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Pragmatic Capitalism

Practical Views on Money, Finance & Life

‘Investing Basics’

Problems with “The Long-Term”

John Maynard Keynes once famously said “In the long-run we are all dead”. But the full quote doesn’t often get hashed out. Keynes said: “But this long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task, if in tempestuous… Read More

Setting Realistic Investing Expectations

If I had to pick the single largest problem in the investment community it would be irrational expectations about future returns. This comes from several sources. The primary one being overconfidence bias. And the second being widespread misunderstanding of real, real returns. Overconfidence bias leads most of us to believe that we’re better at something… Read More

Investing and the Intertemporal Conundrum

I went to see Interstellar last night.  I won’t ruin it for you, but if you’re in to things like time travel, intergalactic travel and space ships then you should probably go see it.  One of the central themes of the movie is relative time discrepancy.  Due to gravitational anomalies time in the movie is… Read More

Great Investors Think in Terms of Probabilities

The smartest investors know that they’re actually not that smart.  That is, they recognize the fact that they’re going to be wrong a lot.  But in realizing this they also acknowledge a more important fact – they don’t have to be right all the time to succeed.  They just have to be right about the… Read More

Understanding Your Real, Real Returns – Fee Edition

A recent post of mine discussed the importance of understanding your real, real returns (see here).  That is your return after fees and inflation.  We don’t usually hear about this return which is really strange because it’s the money that actually goes into your pocket.  The 10-12% nominal return we often hear about the stock… Read More

Saving is not the Key to Financial Success

You’ve probably heard it a million times from financial “experts” – the key to financial success is saving.  The idea is that if we save more now then we’ll have more to spend later.  And while that’s true at the individual level it’s actually disastrous advice in the aggregate.   Saving isn’t the key to financial success.… Read More

Understanding Your Real, Real Returns

Thornburg Funds has a new report out on understanding your real, real returns and it’s fantastic.  I discuss this topic in detail in my book, but they do a much better job covering this than I do.  So go have a read. The chart below is super important.  Most people who get into investing think only of their nominal… Read More