When we discuss financial principles on The Fat Wallet Show, we try to make them a rule of thumb. More often than not, debt is bad and saving is good. Most of the time, retirement and tax-free should be where your money goes first.
Of course there are exceptions to these rules. There are as many unique financial situations as there are people. Sometimes a set of circumstances leads to an opportunity. Other times you do everything exactly the way you’re supposed to and it still doesn’t work out.
This week’s question from Vee M got me thinking how a “bad” rule-of-thumb decision can be a great decision in certain circumstances. Another case in point is Simon borrowing against his bond to buy shares during the 2008 financial crisis. Would I tell my best friend to do that? Hell no! Did it work for Simon? It did.
If you are honest about the risks and possible outcomes, you have your financial base in place and you are a fiscally responsible individual, odds are you’re in the best position to make a call about your finances. Ask for input and advice by all means, but never forget that the success or failure of your financial plan affects you and your family. Whether those you consult agree with you or not, you have to live with the decision.
What I loved about Vee’s question is that she had the following information:
This information enables her to:
Data is power when it comes to financial decisions. Data overrides the fear and greed of financial decisions. Vee hit the nail on the head.
Links
We built a spreadsheet to help you work out how long it will take you to make up the penalty you have to pay to move your RA. Click on the link to download it. Moving your RA
Chris de Jager sent a link to a forum discussion on estate duty. The discussion follows on the discussion we had with Candice Paine about investing abroad.
Danie de Waal sent shared an article on how index funds can affect the market. Read that here.
P.S. Our Fat Wallet Listener Love index took a beating at the time of recording. Hopefully by the time you read this things will be looking up!
Kris
Fat Wallet regulars know that index-tracking products are at the heart of our investment philosophy. Even Simon, with his individual shares and trading accounts, prefers having at least half of his portfolio invested in exchange-traded funds (ETFs). ETFs are financial products that track the performance of an index. If you struggle to understand what an index is, you’ll probably find ETFs difficult to grasp.
In the last Fat Wallet episode, we decided to create our own index to illustrate how indices are put together. Zack Bezuidenhoudt from S&P Dow Jones Indices graciously agreed to help us put together an index of Fat Wallet listeners’ favourite companies. The rules of the index were entirely made up by me. I was drunk with power.
We received 22 submissions between Monday and Wednesday morning. Since some listeners liked the same companies, we decided to give more weighting to companies that received more nominations. We are therefore happy to announce the world’s first index weighted by love. Probably.
We capped the exposure of each company at 10% to avoid over-exposure to an individual share. We also opted for a variation on an equal-weighted index. The result is an index as diverse and colourful as the Fat Wallet audience.
You can have a look at the complete working document here. And finally, below for your viewing pleasure, is the Fat Wallet Love Index, organised by weighting.
Kris
It’s our 60th show! At the time of recording we were also only a few downloads shy of the 70 000 download mark. What a time to be alive! We are so grateful for your support.
This week we received a bunch of related questions about my favourite topic - ETFs. We discuss:
We also decided on a whim to put together a Fat Wallet index. It’s a fun way to see how indices are created and to see if we’re collectively smart enough to beat the market. You can submit your favourite listed company for inclusion in the index by sending a mail to ask@justonelap.com. Maybe we can get some industry peeps to take us through the nuts and bolts in a future episode.
Last week, we spoke about the basic concepts you need to understand to make good financial choices. We recap those this week, because understanding these concepts will change the way you think about your money. To recap, they are:
We also discuss the different types of expenses that will impact how you spend your money. They are:
This week, we discuss how each of these expense categories will affect your spending in different phases of your life. We start with those who have no financial responsibilities and very few expenses. Then we talk about how to handle debt and finally we deal with family obligations.
The TL;DR version of this episode is: