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We all know that it is dang near impossible to beat the market over any extended period. We all know that we are better off in index funds.

But do we invest in index funds? No.

We open accounts at Robinhood and Coinbase, trade a bunch of futures and options, subscribe to newsletters and trading services, read books on how to beat the market, and waste a lot of time and energy trying to beat the market when we know it is impossible to beat the market.

Why do we do this? Because it is fun.

I’m serious. Finance is a hobby for many people. Just look at options trading. It’s recreational. It certainly was in 2021, with the degenerate call buying on meme stocks. Sure, there are covered calls and cash-secured puts and slow boring strategies like that, but a lot of options trading is people trying to make 10X or 50X returns. Not too different from having a spin at the Roulette wheel.

Sure, people do manage to beat the market for short periods, but there are only a handful of people in the entire world who can do it consistently.

Bond Investing Works

Having worked on the institutional side of the business, I can tell you that it was not all slow and boring. Even hedge funds traded for amusement. Things would get slow, and people would start ripping around SPYs and QQQs. I can tell you that I personally executed trades that had no economic purpose whatsoever. It was the middle of the day, I had just eaten a charcoal chicken panini, food coma was setting in, and I was bored. Human behavior, man.

Maybe bonds are slow and boring? You must not know any bond traders. There is more than enough gambling in the bond market to go around. I can tell you that the business of making markets in bonds is not slow and boring. There is a lot of gamesmanship, and a lot of fun. Maybe it’s not perceived as the sexiest way to make money, but it works.

By the way, my Bond Masterclass is now accredited! We offer continuing education credits to financial professionals who have completed it—it has been granted 3.5 Certified Financial Planner (CFP) and 3 Investments & Wealth Institute (IWI, formerly CIMA) credits. If you’ve completed my Bond Masterclass, you can click here to claim your credits.

Now, when I first started investing, at age 23 in 1997, I decided to compartmentalize my financial life. I was going to have a slow boring part (index funds) and a fun part (actively managed stuff).

I suspect that is what most people do. They have serious money and fun money, and they take big risks with fun money because it’s, well, fun. The danger lies when you have your entire portfolio as fun money, which is what a lot of people did in 2021.

People have a psychological need to punt stuff around. I get it. I am the author of a personal finance book that is coming out next year, and I talk about this psychological tendency.

Financial Infotainment

As the purveyor of a newsletter, I can tell you when enthusiasm for finance waxes and wanes over the years. 2021 was my best year in terms of new subscription revenue. 2020 and 2022 were pretty good. 2023 has been terrible. Everyone was burned by the bear market, things are boring, they don’t see opportunities, and nobody wants to read about markets.

This isn’t specific to just me—the entire newsletter “industry” has been affected. You might say that it is greed that waxes and wanes, but really, I think it is the need for financial entertainment.

I am part of the financial infotainment complex. And one of the reasons that I’ve been as successful as I have is because I provide entertainment in addition to financial deep thoughts. I am not bashful about that.

The goal of The Daily Dirtnap is to make money, but a secondary goal is to have fun. Sometimes markets are boring, and the funny, lighthearted stuff carries you through.

Jared Dillian