Interesting articles I stumbled across this week:

• Diversification sucks (Bason Asset Management)
  • We all know investors are supposed to diversify their investments. It's really hard in practice though because you accept that not all of your investments will be top performers. This article provides the psychology behind what makes diversification so difficult. 

• If You Want to Feel Better, Spend Money on Saving Time (Wall Street Journal)

  • "People feel happier when they pay to save time than when they buy something nice for themselves.Those are the results we found in a series of recent studies. Spending on things like housecleaning services or grocery delivery left people feeling more satisfied than spending on things like new clothes and wine. The findings held true for people in different countries, and at different income levels.But we learned something else too: Even though people feel better when they spend money to free up time, they often don’t choose to do it."

• Ten depressing thoughts on data breaches (Abnormal Returns blog)
  • "These companies don’t think of us as customers. They think of us as products. They get lenders and others to send over our payment histories to them, aggregate it and resell the data elsewhere…Now, however, Equifax has to answer to all of us consumers and others, since they’re going to be sued and investigated to kingdom come." Ron Lieber (NY Times)

• The Ultimate Guide to Making Smart Decisions (Farnham Street)
  • Thought-provoking blog post that will help you make better decisions in your life. 
  • Here's a sample: "Even small decisions can matter as they accumulate. Consider where to eat, one of a number of seemingly small and insignificant decisions we make daily. Over a small period of time, say a week or even a month, these decisions affect us little. However, as the months turn into years and compounding kicks in, we develop a pot-belly as the true consequences of a long series of poor decisions reverberate. That’s why many of the smartest people I know try to make as few decisions as possible. They go to the same restaurants every day. They eat the same meals. They wear the same clothes. They reduce the trivial choices in their lives so they can focus on making their essential choices well. They know that they are the sum of their decisions — and they want to make the right decisions at every juncture."

• How Is Personal Finance Not A Required Course in High School (Wall Street Oasis)
  • Obviously preaching to the choir here..."How does an entire educational system miss arguably the most important subject to real life? No wonder we have a huge student debt crisis if many of those taking out student loans don't know even know what annuity is, and they're using them to pay for school."

• Out of My Mind (Humble Dollar with Jonathan Clements)
  • Jonathan Clements (NGPF Podcast guest) always full of good advice, this time about how to change behaviors: "What to do? To change our financial behavior, we could try automating our regular savings (payroll deduction into 401(k) plans, automatic investment plans), removing temptation (stay away from stores, get excess cash out of our checking account, leave credit cards at home) and raising our own awareness (set calendar alerts, post notes on the refrigerator, write down every dollar we spend). But I have come to believe that the key to success is social pressure. If I tell myself I need to sock away more money, it’s so easy to break that promise. But if I announce to friends that I’m going to save enough to make a house down payment within 12 months, I’ll feel truly committed."

• 36 Obvious Investment Truths (Wealth of Common Sense)
  • Here's a sampling: 

    1. If you need to spend your money in a relatively short period of time it doesn’t belong in the stock market.

    2. If you want to earn higher returns you’re going to have to take more risk.

    3. If you want more stability you’re going to have to accept lower returns.

    4. Any investment strategy with high expected returns should come with the expectation of losses.

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.

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