The Balhiser Crazy Ivan Account (CIA) is more about investment psychology than about investment logic and techniques. It is about concentrating financial angst, excess energy, and investing whims into a relatively small-money account. CIA started as a rollover IRA with $15,784 in October 2005. It closed 2010 at $24,630. As of Feb. 24, 2012, it is worth $27,501. Sept. 28, 2012 it closed at $28,621.
The Balhiser CIA leverages concepts from the field of behavioral investing, finance writers including Jason Zweig, and his book Your Money and Your Brain.
The basic idea putting a small about of money aside (say 10% of one’s investing portfolio). This “mad money” can be used to speculate, test short-term investment ideas and play hunches. Don’t add money to this account once it is established. Once it’s gone its gone… no more fun money. Try not to lose it all.
Some investors have no need for a CIA. These people are content to invest exclusively for the long-run and aren’t tempted to dabble with their account or play hunches. If you fall into this group, just chuckle as you see my occasional updates and anecdotes about the Balhiser CIA.
Other investors, myself included, have a lot of financial energy. For such investors, it takes effort and discipline to pace for the financial marathon. It takes force of will to stay on track with smart index investing approaches. For example, it took me significant effort too avoid the dot-com investing craze, year after year, as I was assailed with stories of huge gains on a near daily basis. In the long run I’m very glad I resisted the temptation to de-diversify into techs. Discipline allowed me to avoid the financial devastation of the dot-com implosion.
I find the Balhiser CIA a helpful diversion. It’s fun, a method to easy some of my financial angst and dissipate my excess financial energy and enthusiasm. Enthusiasm or exuberance, in excess is risk, but also a tool motivating us to try out investment strategies and get a feel for our emotion reaction to various financial outcomes without risking our primary investing portfolio.
- Balhiser Crazy Ivan is NOT my main portfolio. My main portfolio is comprised of ETFs, stock index funds, bond index funds, money markets, cash and mutual funds. Index funds comprise the core.
- In general, invest in diversified index funds — both bond and stock index funds.
- If you decide to own a mad money account: keep it small (<10% of your investing portfolio) and make sure it’s money you can easily afford to lose. Resist the temptation to replenish it with new funds.
Closing CIA Fund Values:
April 29, 2011: $26,565
June 9: $25,360
July 5: $25,637
July 27: $25,543
July 29: $25,589
Nov 04: $25,625
Dec 24: $25,501
Jan 19: $26,733