node: no man is an island; you must be part of a network.

base: build a foundation; both wealth and spirit require sanctuary to grow.

x: luck is the x-factor; the harder you work, the more you'll have.

y: raison d'être, 生き甲斐 «ikigai», purpose; find your why and devote yourself to it.

z: vision is the vertical axis; live not in fear, seek peace and dream big. : luck | purpose | vision : connect the dots and build wealth

Call Options: A Short Story on How I Went Long

Published: April 13, 2021
Author: Adam Anderson
Read Time: 15 minutes

I bought my first ever options contract yesterday, specifically a call option. Simply put (no pun intended), it means I made a bet. The bet was that the price of the Gold Miner's ETF, ticker $GDX, was going to go up.

Each option contract is equivalent to 100 shares of the underlying instrument, in this case GDX.

However, the advantage with (and the whole point of) an options contract is that you don't need to buy 100 shares outright. You can choose how much you want to pay upfront. This is called your delta. In my case, I wanted to be In-The-Money (ITM) about 15% so that my option would have some intrinsic value (equal to ~15 shares of GDX).

GDX was trading at $33.88 a share. And it met some other criteria I look for when placing swing trades: price right near the 8-day exponential moving average, good volume, lower volatility recently, in an uptrend in the mid-to-long term, good RSI level...

So I looked at call options expiring from between 1 to 6 months out. I chose something in the middle that had a non-zero volume at that time (meaning people were trading the contract). I landed on the $29 strike price option (14.4% ITM) expiring on September 17th of this year, or in 157 days (counting from yesterday).

Buying this call option at this strike price cost me $5.92 per share, or $592 all together for 1 contract, giving me the notional exposure to 100 shares of GDX, for the price of about 15 shares. (Commissions were $0.65 in total.)

At this point I had placed my bet, all I had to do was wait to see what would happen next...

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ETF Selection Guide: Liquidity and Legal Structure

Published: November 2, 2020
Author: Adam Anderson
Read Time: 20 minutes

Over $7 trillion is invested globally in Exchange Traded Funds (ETFs) and other Exchange Traded Products (ETPs) as of September, 2020. [1]

If you are evaluating different ETFs for inclusion in your portfolio, most likely you will have considered things like total Assets Under Management (AUM), tradability, and expense ratio (fees). Other factors such as legal structure may be considered as well, as I explore later in this article.

Ideally, I like to narrow down my ETF "investment universe" using the following filters on's ETF Screener:

  1. Total Assets Under Management greater than $50 million. This decreases fund closure risk and increases tradability, or the ease with which you can get into or out of a position without significant slippage. The total number of ETFs meeting this criteria is currently: 1424 out of 2317 funds (61%). [2]
  2. Next I look at fees, setting Expense Ratio to 0.50%. This narrows down the list to 910 funds, or 39% of the ETF universe. [3]
  3. Then I specify that I only want to consider funds where at least 100,000 shares are traded every day on average. (Average Daily Volume >= 100,000). This brings us down to 405 out of 2317 funds (18%). [4]

Now we've mercilessly eliminated over 80% of the funds. Not to say that there's not value to be found in some funds with higher expense ratios or lower trading volumes, but for the average investor, I think low fees and high-liquidity are some of the main attractions when it comes to ETFs.

If we want to get more aggressive with the Expense Ratio and set it to 0.25% at most then we are left with just 250 funds. [5]

Without necessarily knowing anything about what is in these remaining funds, we can rest assured these are all highly-liquid, easy to trade, and low cost products, generally speaking.

If we then peek under the hood at the Structure component, we'll see that of these 250 funds, 237 are classified as ETFs or 'Open-Ended' funds. What's left are 4 Grantor Trusts, such as IAU which holds gold on behalf of clients, and 4 Unit Trusts, such as SPY, which is actually the largest fund of all with over $280 billion in Assets Under Management (AUM).

From this list, the top 5 funds by AUM are:

  1. ($283B) SPY: SPDR S&P 500 ETF - Unit Trust
  2. ($212B) IVV: iShares Core S&P 500 ETF - Open-Ended
  3. ($164B) VTI: Vanguard Total Stock Market ETF - Open-Ended
  4. ($157B) VOO: Vanguard S&P 500 ETF - Open-Ended
  5. ($131B) QQQ: Invesco QQQ - Unit Trust

Seeing that 2 of the top 5 funds are structured as Unit Trusts makes one wonder: What are the differences in legal structure between the open-ended ETFs and the Unit Investment Trusts (UITs)? And what are the tradeoffs of these structures?

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Why You Should Open a Taxable Brokerage Account

Published: October 7, 2020
Author: Adam Anderson
Read Time: 20 minutes

Over half (56%) of all American workers participate in a workplace retirement plan. As such, money is automatically deducted from each paycheck and put into either a Pension Plan or a Retirement Savings Plan, such as a 401(k).

If you participate in such a plan, you stand to benefit from a reduction in the income taxes you pay during your working years. Your employer might also offer matching of up to X% of your contributions, so your retirement fund can grow faster.

This is great if you plan to work until you are 65 and then take out no more than 4% from your nest egg each year. If you follow that guideline at least, your money is likely to last 25 years. And you'll pay relatively little income tax on these distributions during your retirement. (You're taxed on whatever you take out each year. This is counted as 'income'.)

But maybe you're not the typical investor... Maybe you want to retire sooner than 65 (or sooner than 59-1/2 even). Or perhaps you could see yourself spending more than 4% of your retirement money in a given year. Trip around the world, anyone? Buy a car for a grandkid?

If you have a hard time imagining yourself as a perfect, By-the-Book Retiree, or dislike the thought of being restricted to a fixed budget forever, then read on. You may benefit from the use of a Taxable Brokerage Account.

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The Four Dimensions of Asset Analysis

Published: June 11, 2020
Author: Adam Anderson
Read Time: 35 minutes

Investing doesn't have to be hard. In this article, we attempt to distill the evaluation process for new potential investments into the following four basic dimensions:

  1. Past Performance
  2. Risk Profile
  3. Fundamentals
  4. Time

Four Dimensions of Asset Analysis (Cube)

Let's first define these terms...

Past Performance (The 1st Dimension)

Past Performance relates to the total gain in purchasing power for an investor who has held an asset (stock, bond, property, etc.) for a given amount of time. The baseline for comparison is usually 'cash in the bank'. So the question is: How much more could you purchase if you sold your investment versus if you had just held cash the whole time?

Performance is sometimes couched in terms of "inflation-adjusted" or "CPI-adjusted" returns. By this we mean, over a given span of time, by what percent margin has holding this asset beat holding cash after accounting for inflation? In additional to total returns, say 'gold price increasing by ten times in ten years', you may wish to consider annualized returns as well: Compound Annual Growth Rate (CAGR) is a commonly used metric for this which frames investment performance in terms of the average percentage gain in value per year.

For example, the S&P 500, the benchmark index for US Large Cap Stocks, has historically returned around 7% per year after inflation. Put another way, the S&P 500 as an Asset Class has a "CPI-adjusted, Compound Annual Growth Rate" of 7%. This level of Performance is stellar, and very hard to beat as an individual investor. But keep in mind this is the long-term average. Looking at the price over the last 20 years of two of the main Exchange-Traded Funds (ETFs) that represent this index shows it has not always been a smooth ride:

[ READ MORE... ]