Wednesday Reads: Investing Lessons from Catan

A round up of interesting or cool stuff I’ve read.

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Image from Wikipedia

 

Longing

I’ve been reminiscing about board games.

In particular, some of the board games sat on my shelf.

We haven’t played some of them in at least a year. A pandemic-induced lockdown is not an ideal time to invite a few friends round for drinks and games!

Of course some of our games are suitable for just Ms FIRE and I. But there’s one in particular that I’ve been itching to play.

 

Settlers of Catan

Settlers of Catan was my gateway from a childhood of Monopoly and Boggle to an adulthood of modern board games.

To be honest, I played it so much during University that I had to take a long break from it. But every so often I get the desire to knock out a  game for old times’ sake.

Seeing as socialising in the UK is banned for at least another month, I thought I’d do the next best thing, which, obviously, is to write a tribute to Catan, and the lessons one can take from it for investing and life.

 

Wood for Sheep?

We all have that one friend.

Every game, they go all in on sheep.

They only place their settlements on those hexes that maximise their chances of receiving sheep after a dice roll.

They will also be sure to stick one of their settlements on the sheep port, allowing them to trade just two sheep with the bank for a resource of their choice. This is half the cost it would be otherwise, and also means that you don’t have to compromise with your fellow players in order to reach an agreement.

Sometimes it works like a well-oiled machine, and no one can compete.

Unfortunately, usually you’re left with so many sheep that by the time it’s your turn, someone else has rolled the robber, causing you to lose half your resources.

Much like life, sometimes going all in on a single stock works wonders and you can crush the competition. The obvious comparisons today would be Tesla and GameStop, or, looking to another asset class, Bitcoin.

However, there’s no guarantee in advance that it will pay off. It makes sense to diversify.

In Catan, you typically want access to a good range of resources in order to build all of the settlements, cities, roads and development cards necessary to gather enough victory points to win the game.

Having a range of resources enables you to always be building something and pushing forward, advancing inexorably towards victory.

It also means that, if you do have to trade, you’re more likely to have a resource desired by another player.

The obvious investing comparison is index funds. Why risk holding one stock when you could hold them all, capturing the aggregate gains of the market? It’s slow and steady, but also consistent and safe.

(And, coincidentally, exactly how I invest my own money)

 

Adaptability

The other key to success in Catan is adaptability.

As I said above, sometimes going all in on sheep really does work!

But often, you need to take account of the lay of the land and come up with the best strategy for this particular situation.

If two players are competing over the Longest Road achievement, for example, maybe you should spend your efforts elsewhere.

If there looks to be an abundance of one resource at the beginning of the game, maybe you should look to monopolise the rarer resource, preventing anyone else from easily accessing it.

Adaptability wins in board games, just like it does in real life.

Adaptability meant that I was able to make the most of my time living abroad, post-PhD. Likewise, my partner has had to make huge adaptations, moving from the US to the UK (I am, of course, very easy to live with, so that part was undoubtedly no problem. Probably).

 

Any one else?

Are there any other board game fans out there? Any suggestions of games to wile away the lockdown until we’re allowed outside again?

 

Interesting links that caught my eye this week:

Blogs

Financial Origins

• A Chat With Kat – Financial Origins: Always A Saver, New To Investing
• Indeedably – Origin

Kat and Indeedably take part in the Sovereign Quest February Challenge, sharing their financial origin stories.

 

Diversification

• Fire and Wide – An Extreme Tale Of Asset Liquidity. Are You Prepared?
• Mr MedFI – Am I Diversified Enough?

Michelle from Fire and Wide tells how awkward it is if your platform provider collapses. She received all of her money back eventually, but could you manage without access for 12+ months? A lesson that it might be prudent to split your ISAs/SIPPs/etc across at least two providers? Meanwhile, along a similar vein, Mr MedFI ponders just how diversified he really is.

 

Useful Info

• Monevator – Accumulation units – the income tax loophole that never was
  I was today years old when I learned that Accumulation units are still taxable, even if you never actually *see* the dividends. Not relevant to me at the moment, as I hold everything in an ISA, but something to bear in mind in the future.

 

• The Humble Penny – Side Hustles UK: The Complete Guide to Tax
  A very useful, comprehensive overview of paying tax if you earn money outside of your 9-to-5.

 

Mindset

• Darius Foroux – The Stoic Path to Wealth: An ancient investing strategy for the modern world
  Reminds me of my own post on stoicism. In short, focus on what you can control!

 

• The Rational Walk – Cultivating Habits in Good Soil
  An interesting take on Atomic Habits. Argues that, whilst you can’t improve exponentially in a physical sense (you can only run so fast, for example!) you can in an intellectual sense by reading/learning often and giving your brain a good workout.

 

• Mantaro Money – The most important finance book I’ve read
  Tom gives an overview of the book “Enough?: How Much Money Do You Need For The Rest of Your Life?” written by Paul Armson. The overall message – life is not a rehearsal. You only get one shot, so make the most of it.

 

FIRE

• Fire Your Own Way – How to get your partner to join your FIRE journey
  Struggling to convince your partner of the virtues of FI? Not to worry, Jordan’s got you covered. My favourite tip is “lead, don’t criticise.”

 

• Andy Hart – Know Your Numbers
  Andy summarises some of the key numbers to know when planning for retirement (early, or otherwise). The two that stood out to me were:
  1) Your wealth window. Saying you have roughly 30 years left to work seems like forever. But if you say you have exactly 387 months left before you retire, that suddenly sounds much more urgent!
  2) Your shortfall. How much do you have, and how much more do you need, to support yourself in retirement?
  At only ~20 minutes long, it’s an easy listen

• Bully the Bear – The 3 ways to Financial Freedom, part one and two
  A great poem by BtB on the three ways to financial freedom. I’m looking forward to part three!

 

• Quiet FI – ALL THE ANSWERS TO THE MYSTERIES OF BLOGGING
  QFI shares a very entertaining behind the scenes look at his blog.

 

• Full Time Finance – Mania Stocks and the Large Portfolio
  

  “There comes a point on your journey to Financial independence when mania stocks are just not worth your time.  You’d be a fool to take a large position in them.  And it’s a waste of your time to take a small one.  You are better off investing along with your standard risk tolerance.”

 

• Me – How I Invest My Money
  Earlier this week I shared how I invest my own money. Check out all the meme stocks and Bitcoin I own! (Spoiler alert: Zero. I own zero meme stocks and bitcoin).

 

News

Misc

• Sign up to Trading212 via this link and we both receive a free share.

 

• Sovereign Quest – A new personal finance curation site launched by Indeedably. It’s already off to a great start. Definitely worth checking out.

 

• Money Saving Expert – Working from home due to coronavirus, even for a day? Claim a year’s worth of tax relief. It only takes 2 minutes and could net you £62/year or £124/year for basic/higher rate tax payers, respectively.

 

Thanks for reading. Hope you all have a great week!