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Family Inc: Viewing Your Career as Investments (Investment Moats)

I think Kyith at Investment Moats is going through some sort of career transition and chanced upon this book. There is a nice bit at the front part of his post on the importance of human capital.

I written about it before (here and here) but it’s interesting to see how prevalent it is that people don’t consider their human capital as part of their net worth.

This is especially true when it comes to asset allocation. I know far too many people whose incomes don’t vary much and where the threat of redundancy is low with respect to economic cycles (think civil servants, doctors, etc.) and most of their wealth comprises spare cash in the bank or they lock up themselves up in some sort of low-yielding endowments.

On the other hand, it’s the very people whose incomes and jobs vary with economic cycles (think property agents, bankers, traders, business people etc.) that load up on risk assets with leverage to boot.

If there was anything that I learned some the CFA level 3 syllabus, if was this – that if your human capital is bond-like, you can weigh your financial portfolio more towards equities and vice-versa if your human capital tends to be more equity-like.

The Thing That’s Probably Blowing a Hole in Your Budget (A Wealth of Common Sense)

Ben Carlson has a great post on how a car is probably the worst of the three big forms of debt for the average American since a car is a depreciating asset while a mortgage and a study loan, arguably, helps you purchase an asset that increases your net worth.

A wise colleague told me the other day that he read on the papers that owning a car in Singapore is one of the major differences between comfortable retirement and a barely-there retirement for the average Singaporean.

Cars are darn expensive in Singapore and the COE only lasts 10 years. Also, public transportation is relatively affordable. So, yeah, I agree.

Double feature since there are on the same issue. NYT link via The Big Picture and the other sent by a friend.

It’s crazy to see how long and how low interest rates can go. But as I replied to my friend, it’s also this sort of environment that leads to asset bubbles as easy credit means that money has to find a place to be invested no matter how ridiculous the premise.

Initially, I thought that we were at the end of the cycle with all the new tech IPOs but it looks like the powers that be hope that this will continue for some time yet.

The other positive thing that this environment has going for it is that valuations, in general, are not at extremes, the masses aren’t making the easy money, and we don’t have the inflation necessary to force the hand of the central banks.

So perhaps, this party could go on for some time.

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