The Wisdom of THIS crowd.
The Wisdom of Crowds.
For those who are not aware, that is the title of a book written in 2004 that is worth knowing about, if not reading. Its central thesis is that a diverse collection of independently-deciding individuals is likely to make certain types of decisions and predictions better than individuals or even experts. For example, take an ox, ask 1000 random people how much it weighs. Then ask 4 experts. The 1000 non-experts opinion (collective opinon) is better than the opinon of the experts(and better than any one opinion from the non-experts). Even better take 70,000 non-experts and have them pick stocks as a way to outperform the experts making 7 figures on Wall St. Sound familiar?
That is theoretically the working mechanism behind the CAPS community, and why, theoretically, a CAPS 5 star rating is much more valuable that a Value Line 5 Star rating. A group CAN outsmart the pros IF (and this is a BIG if) the groups’ ideas are somehow caputred and shared with the group. For stock picks, the CAPS stock picking game does the gathering, and condensing of the info in order to put the opinions of the crowd into a usable form. But bringing together 70,000 investment minded people to create a wisdom generating behemoth and using it only to pick stocks is like buying a Ferrari and using it to only to drive to your neighbors for sugar. Sure it does a better job at that than any other car, but the capacity of the car is much greater than the usage. (meta-thinking anyone? – see my post “THINK!!! I think?” if you dot get this) Part of what I am tryng to do here in CAPS is create additional value for/from this community. Kind of like an “off label” use for a drug – which may have been created to lower cholesterol, but if it can also grow hair you will benefit by using it that way too. CAPS was created to find stocks, but it could do a lot more, and really help us create wealth much more effectively if we choose to use it for “off label” uses .
Having said that …
The results are in Part 1: CAPS Personal Financial Advice
I asked 4 questions in my last post about Personal Financial Planning. I said I would compile the data from the CAPS members at large in an effort to tease out the Wisdom of the Crowd. One question was regarding what CAPS people use as a financial plan, Less than 10 CAPS community members (aka CAPSaicins) responded. Surprising (to me). I thought there would be more community contribution but, as I have said I still am learning the dynamics of blogging and of this community. (As an aside what I am starting to piece together is that CAPS may be more like a party for “investors only” with drink and merriment and banter about investing, and that it is not a group that is really pulling together for everyone's mutual benefit like, say, a volunteer fire department. But we may grow into the new role, or create a community within a community - of people who want to maximize the value of thier assets - and I mean non-financial assets in this instance). In any case, I said I would compile CAPS members advice so that you would not have to troll through dozens of comments to find the pearls of wisdom. So here it is. This is the CAPS Personal Financial Plan Advisor 2010. I am interested to hear what people think. It was not what I expected - is it what you would have thought? What are your thots about the CAPS collective wisdom re Personal Financial Planning?
CAPS Personal Financial Planning Strategy #1
1 Get a job
a -Make sure you love it
b- Make sure it gives you a decent income
i Make sure you get decent raises
2 Spend a good amount less than you earn
a Don't spend money on things you don't need.
b Get good deals on stuff
i Don't buy a cheap property in an area with high unemployment.
c Take care of the things you have. (house, car, health)
3 Save- according to your dreams
4 Invest for a good return on your saved money
a If you don't know what you are doing, invest in an index fund.
5 Don't co-sign on a debt
6 Set realistic goals
7 Don't sell things for almost nothing--others will assume the objects have no value.
Note that one CAPS member said something that differed from the rest in that it did not prescribe any universal ideas, like those above. I suppose it could be called…
CAPS Personal Financial Planning Strategy #2.
This strategy says, essentially, that what you should do depends on you, “It all comes down to risk and how much you could handle, your ability to learn something new, and determination.”
As before I will comment with the rest of the crowd.
Oh and I will also compile the data about which famous financial advisors in a post soon.
As always Be Happy (when?) NOW....
Really, right freakin NOW. I mean it ...smile. If ya cant spontaneously smile, think of something that will do it for you (a great memory, your kids, your spouse, your parents, a Twix bar... whatever) Ahhh...feels nice huh?