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Remember learning about means, medians, and modes in middle school? You're about to understand why they taught that shit to you.

What’s the REAL Rate of Return on the Stock Market?

Our awesome Patreon donors have asked us to tackle a really interesting question this week: what’s the real rate of return on the stock market?

If you ask people this question, you get surprisingly different answers. And for some reason (boredom at my day job) I decided to get all art school with it. Here, I wrote you a one-act play on the topic!

WHAT THE FUCK IS IT EVEN: THE REAL RATE OF RETURN ON THE STOCK MARKET

A Play in One Act

SOME PEOPLE
(With great confidence)
Ten percent!

OTHER PEOPLE
(With low confidence)
Ssssssssssix?

MOST PEOPLE
(In anguish)
Why are you asking me this?! Shit. Am I supposed to know?!

SOME PEOPLE
(Smugly)
It’s totally ten percent. Why would you ever buy a house or pay off debts when stocks are so mathematically superior?

OTHER PEOPLE
Ssssssseven??

MOST PEOPLE
(With self-loathing)
I feel like I’m too busy to know this. But also I made time to watch that Zac Efron Ted Bundy biopic on Netflix, so…

SOME PEOPLE
Don’t even buy a single tube of mascara or a ham sandwich. It’s a waste. It’s unoptimized garbage. I buy nothing but stocks and Soylent!

OTHER PEOPLE
Wait, is this the four percent thing? I’ve heard people talk about the four percent thing. Is it foooourrrr?

DAVE RAMSEY bursts onto the stage.

DAVE RAMSEY
It’s 12% if you follow my system! But I never agreed to be here! My company sends cease and desist letters to people who criticize me!

DAVE RAMSEY exits the stage and the playwright forgets to go back and delete that part.

MOST PEOPLE
(With resignation)
No, you know what? I know that Alleras the Sphinx is actually a lost Sand Snake, and I know three quarters of the verses of Mambo #5, but I do not know what the rate of return on the stock market is and I have accepted that fact about myself.

SOME PEOPLE rubs stocks all over his torso. He visibly nips out. OTHER PEOPLE keeps mumbling random numbers. MOST PEOPLE starts adjusting the Pinterest board for her wedding, even though she is not engaged or seeing anyone seriously.

Rocks fall; everyone dies.

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How do you like me now, Dotty?

How I Learned to Stop Worrying and Love Financial Math

I fucking hated math in high school.

It was torture. Though I did ok throughout Algebra I and Geometry, once I got to Algebra II the wheels came off the bus. I listened to entire lectures on logarithms delivered in the voice of Charlie Brown’s teacher. I didn’t understand why it mattered, its practical application, why I needed it.

And to this day I’m convinced my teacher was a sociopath who derived great joy from my confusion. Let’s call her Dorothy Ball because her fucking name was Dorothy Ball (HOW YOU LIKE ME NOW, DOTTY?). She was one of those teachers who, instead of motivating students to give it their all, slowly crushed the joy of learning out of me and convinced me that I was a feeble-minded and frivolous girl for not picking up what she put down.

Clearly I wanted to learn math—or I at least cared about my academic standing—because I remember sitting through a meeting with my mom and Ms. Ball to come up with a strategy for improving. I’ll never forget that meeting.

With great pity in her eyes, she said, “It’s ok that you’re not good at math. You’re good at other things. So let’s just shoot for passing, ok?”

The callous harridan was right: I was good at other things. Like mentally eviscerating those who dared to condescend to me.

But, as we all know, I still needed math to survive.

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Hogwarts Arithmancy classes clearly do not cover compound interest.

When Money in the Bank Is a Bad Thing: Understanding Depreciation Expense

Here’s a riddle: when is $100 worth $97? 

The answer is: when you put it in the bank a year ago.

Being frugal and being money-savvy are actually two very different skills. The former requires self-discipline, planning, and a strong sense of the relative importance of resources. The latter relies more on understanding how to take advantage of existing financial systems, economic regulations, and mathematical quirks.

Think of it this way: a frugal person packs their own lunch, whereas a money-savvy person itemizes it.

Depreciation expense is one of those mathematical quirks. It sounds tricky, but it’s really not! And if you know how it works, you can make it work for you.

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