Financial repression:  a term used to describe measures sometimes used by governments to boost their coffers and/or reduce debt. These measures include the deliberate attempt to hold down interest rates to below inflation, representing a tax on savers and a transfer of benefits from lenders to borrowers.

If our economy were like the “olden days” when bonds returned 5% and stocks returned 10%, I would be less reluctant to share my returns with financial middlemen and the government.  However, as financial repression has driven down bond yields and pumped up stock valuations, even the most optimistic forecasts predict that over the next 10 years intermediate-term bonds will return less than 2% per year (before taxes and fees) and stocks will return less than 5% per year (before taxes and fees).  In this scenario, I am reluctant to share my razor thin returns.

I don’t want to be eating cat food when I’m 80.  I want better.  Thus, I need to take risk to get a return on my investments, and I need to keep my investing costs as close to $0 as possible to keep my piddly returns.

Keep taxes as close to $0 as possible by holding only tax-efficient index mutual funds and ETF’s.  Avoid trading hot stocks.  Instead, go to Las Vegas to satisfy your greed!  Each dollar paid in capital gains taxes to the IRS is gone forever!

Keep fees as close to $0 as possible by buying cheap funds from Vanguard and firing your expensive financial advisor who has all kinds of tricks to legally help themselves to huge amounts of your money each and every year, forever.   

Keep it simple.  The scientific evidence is clear.  You really only need one low-fee, diversified balanced fund like the Vanguard Target Date Retirement Funds or the Vanguard Life Strategy Funds.  The savings on fees and taxes allow these funds to outpace active management over any 3, 5, or 10 year period.  

Making kimchi is hard work, just as saving money is hard work.  After slaving away for hours, the kimchi will not be ready to eat.  It will be raw and sharp and have little culinary value.  The goal is to let it ferment and age, undisturbed, like a fine red wine.   This aging process will allow it to develop its characteristic complexity and depth of flavor.  If strangers keep taking a few pieces out every few days before it reaches its peak of ripeness, I will never have a full jar of ripened kimchi to enjoy and share with others.  Protect your kimchi (and your assets) from prying fingers.

— AK