you shouldn't).

the great part? you can eliminate idiosyncratic risk by diversifying your investments. some of my top ways to do that:

• buy a low fee ETF that covers the whole market [SPY, VOO are my favorites] (and yes, i know i'm the thousandth person on the internet to give this advice - but it's right!)

• if you want to invest in stocks individually, totally fine, just invest in 10 or 20, not 1 or 2. buy a little bit of a bunch of companies, not a lot of one company. your highs may not be as high, but your lows definitely won't be as low.

• if you want to day trade - fine. pick an amount, 5% or 10% of your total equity and cash, and use that and nothing more. if (and when) that goes to zero, wait 6 months before starting again. personally, with my 5%, i also treat the wins as fun money - if i get lucky day trade smartly and make money, i use that money to upgrade my next vacation. if you're going to gamble, you might as well do it all the way.

• stop watching your investments! make a choice, make the investment, forget about it. set it and forget it.

and yes, around the tip to stop watching your investments on a daily basis, this is a "do as i say, not as i do moment (just picturing my kids reading this and trolling me for this advice, "but daaaadddd" (picture the whiny california vocal fry, "you're always on your phone looking at your eTrade" - then something gross usually cause they're adolescent boys). but you have to remember - i have a degree in stock picking. that means I'm special and the rules don't apply to me :)

this post perpetuated by: kirkland signature malbec