Greasemonkey Journey Notes

Scope And Purpose Of This Post

Holds my notes as I learn Greasemonkey/Javascript/XPath/CSS/HTML/FirefoxWebDevTools.

Notes On How Modern Financial Markets Work

Scope And Purpose Of This Post

This post has snippets/paraphrasings of articles that get into stuff like exchanges, wholesalers, market makers, dark pools, high frequency traders, and so on.  Bullet points in quotes are article quotes.   Bullet points not in quotes are paraphrases of the article, unless I say something like "I think"/"I believe"/"I guess", which will be my own analysis.

My post The Mechanics Of How Stock Prices Change has stuff explaining basic workings of exchanges, and has an appendix about how price improvement works.

Reasonable Prioritizations Of Accounts

Scope And Purpose Of This Post

This post talks about reasonable prioritizations for putting your money into various accounts (401k, IRA, HSA, tax-normal brokerage, etc).  I will try to add on to what the Bogleheads wiki and /r/PersonalFinance wiki have already said on the matter.

Sections:

• A Baseline Ordering
• A Possible Ordering When Saving For A House
• Explanation Of Terms/Accounts
• Overall Reasoning Of Baseline Ordering
• How Does Employee Stock Purchase Plan (ESPP) Fit In?
• Why Traditional Over Roth?
• What About Saving For A House Or Something Else Before Retirement?
• Can I Eliminate My Emergency Fund?

A Baseline Ordering

Vanilla: exotic spice but default flavor.

To give you something notable right away, here is a reasonable ordering for putting money into various accounts if you are mostly looking to save for retirement or other long-term goals:

• Pay down high-interest debt.
• Build up an emergency fund (savings/checking account, able to cover 3-6 months of expenses).
• Max out ESPP contributions and sell shares immediately.
• Contribute to your Traditional 401k enough to get the full match from your employer.
• Max out HSA contributions.
• Max out Traditional 401k contributions.
• Max out Roth IRA contributions (and Mega Backdoor Roth contributions to your 401k if your 401k supports it).
  
• Contribute to a taxable (normal) account.

Note: this ordering also assumes that your 401k doesn't have ridiculously high fees and that you have too much income to be eligible for making tax-deductible contributions to a Traditional IRA.  Even if your income is too high to be eligible for contributing to a Roth IRA, you can make non-tax-deductible contributions to a Traditional IRA and then Roth-convert that money so that you end up with Roth IRA money.

I will explain the terms/accounts and reasoning in the sections below.

Dividends Vs Share Buybacks

Scope And Purpose Of This Post

This post is a work-in-progress and right now is mostly a collection of pertinent snippets/summaries of articles on the matter of dividends vs share buybacks vs other.  Some basic points:

• Many arguments in favor of dividends are fatally flawed.
• Many arguments made in favor of dividends are actually arguments in favor of dividends and share buybacks.
• For individual investors, with their tax-normal investments, share buybacks are superior to dividends due to how they're taxed differently.
• For corporate investors, dividends can be superior to share buybacks due to taxation differences.
• For tax-advantaged accounts (401k, IRA), "share buyback vs dividend" doesn't matter.
• The more a company is undervalued, the better share buybacks are, and the more a company is overvalued, the worse share buyback are, but it is foolish to think you know better than the market about the proper value of a company.
• Even if a company is undervalued, a share buyback may be inappropriate if there are good investment/growth opportunities available to the company.

Some more points:

•  A share buyback financed by debt can be thought of as a shift from equity-based financing to debt-based financing.  Interest rates are currently low and interest payments are tax-deductible (while dividends and share buyback payments are not), so this shift to debt-based financing can make a lot of sense.

Thoughts And Articles On REITs

Scope And Purpose Of This Post

This post will be a perpetual work in progress, where I will share article, snippets, and my own thoughts about REITs, with a focus on "how much of my portfolio should be REITs?".  Currently my answer is "about what you already get with a total stock market index fund".

Article 1: The Role of REITs in a Diversified Portfolio

https://www.advisorperspectives.com/articles/2017/08/21/the-role-of-reits-in-a-diversified-portfolio

author: Larry Swedroe

Sam Soundar Biweekly Newsletter #8, Use Scrollwheel To Zoom Edition

Treasured Subscribers:

Sam Soundar has just published his ninth romantic comedy novel, Nception: The Unplagiarized Story Of Dream Crime.  Take a look at the following reviews.

"I was absolutely floored by the foreword, pleased with the preface, idolized the introduction, and prized the prologue.  But what about the colophon?  Oh, hoho, the colophon was only bested by the epigraph!" ~ Reginald Rolokoaster

"Nception clearly has the best table of contents and index I've seen in the last century of romantic fiction.  The glossary has no parallel in all of dramatic literature, and has convinced me to reconcile with my estranged children." ~ Gertrude Grinner

"Nception is an engrossing tale of love and human connection.  I simple could not put the book down as I read appendices C through J and their associated errata." ~ Hazel Ahaviel

"On a scale from zero to ten, I'd say it was decent." ~ Mortimer Quickpunch

Word of the biweek: putrid
Definition: decaying or rotting and emitting a fetid smell.

Example sentence: Steve and Larry, strained and strained as they tried to lift the putrid cow corpse over the chain-link fence; no one must know about their failures as pet sitters.

Your nonsensical newsletterer,
Jacob

Some Ways To Think About Work, Savings, And Expenses

Scope And Purpose Of This Post

This post covers some new formulas that I came up with on my own that deal with a quantity (like the monetary value of your retirement portfolio) that experiences both exponential growth and regular contributions.  It is very unlikely I am the first to come up with these formulas, but it has been hard for me to find these formulas on the internet.  This post also covers some implications of these formulas, and some ways to think about the opportunity costs of savings and expenses, especially in terms of work until retirement.

Most notably, Example 5 tries to answer whether using a toll road increases or decreases the amount of time spent working/commuting until retirement.  The math/logic in the example can be used more generally to think about whether any expense is worth the extra work you must do to pay the expense.

You do not have to do any of the math yourself; you can make a copy of my Money Formula Demo Google Sheet and change some of the inputs.  To make a copy, go to the "File" menu at the top of the spreadsheet and select "Make a copy".

Misc Math

Scope And Purpose Of This Post

This post is a grab-bag of various math things that have been useful more than once in my life, and thus publishing them on my blog might help me and others in the future.

Pretty math pictures generated by Roger's Online Equation Editor.

Sections:

• Value Over Time With Growth And Contributions
• ESPP Returns
• Simple Regression Stuff
• Mental Squaring
• Chi Squared Distribution Test
• Distribution Approximations
• J-Family of Means

The Mechanics Of How Stock Prices Change

Scope And Purpose Of This Post

I've had a few people ask me, "how do stock prices change?".  They do not mean how to look at a company and try to figure out what the stock price should be; they are wondering what are the little actions going on during a price change that result in a price change.  Unfortunately, if you google "how do stock prices change", you will get a bunch of pages that answer slightly different questions, or pages that stay at the vague level of supply and demand.

This post tries to explain how price changes actually happen, mostly through examples that take place on an exchange.  The most famous exchange-traded-things are stocks, ETFs, and financial derivatives (options, futures, etc), but the underlying concepts apply to more than just things on exchanges.

A related post is Notes On How Modern Financial Markets Work, which has article snippets/paraphrasings that cover exchanges and other workings of modern financial markets.

Following Sections:

• 2 Background Info sections: will help explain a lot of concepts that I use in my examples (bids, asks, limit orders, market orders).  People familiar with such concepts might want to skip ahead to the example sections.
• Examples {1, 2a, 2b, 3}: the heart of the post, painting detailed pictures of prices changing, with some general observations as well. 
• Brief Recap: briefly summarizes of the ways that prices change, restating the lessons learned in the examples.  The section might be too abstractly worded if you haven't gone through the examples, but once you have, I hope the section will help quickly refresh you on how prices change.
• Appendix A on Price Improvement: a sidenote explaining the mechanics of "price improvement" that your brokerage may boast about after a trade.  This section may be moved in the future if I ever have a post that goes into more detail about how exchanges work.

Stock Market Index Reference

Purpose And Scope Of This Post

There's a lot of indices out there, and they will mislead you. The  S&P 500 is intuitive because it's basically the 500 biggest US companies, but the S&P 600 is unintuitively the 600 smallest of the 1500 biggest US companies.  The S&P 600 is also called the "S&P SmallCap 600", but by more popular definitions, it is the smallest 15% of  mid-cap stocks.  The Wilshire 5000 has 3485 companies in it.

This post tries to be a useful reference (mostly for myself) for what the heck a particular index is, how indices relate to each other, and to answer some common questions like, "what percent of the US stock market is represented by this index?".  You should think of it as a work in progress.

Steps to Buy an ETF at Fidelity

Purpose And Scope Of This Post

I want to help answer the question, "How, exactly, do I buy an ETF?  What buttons do I click?  What options do I choose?   What numbers do I enter, especially for things like quantity and limit price?".  There seems to be lots of written material about how to choose an ETF and the different types of buy orders, but very little written material that tries to answer the questions in quotes above.  The best I can find is stuff like the "ETF Best Trading Practices" section of this pdf from Vanguard, which still leaves things at the abstract level of "use a limit order that is likely to be executed instantly".

This post will go, click-by-click, through the process of transferring money into a Fidelity account and submitting a buy order for an ETF.  Hopefully, this click-by-click will help make people's first time easier and less scary (especially due to clear statements of which clicks have real-world consequences).  Also, this post will give the exact logic/calculations I use for coming up with the quantities and limit prices for my buy limit orders.  The logic/calculations for quantity and limit price are applicable at all brokerages, not just Fidelity.

If you are wondering what ETF to buy, see this long post or this short post.

2022-Jan update: Fidelity now has a quantity calculator, which helps with a lot of the calculations mentioned below.  Also, Fidelity now lets you buy fractional amounts of ETFs where you specify how many dollars you want to spend.  The "Explanation Of How We Calculate Desired Quantity And Limit Price" could use some updating..

Oversimplified Conversations About Portfolios

Scope Of This Post

Hubert Featherbottom

This post is not financial advice, and I refuse to take any responsibility for any financial ruin or prison time you experience.  Please do your own research and make your own conclusions.

This post is mostly a series of hypothetical conversations between fictional characters.  Fictional people ask the fictional Hubert Featherbottom about what sort of portfolio might make sense for them, and they want the simplest responses possible, disregarding all nuance, caveats, and even sanity.  By "portfolio", I mean "collection of financial assets (stocks, bonds, bank deposits, etc) someone owns in order to save up for particular needs and goals".

If you see a fictional person who asks questions similar to things you're wondering, you might find their conversation useful.  If you just want to save for the long-term in the simplest way, please look at the 401k section and Conversation 1.  If you're interested in mutual funds instead of ETFs, see Appendix B.

If you want a huge walls of text about saving/investing, see Starting Point For Saving And Investing.  If you want a click-by-click of how to buy an ETF, see Steps To Buy An ETF At Fidelity.  If you want a slightly more in-depth article about simple portfolios, see Boglehead Wiki article on Three-Fund Portfolio.

If you'd like the tables updated to include a particular broker or line of ETFs, tell me, and I'll see what I can do.

Starting Point For Saving And Investing

Scope Of This Post

This post is not financial advice, and I refuse to take any responsibility for any financial ruin you experience.  Please do your own research and make your own conclusions.

This post is a list of resources I found useful and a few thoughts not present in those resources.  This post tries not to assume any knowledge of the world of saving and investing.  A lot of friends and acquaintances have questions like "how do I even start saving for retirement or a house?".  I hope this post will help those people see what their options are, and be able to evaluate those options...after reading a lot of stuff from different places.  This is just a starting point; there is so much more to be said.

If you want to yell at me "I DON'T WANT TO KNOW STUFF, JUST TELL ME A PORTFOLIO", then read the oversimplified conversations post, possibly followed up by the steps to buy an ETF post.

If you have questions like, "should I prioritize my 401k or my IRA?", then read Reasonable Prioritizations Of Accounts.

Also, be careful; there's a lot of very bad investment advice out there (ex: "These are the must-buy Chinese biotech stocks of 2018!").  I hope to provide a safe starting point for people to educate themselves, but you should read my words with a critical eye as well.

Sam Soundar Biweekly Newsletter #7, Truly Desperate Effort Edition

Also, see these people.

Precious Subscribers:

I am very, very pleased to announce that Sam Soundar Secret University will add the following classes to its spring semester curriculum:

• Classic Civilizations: Were They Just Stupid Or What?
• Artists and Musicians: Why They Deserve Our Eternal Scorn
• The Secret of Humor: Lists!
• Philosophy: The Pitiful Scraps That Aren't Wrong/Useless
• Experimental Ethics 1: Fun! Exciting! Addictive!
• Experimental Ethics 2: Dealing With The Crushing Remorse Of What You Did In Experimental Ethics 1
• History of Hats 8

Word of the biweek: hankering
Definition: desire
Example sentence: Late, one dreadful night in 1958 in the remote Alaskan town of Bugtussle, Steve indulged his hankering for the unique tang of antibiotics, broke into the only medical clinic for hundreds of miles, and guzzled down the town's entire supply.  Yes, he had condemned several ill townsfolk to death, but he had lived life to the fullest.