A Personal Encounter with the Psychology of Money
Mark Crothers | Jul 28, 2025
I've been in a bit of a financial funk these last three months, and I've finally managed to overcome my heart and listen to my head. I'm really surprised how difficult I've found it, especially with my business and financial background. I mean, truly difficult. It all started when I was setting up a 10-year fixed-term annuity before retirement. I had initially decided on a purchase amount and, to fund it, liquidated some of my developed world index tracker. I moved the cash into my Vanguard money market fund to keep the money safe prior to the annuity purchase. After more research and some analysis, I decided to purchase a smaller annuity, leaving me with approximately $120,000 still sitting in my money market fund. Because of market behaviour this last while, I kept putting off reinvesting the money back into the original fund it came from. I've looked at it nearly every other day for the last three months, and I couldn't pluck up the nerve to simply reinvest. It's absolutely ridiculous, and the annoying thing is I knew I was being pretty dumb and needed to get a grip, but man, was it hard! I got a severe case of status quo bias with a large helping of loss aversion, all wrapped in a blanket of analysis paralysis, and I'm here to tell you it's as real as a brick wall and nearly as hard to knock down. I was literally mentally stuck and couldn't execute a simple financial transaction for three months—unbelievable. I think this experience has really hit home that financial decision-making isn't purely rational, even with my strong business and financial background. Emotions, biases, and an irrational fear of making a "wrong" move overrode my logical understanding. I guess this is why personal finance is often…
Read more » Well That’s A Bummer!
Mark Crothers | Mar 16, 2026
I find it rather annoying to waste my time. Unfortunately, it seems I have to tag that handle onto my threshold rebalancing strategy over the last ten year period. A quick recap: I follow a once and done rebalance strategy anytime my equity holdings drift 15% from their normal allocation. The idea is to capture upside during a rebound. After a recent post about my experience doing a rebalance during the April '25 "liberation day" tariff announcement, a comment from a fellow HD reader mentioned she used a 10% threshold. I speculated about which strategy would have generated better alpha but pointed out I was too lazy to try the comparison. The idea stayed in my mind unresolved until I had the simple epiphany to ask my friendly AI Claude to have a stab at crunching the numbers for a side by side comparison of the two rebalance points over the last ten years. I duly received the results which proved interesting. Essentially they are neck and neck — 108.2% return vs 108.8% in favour of the 10% trigger point. The fly in the ointment occurred when Claude pointed out that a 60:40 portfolio with an annual rebalance beat both, with a ten year return of 111%. It seems I've done a bit of faffing about for no good reason over the last ten years — all a bit of a bummer if you ask me! I have to admit, it's a bit of a black box situation. I truly have no idea of the maths methodology Claude used but I'm taking a leap of faith and assuming the results have some basis in reality. If nothing else, it might show the power the average investor now has to run complex calculations using AI on their investment portfolio. Only five…
Read more » Financial AI: Benefit or Danger? I Don’t Know
Mark Crothers | Jul 10, 2025
There's a debate ongoing in the UK at the moment around a cash-only tax-advantaged account, and if the benefit should be reduced from a yearly £20,000 deposit allowance to £4,000. This is with the aim of making people favor equity-based, tax-advantaged accounts to enhance returns. Very UK specific, but it got me thinking once again about the general idea of holding cash as a defensive asset in your portfolio for sequence of returns (SOR) risk when in retirement. Truthfully, the maths was beyond me for a quick article, but I thought this was maybe something I could test with one of the shiny new LLMs that are popping up everywhere. I chose Google's Gemini, and after politely introducing myself, I posed a question: "Can you quantify the difference on a standard 60:40 $1,000,000 portfolio of holding a five-year cash buffer during a three-year 20% market drawdown, and project out to two years after the recovery at average market returns?" Here's the LLM's condensed summary: "For retirees with a $1,000,000 60:40 portfolio, a $200,000 (5-year) cash buffer significantly mitigates 'sequence of returns risk.' Our analysis shows that during a hypothetical 3-year, 20% market drawdown, the buffered portfolio avoids forced selling of depressed assets. After the drawdown and two subsequent years of average returns, the portfolio with the cash buffer would be worth $916,649. The unbuffered portfolio, forced to sell assets at a loss, would stand at $886,906. This $29,743 difference highlights the cash buffer's crucial role in preserving capital and enhancing long-term portfolio resilience, especially when regular withdrawals are necessary. It demonstrates how avoiding sales during downturns allows the invested portion to recover on a larger base, ensuring greater financial stability." This seems a reasonable outcome to me and highlights a possible benefit of holding cash if you are of the…
Read more » What If You Don’t Want to See the World?
Mark Crothers | Aug 28, 2025
From my readings on this site, I seem to be in the minority on a particularly popular and expensive retirement pastime: foreign travel. Over the years, I've traveled a fair part of the world, from wide-ranging business travel throughout Europe and extensive global leisure travel on every continent other than, strangely enough, the Americas (except for the Caribbean). I still travel. For instance, I was in the Canary Islands just off the coast of North Africa for a 60th birthday celebration in February, and I'm meeting a friend from London in Spain for a week in late September. Suzie and I are currently organizing a trip for next August to see a total solar eclipse. But my enthusiasm for foreign travel has waned these last few years. Part of it, I think, is a subtle shift from the thrill of novelty to a deeper appreciation for more settled pursuits. After years of navigating airports, packing suitcases, and adjusting to new time zones, the sheer hassle of foreign travel has started to feel less like an adventure and more like a task. With so many popular destinations becoming increasingly crowded, the quiet, more peaceful moments seem harder to find. It strikes me that most would think this is a most inconvenient time to be losing interest in travel. After all, I'm only 58 and just recently retired. This is supposed to be the time! Get to it! Travel through the go-go years, the world's your oyster! But my travel now seems to have evolved alongside myself, tied to more purposeful and personal reasons. I have no real enthusiasm for destination travel. It has to have a meaningful reason now. Another example to illustrate my point, I'm thinking of visiting my cousin in Australia who recently lost her husband. I think it's…
Read more » I Don’t Like to Judge…But.
Mark Crothers | Nov 9, 2025
I'm pretty much a non-judgmental person, though this isn't a virtue I've cultivated or a moral position I strive toward. As my wife Suzie has pointed out on many occasions, normally in an exasperated tone, I tend to wander through life in a state of "fuzzdom." Suzie's phrase, not mine. Case in point: last week my opinion was asked about the dress sense of the weird guy with the high heels, lime green miniskirt, and shocking pink topknot hairstyle we passed while crossing the road. My reply was honest—I couldn't even remember crossing the road. I wouldn't make a good detective. I find the occasional marital tension this causes to be gloriously amusing, but sometimes my unintentional "fuzzdom" is penetrated by what I consider the unusual behaviors of people around me. The other day I held open the door to a convenience store to let two young women pushing prams and trailing children enter ahead of me. They must have been regulars, as the clerk greeted the tattoo-covered and unconventionally dressed young women by name. The children, as they all do, kept picking up candy bars and asking for them, only to receive sharp rebukes and have them roughly removed from their hands. The two women then proceeded to purchase their "usual" $50 of lotto and $30 of instant win tickets, two packs of cigarettes, and a four-pack of energy drinks. They kindly conceded to the household budget and purchased $5 of electricity and $5 on a prepaid gas card, and with an exasperated tone reluctantly let the kids each have a 10-cent candy lolly before leaving the shop. I paid the clerk for my selection, wished her a good day, and left. The whole incident left me feeling sad and a little unsettled and uncomfortable. On the drive home…
Read more » Make My Day Punk, Harvest the Bubble.
Mark Crothers | Oct 14, 2025
The normal thinking would have us believing that a bubble is a dangerous situation for our retirement accounts. What if I told you that I believe a market bubble makes your portfolio more resilient? Would you believe me? Everyone fears bubbles. You should harvest them. Don't worry, I haven't lost the plot, let me be clear: I'm being deliberately provocative to make a point about something some investors neglect when things are going splendidly well, disciplined rebalancing. In reality, bubbles are only devastating if you lack a system. With the right approach, they can actually strengthen your portfolio. I have some caveats to qualify my contention, although they are actions you should, as a responsible investor, already be practicing. Rule one. Don't be greedy and lose track of your investment statement. Rule two. Rebalance your inflated equity position back to your proper asset allocation. Rule three. When the bubble bursts, draw from your cash and bond positions. That's all you need to do. Rule one forces you to rebalance, rule two forces your allocation back to your statement allocation and indirectly increases the size of your safe assets. Rule three stops you from selling distressed equities. Let me show you what this looks like in practice. Say you start with a $1,000,000 portfolio split 60/40 between stocks and bonds. This means you have $600,000 in stocks and $400,000 in bonds.A bubble inflates your equities by 50%, growing your stocks to $900,000 while your bonds stay stable at $400,000. Your total portfolio is now $1,300,000. You now have a risky 69/31 split.Most investors, your neighbor, for instance, ride this wave, convinced they're geniuses. You rebalance.You sell $120,000 in stocks at bubble prices and use that cash to buy bonds. Your portfolio is now back to a 60/40 split, with $780,000 in…
Read more »
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