Updated: Feb 19, 2021
Crayons are obviously delicious, we all know that. But something remarkable is beginning among the ranks of the Marine Corps that deserves some attention. It seems that the junior enlisted have learned that these tasty treats can also be used to... draw up financial plans??
That's right folks! The conditions have finally aligned for financial literacy to flourish. Some of the Swiss Cheese holes that have lined up could include:
- Policy changes brought by a new administration that are shifting the market
- The GameStop craze and all the questions it has uncovered
- A year of quarantine lending some free time to curious new investors
Whatever the reason, this new found interest is long awaited and warmly welcomed in veteran culture. If you're a used car dealer hustling boots overpriced Mustangs, your days are numbered, Buck-O.
Now let's get to the good stuff, "Portfolio Diversification".
Before you blow half a paycheck on a meme stock, you'll want to prepare yourself a safety net you can trust. You have a portfolio to manage now. Here is a framework to get started:
Emergency fund - Three to six months of runway. If you aren't there yet, no sweat. Put away the biggest lump sum you can. We'll circle back to this in a bit.
Holiday Savings - If you allot $50 per month to an account you'll always have $600 to fly home in December. Savings accounts and auto-allotments are free and easy.
Thrift Savings Plan - Again, Allotments are your best friend. Set up at least 10% of your base pay to go straight to the TSP before it Passes Go, and collects a $200 tab elsewhere. There are different risk-level accounts to choose from, as well as Traditional vs. Roth options — we'll cover tax deferral benefits later.
Once we've got our arm floaties on, we're ready to hop into the deep end. Sort of...
"Why didn't they teach us how to do this shit in high school?". It's a sad phrase you can count on hearing at least once a year around tax season, in any one of our United States —where national debt looms over our citizens (80% of whom live in personal debt).
This is the trend that our newly heightened financial literacy is ready to buck. Did you know that a person's ability to comprehend exponential growth can predict their likelihood of poverty? The banks sure do, and they use credit cards to keep us chained us to this problem.
We aren't taught how to think about money. I have a few hunches why:
A. It's complex, and can be difficult to explain
B. Many of our teachers weren't taught how to think about money either
C. Finance has been kept complex intentionally by those who seek to maintain control
It's a dilemma best tackled with logic — A beautiful branch of math that can arm anyone with a solid argument that they can point at.
Example: Statement C explains both Statements A, and B.
Solution? Make finance more understandable, so that we can teach younger generations how to avoid the debt lifestyle that is overtaking our culture.
Now for a solution we can apply? Daily Budgeting. Humans tend to struggle with big numbers, yet we measure our salary annually, and our bills monthly. What about daily goals?
Living "paycheck to paycheck" sucks. Don't we tend to live more hour to hour, or meal to meal? Why don't we consider money from a daily perspective to help our chances at tracking spending? We have a tool for that, check it out! ---> Daily Budget Calculator
We know enough math to solve this riddle — This nightmare on Wall Street. We can do this!
Let's get one thing straight — Wall Street is a fucking casino, don't forget that.
If it was just "shares" of a "stock" being bought and sold at market price, trade could be followed and understood. That is not the case, however. It's an absolute craps table of deception, filled with calls, place bets, shorts, and all sorts of other jargon terms that we aren't intended to understand.
This Casino, and the pit bosses who run, it are responsible for maintaining the lavish facade that is American lifestyle. The performance of the casino dictates the loans available for us lucky devils to buy houses with. An interest rate is 'fixed' to us for 30 years based on current market conditions. DO NOT ACCEPT ADJUSTABLE RATE LOANS.
Accountability is a hot potato that's tossed around, and easily brushed under rugs we can't afford to step on. Meanwhile, we (non-billionaires) are chastised for not taking "personal responsibility" for our finances... but I digress.
If you're still jonesing to toss a penny into this wishing well, here are some considerations to minimize risk through portfolio diversification.
Areas of Industry
Energy, Materials, Industrials, Consumer Discretionary, Consumer Staples, Health Care, Financials, Information Technology, Telecommunication Services, Utilities, and Real Estate
Types of Stocks in Each Area
Blue Chip, Growth, Dividend, Cyclical, Defensive, and Penny
All of these characteristics describe individual stocks that can be traded by anyone with a dollar. There is safety in diversity — not having all your eggs in one basket. The above are just some diversity considerations. We haven't even talked about the various types of currencies used to purchase these assets ("Cash", Raw Metals, Crypto, and International just to name a few categories of this realm).
You'll also want to consider your exit strategy — when you plan to sell your shares. If you're looking to make quick money, be sure to familiarize yourself with short term capital gains taxes and how much growth you'll be actually be looking at after you subtract them from winnings.
None of this is intended to deter you from participating in investing. In fact, it's quite the opposite. You should be investing — just wisely. Consider what percent of your net worth is put into each individual company, each industrial area, and each stock type. If any one of the answers is high, what are the risks? If one stock tanks, is it going to wipe you out?
I highly recommend establishing a solid foundation of savings comprised of both liquid cash and long term mutual funds prior to dabbling in this mayhem just for shits and gigs. Get yourself set up, and then go mess around and have fun. The same way you would prepare your pack and rifle before going on a patrol. You don't ever want to need your 9m, but you'd better have that puppy ready to bark, just in case.
There is absolutely money to be made by the best thinkers, but there is even more money to be lost by those that haven't been trained how to. It's a casino.