Personal Finance 101 in a Single Picture

Tyler Linsten Investing, Personal Finance

Study up. You’re living the test.


You can head straight to PF 201 if you master the course above.

Spending the $1,000 results in an instant 100% loss in value, storing it in cash brings a 53% loss in value over 25 years, saving it brings a 22% loss in value over 25 years, but investing results in a 238% gain in value over 25 years.

There are so many important bullet points to be extracted from the table above. These are lessons some people never learn and are more valuable the earlier you start:

  • Spending money is not a great investing strategy, but prevents losses to inflation (this is sarcasm).
  • Inflation is an absolute killer. It is the slow-churning, deadly assassin in your financial life.
  • Even a 2% rate on cash in the bank leaves you with a 77% less purchasing power after 25 years when compared to investing @ 8% per year AND you still lose to inflation.
  • Beating inflation (earning 8% versus 3% inflation) is the only way to increase your wealth.

Let’s repeat that last one, as it’s the answer to the only question on the PF 101 test:

  • Beating inflation is the only way to increase your wealth.
  • Beating inflation is the only way to increase your wealth.
  • Beating inflation is the only way to increase your wealth.

And for the visual learners:

Stop Throwing Away Free Money, Emergency Savings Edition

Tyler Linsten Investing, Not Sarcasm, Personal Finance

Yeah, you. Knock it off. 


If you have any kind of sizable amount of cash saved outside of your retirement accounts, and many people do, then you’re probably passing up a nice chunk of change by letting it sit idle, earning little-to-nothing in interest. It’s understandable. You just accumulated it in a checking or savings account at your favorite bank, and it’s annoying to open new accounts. Inflation has been pretty low so you’re not too worried about earning nothing. And pretty much everything is better than opening a bank account.

But now you can be paid handsomely all year for a few minutes of your time today.

A Normalization

This is a serious move in the interest rate on US Treasury Bills, and yields on savings accounts have followed.

Seemingly overnight, we’re back to a more “normal” interest rate environment. The Fed is raising rates and banks are more comfortable hiking their own rates on deposits. This is something you need to take advantage of. Here’s why:

Let’s say you have $50,000 in annual expenses.  A very reasonable amount of cash to have in reserve for an emergency account could be deemed six months’ worth of expenses, or $25,000. Plop that amount in an account yielding just 1.85% APY (annual percentage yield) and, voila, you’re now making $462.50 per year for barely lifting a finger. Even if it takes you half an hour to set up the new savings account and link your old checking/savings account, it’s basically the equivalent of earning over $900/hr for your time.

It’s super easy. Do an online search for banks with FDIC insurance and then you can sort according to yield. If you have no allegiance to specific brands or features then you’re free to decide based on yield. Here’s a search I was able to pull up via Nerd Wallet:

Potential homes for your emergency savings.

That’s it. We’re no longer in an interest rate environment where it doesn’t matter where your cash sits. Take advantage of the sea change and pay yourself.  Future You will like this.

Achievement Unlocked: CFA Charterholder Edition

Tyler Linsten Announcements, Not Sarcasm

Let’s take a break from sarcastic financial commentary on the internet for a personal announcement. 


This week, after almost nine years since the journey began, including over a thousand hours of study time for three exams, plus subsequent years of gaining required work experience, I now hold the right to use the Chartered Financial Analyst® designation.

It feels good to type it out: I am a CFA® charterholder.

I have so many people to thank for their support and I would never have made it without them. A special shout-out to my wife, who over the final two exams (and for months at a time) dealt with not only long periods of daily isolated study time, but put up no objections to surrendering an entire wall that contained hundreds of yellow post-it notes. I wish I had pictures — only a huge grid of tiny holes remain from the thumb tacks I used to hold them on the wall. No joke, I’d stand there with a guitar on my shoulder, spacing out, while trying to absorb the contents of each yellow square, one-by-one. I guess it worked.

Now, it’s time to update the business cards.

A New Leader in the Clubhouse

Tyler Linsten Investing, Personal Finance, Sarcasm

When winning is losing.


An exciting part of helping people with their portfolios is seeing what kind of BS they’ve been stuck with, and then reversing it immediately. Usually, the most common culprits are high-fee funds with fancy names. This week produced an all-time worst.

Behold, Legg Mason’s QS Global Market Neutral Fund. Ticker: LNFIX.

This particular younger client was stuck with this fund comprising 100% of two different IRAs they own, likely because it was very profitable for someone to do so, and the expense ratio is, get ready for it…

No, I don’t think you’re ready yet…

Have you grabbed a paper bag in anticipation of hyperventilating?…

Get one.

Take a deep breath…

Grip the bag and put it up to your mouth.

The expense ratio is…

THREE.

POINT.

SIX.

FIVE.

PERCENT.

3.65%!

Three hundred and sixty-five basis points!

Treat it like a solar eclipse – use eye protection if you must look.

 

LNFIX is over 91 times more expensive than Vanguard’s Total Stock Market Index ETF, which costs only .04% per year. This is by far the worst fund I’ve ever seen in someone’s portfolio. Usually you only hear about these kinds of wealth evaporators second hand through some guy you knew back in the day, or on archived internet forums from the 90s.

I can only imagine that those who willingly buy products like this have a strategy of investing only in funds whose ticker symbols were written on bathroom stalls in gas stations in the middle of nowhere. A market neutral strategy — making some bets for securities to go up, with other bets for things to go down, resulting in only exposure to the manager’s potential skill, or lack thereof — is a painfully inappropriate strategy for a young person, with decades to invest, to put all of their account into. The worst part of it all was this client had to pay a 5.75% sales charge before even getting their money invested. This also means the fund has to not only earn more than the inflation rate, but the inflation rate PLUS 3.65% every year in order to show a real appreciation. Also laughable: They compare the fund to US T-Bills on the website, as if to boldly imply it can be considered to be in the same ballpark as a risk-free asset like Treasuries.

I joke and endlessly lay on the sarcasm, but this is a damn shame. We need a true fiduciary rule applying to the entire investing industry.