The Man in the Car Paradox: Why Your BMW Has a Zero-ROI Signal
You spend capital to generate a signal. Engineering rule: a signal nobody receives has zero value. The data proves luxury cars fail this test completely.
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The Aviation Principle That Explains Why Most Engineers Never Achieve Financial Freedom
How a 1-degree error in your savings rate compounds into a financial canyon — and what it takes to correct your heading
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The passive paradox: Why index funds ignore the biggest companies in the world
If you’ve ever wondered why the numbers behind market indices sometimes don’t quite match up with what you’d expect from just adding up all the companies’ values, it’s often because of something called float adjustment, which basically means that not all shares are counted equally—especially when some are locked up by governments or insiders—so it’s…
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Tax Drag in Investing: How Taxes Destroy Active Alpha
If you’ve ever wondered why your investment returns sometimes seem to fall short of what you expected, it might help to look at how frequent buying and selling in a portfolio can quietly chip away at your gains through taxes, which is why sticking with a simple, passive index approach can make it much easier…
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Dividend Aristocrats vs. High Yield: A Yield-on-Cost Analysis
Today I want to explore why those investments that look great at first because they pay high yields can actually end up lagging behind the ones that focus on growing their dividends faster, especially once you let some years go by and see how things play out. We’ll also walk through how you can figure…
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The Rebalancing Premium: How Equal-Weight Funds Harvest VolatilityThe mathematics of mean reversion
If you’ve ever wondered how equal-weight index funds work behind the scenes, it’s actually pretty interesting, because the way they rebalance can take advantage of the market’s ups and downs to potentially boost returns, although there are some trade-offs to consider along the way.
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Smart Beta ETFs vs. Index Funds: The Hidden Fee Drag
I wanted to see what was really going on with these Smart Beta ETFs, so I dug into the numbers and found that, when you break it down, they’re mostly just taking well-known investing ideas from textbooks, giving them a new label, and then charging extra for what is basically a simple tweak to a…
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Index Funds vs. Value Investing: The Mathematical Flaw of Cap-Weighting
When you build a portfolio using fundamental weighting, what you are really doing is making sure your investments are based on the actual size and role of each company in the real economy, instead of just following whatever stocks happen to be popular at the moment. This approach naturally helps you avoid the kind of…
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The “God Mode” portfolio: Optimizing the mix with international stocks and gold (Part II)
Let’s talk about why, just when you really want your investments to be spread out and safe, stocks around the world tend to start moving together anyway, and how gold steps in at those moments, not because it has some deep, magical value, but because it works like a kind of mathematical shock absorber for…
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The “God Mode” portfolio: Finding the optimal stock/bond mix over 30 years (Part I)
Imagine looking back over the past thirty years and running every possible combination of stocks and bonds, just to see which mix would have given you the best balance between risk and reward. That’s basically what a brute-force simulation does: it tries out all the options, one by one, to figure out which approach would…
AI Software Engineer at Google | PhD in AI & Engineering | Writing about AI, Engineering, Investing, and Personal Finance.