Financial Dictionary

It took me a great deal of life experience to get my far from complete understanding of the financial world. Here is my attempt to capture in as few words as possible the right way to think about some financial terms.

Bank: An entity that aims to take you for about 3% of everything you own or owe each year.

Bonds: Payday loans to governments.

Car: The most expensive part of your self-image.

Commute: The most underestimated cost of both time and money.

Debt: A crushing burden that weighs down your life and dreams.

Expenses: Anything a salesperson calls an “investment”.

Government: An entity that transfers your tax money to its employees.

Inflation: An invisible force that slowly makes your retirement income worthless.

Insurance: Something sold using the illusion that it will prevent bad things from happening.

Insurance Company: An entity that pays small claims and denies large ones.

Investment Industry: All entities whose income comes solely from dipping into your savings.

 Longevity Risk: Cat food.

Lottery Tickets: A common retirement plan whose success rate increases when combined with smoking.

 Organization: An entity whose main function is to pay its administrators.

 Payday Loans: The last lap in swirling down the financial toilet.

Smoking: A means of combating longevity risk.

Stocks: An overconfidence tax when bought. A fear tax when sold. A wealth generator when held in great variety for a long time.

Comments

  1. Sebastien BenoitNovember 3, 2015 at 6:37 AM

    I thoroughly enjoyed this :) Poetic! If I had to pick a favourite, it would be a toss up between Longevity Risk and Smoking.

    ReplyDelete
    Replies
    1. Michael JamesNovember 3, 2015 at 8:56 AM

      @Sebastien: Glad you liked it. Maybe I'll add more entries over time.

      Delete
  2. Big Cajun Man (aw)November 3, 2015 at 7:00 AM

    OK, so this is the kind of content everyone needs to read, and the sad part is people think you are joking. I didn't laugh, I felt sad reading this, and then I laughed. The only thing missing is the financial toilet graphic (with the swirling).

    ReplyDelete
    Replies
    1. Michael JamesNovember 3, 2015 at 8:57 AM

      @Big Cajun Man: You're right that while I tried to make this amusing, I intended it to have serious messages.

      Delete
  3. AnonymousNovember 3, 2015 at 7:03 AM

    Index Funds - a guarantee to underperform the index

    ReplyDelete
  4. Marko@NorthlandNovember 3, 2015 at 8:03 AM

    Very funny and clever

    ReplyDelete
  5. SSTNovember 3, 2015 at 10:09 AM

    Debt: A crushing burden that weighs down your life and dreams...if misused.

    Inflation: A visible force that slowly makes your purchasing power worthless...unless you keep getting raises.

    Insurance Company: An entity that charges you for doing nothing and charges you even more when it does do something.

    Stocks: A wealth generator when held in great variety for a long time.
    Long Time: The ubiquitous 100-year stock chart that is applicable to no one.

    Smoking: A means of collecting taxes to subsidize a health care system burdened with treating sick smokers.

    ReplyDelete
    Replies
    1. Michael JamesNovember 3, 2015 at 12:09 PM

      @SST: Even many people who think they are using debt wisely get burned.

      It's tough to get raises after you've retired unless you have an indexed pension.

      I think there is good reason to believe that owning a slice of the world's industriousness in the form of businesses is a good bet. Certainly a better bet than the alternatives.

      Delete
  6. Marko@NorthlandNovember 3, 2015 at 12:05 PM

    Very funny and clever

    ReplyDelete
  7. paulNovember 3, 2015 at 12:39 PM

    You really put a damper on my $5 donation to the office lottery pool with that definition today. I was counting on that $60 million to enhance my life of debauchery, and to buy as many high polluting toys as will fit in my garages.

    ReplyDelete
    Replies
    1. Michael JamesNovember 3, 2015 at 12:46 PM

      @Paul: You can count on me to take the fun out of things :-)

      Delete

Post a Comment

Popular posts from this blog

Short Takes: InvestorLine’s HISAs, 24-Hour Trading, and more

I recently moved some cash into BMO InvestorLine’s high-interest savings accounts (HISAs) that are structured as mutual funds.  Their designations are BMT104, BMT109, and BMT114, and they purportedly pay 4.35% annual interest (which they can change whenever they like).  However, the way they report the monthly interest payments is so baffling that I wasn’t able to sort it out in my first 15 minutes of trying.  A further complication is the following text in the HISA description: “The Bank may pay, monthly or quarterly, compensation to your Dealer at an annual rate of up to 0.25% of the daily closing balance in the BMO HISA.”  I couldn’t find any evidence of such a charge, but I haven’t been invested for a full quarter, and I can’t yet say that such a charge isn’t buried somehow in the confusing reporting.  I have more digging to do before I can recommend these HISAs. Here are some short takes and some weekend reading: Preet Banerjee explains the dangers of Robi...
Read more

My Asset Allocation

I’ve resisted discussing my asset allocation for some time, but now is finally the time to describe it and the reasons behind it. I’m not holding it out as a model portfolio; I believe it’s suitable for me and not necessarily anyone else. With that warning, enjoy the discussion and feel free to ask questions or take some pot-shots. The main reason why I haven’t discussed my asset allocation in detail before now is that I don’t want readers to treat it like a model portfolio and follow it blindly. Everyone’s situation is different. The need for variation in asset allocation from one investor to the next usually isn’t huge, but there is no one-size-fits-all portfolio. A secondary reason for keeping my asset allocation to myself is that I can’t be sure I’ll never change it. For example, I recently made the minor change of switching from an ETF of small-cap stocks to an ETF of small-cap value stocks . I don’t have any plans to change my current allocation, but I may think differe...
Read more

Updated Currency Exchange Method at BMO InvestorLine

There is now a more recent update of the method I use for exchanging currency at BMO OnvestorLine . I recently changed the procedure I use to convert large sums between Canadian and U.S. dollars at BMO InvestorLine. The method I use saves a lot of money compared to using the InvestorLine foreign exchange system. The latest change I made eliminated an annoying interest charge that I had to ask to be reversed. Most people don’t realize how expensive it can be to exchange currency. The extra charge banks and brokerages add gets hidden in the exchange rate. To see this extra charge, start by taking a sum in Canadian dollars, say C$10,000, and finding out how many U.S. dollars you can get. Then see what this U.S. amount would get going back to Canadian dollars. Many people might guess they’d get their original C$10,000 back, but they’d be wrong. In a recent test I did at BMO InvestorLine, I’d get back C$9754, for a loss of C$246 in two currency exchanges. That’s $123 per excha...
Read more

Archive

Show more