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Weekend reading: The best investors are dead right

Weekend reading

Good reads from around the Web.

You are not going to find a more pithy comment in this week’s reads than this note from Nate Tobik at Oddball Stocks.

Nate writes:

Fidelity released a study discussing a performance breakdown for their accounts.

The clients that did the best were the ones who were dead.

The second best performing set of clients forgot they had Fidelity accounts.

It seems like a formula to beat the market is to start an account, forget about it, then die.

Your heirs will thank you and marvel at your investing prowess.

Nate’s post goes on to discuss the ramifications for stock pickers.

But to be honest, he really makes the case for passive investing as persuasively as any passive guru ever could.

He concludes:

When we look in the mirror we’re facing the enemy of our returns.

The best course of action is to pick a strategy, stick to it and move on.

For most people, that strategy should be to outsource their stock picking to the markets, via cheap tracker funds.

Then stick to it, and move on.

From the blogs

Making good use of the things that we find…

Passive investing

Active investing

Other articles

Product of the week: Tracker mortgage rates have fallen below 1% for the first time ever, reports The Telegraph. The Chelsea Building Society is offering a two-year tracker mortgage charging 0.48% over Bank Rate, for a total cost of 0.98%.

Mainstream media money

Some links are Google search results – in PC/desktop view these enable you to click through to read the piece without being a paid subscriber of that site.1

Passive investing

  • Interview with Jeremy Siegel about ETFs and indexing – ETF.com
  • Roth: On economic news and the stock market – AARP
  • A low cost way to invest in the US – Hargreaves Lansdown

Active investing

  • VCT wind-up could leave investors with tax bill [Search result]FT
  • Stocks top US fund managers are buying and selling – Morningstar
  • How Jim Simmons built his rare winning hedge fund – Alpha Architect
  • Meet the 99-year old adviser still going strong – Investment News
  • John Lee: Do bosses pass the fruitcake test? [Search result]FT

Other stuff worth reading

  • Millions snared by income tax traps [Search result]FT
  • Inside the minds of early retirees – CNBC
  • Sky accused of guilt tripping subscribers – Telegraph
  • New kiosk will turn old foreign money into cash – ThisIsMoney
  • The lucky French who take more holidays and work less – Guardian
  • Lettings relief on rental property – Guardian

Book of the week: Monevator reader and personal finance blogger John Hulton has published his third e-book, DIY Simple Investing. It’s a commendably straightforward guide to the basics of investment, with a sensible bias towards the passive approach. Given it costs just £3.43, there’ll be plenty of money leftover to pay those ultra-low index fund fees!

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  1. Note some FT articles can only be accessed through the search results if you’re using PC/desktop view (from mobile/tablet view they bring up the firewall/subscription page). To circumvent, switch your mobile browser to use the desktop view. On Chrome for Android: press the menu button followed by “Request Desktop Site”. []

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{ 14 comments… add one }
  • 1 diy investor (uk) June 6, 2015, 11:49 am

    TI,

    Many thanks for my new book mention as ‘Book of the Week’ – much appreciated!

  • 2 Neverland June 6, 2015, 1:43 pm

    The article should really be titled the best investors are dead Americans. Dead Austrians, Russians or Chinese would just have nothing

  • 3 Mathmo June 6, 2015, 2:01 pm

    Excellent set in there this week. TI, thanks. On the lead, for me it’s still best summed up by RB’s rib-tickler last week: “I’m so passive I don’t cast a shadow…”

    Meanwhile — having recently swapped zone 1 for zone 7, I am enjoying enormously the 500k to live in London article, which slightly overstates the figures but not by much. However, I do think there’s a tendency in FIRE thinking to focus on the Moustachian Spartan pleasures (ie cut costs to a minimum, enjoy the free things in life, save on razors…), but there are equally valid solutions to the fundamental FI inequality:
    (savings rate x investment return * swr > expenditure)
    which involve earning a lot more and spending a lot more.

    On the academic side, in a week when the fresh shoots of panic were emerging in such articles with themes like: “is it the top yet” “when’s the crash” and “oh no not again”, it’s fascinating to read AWOCS’ anlysis of the effect on PE of cash and leverage in corporate holdings: this at a time when:-
    – Shiller’s telling us that PE is high
    – Corporate America is hoarding cash for tax reasons
    – Interests rates at record lows means that leverage is up up up.
    I’m left wondering if anyone has actually done the analysis on Shiller CAPE adjusted for cash and leverage.

    With RBs article last week and general fear around this week, it feels more and more the time for passivistas to check their asset allocation is spot on, pack up the RollsRoyce for the summer trip and chuck their log-in credientials in the river.

  • 4 theRhino June 6, 2015, 2:16 pm

    ‘The best investors are dead’ – That is a brilliant observation – love it. Keep up the good work Mr Monevator.

    PS saw Mr Motivator the other day, he is still wearing the same lycra – any relation?

  • 5 dearieme June 6, 2015, 5:12 pm

    “The clients that did the best were the ones who were dead.” How can I invest in them?

  • 6 Mr Zombie June 6, 2015, 8:55 pm

    FIRE v London article was a very interesting read, as was RITs on sequence of return risk. SoR risk is a scary proposition.

    You are without a doubt right, I should probably leave management of my investments to my dog, would do a better job.

  • 7 @algernond June 6, 2015, 11:06 pm

    The Telegraph headline is factually incorrect. I’ve had a tracker of +0.49% above base rate for the last 8 years.

  • 8 Neverland June 7, 2015, 11:10 am

    Fire vs london

    There was a fascinating snippet of an article in the FT a few days ago about a 60 year old American lawyer and his 40 year Russian wife spending a collective £1m getting divorced in London

    What startled me was that after spending (and presumably) earning up to £800,000 a year the couple only had assets worth £6m before legal bills and that was mostly a couple of properties

    Brings home a couple of often repeated personal finance memes

    – importance of living below your means to accumulate assets and achieve financial independence

    – most people you see acting rich really can’t afford it

  • 9 david June 7, 2015, 11:38 am

    We are the dead, the ministry of information towers 300 meters above us, we’ve forgotten our brokers and forgotten our funds. A stock market, what is that? I just go to Waitrose to get my stock cubes. Who the heck is Vanguard? I don’t have a van, why would I need someone to guard it?

  • 10 Steve June 9, 2015, 11:39 pm

    Interesting article, but it gives me a bit of a dilemma. My (equity) portfolio is decidedly UK-heavy. I’ve been swayed by Lars’ arguments on Monevator and I really want to move towards a well-diversified global equities position.

    So on the one hand, I want to sell out my FTSE All-Share trackers and buy world trackers of one stripe or another. No problem. But I read articles like this and I start to think maybe I shouldn’t fiddle with my FTAS holdings. Perhaps I should leave them alone and just put new money into the world trackers. If nothing else, it seems to me the FTAS has underperformed by historical standards over the last ten years and maybe it’s due to make up a bit of ground. (Or would that be a statistical fallacy? I’m genuinely not sure.) Meh. No right answers I guess.

  • 11 The Investor June 10, 2015, 11:18 am

    @Steve — As you say, there’s no right or wrong answer, except with hindsight. 🙂 Then it will probably appear blindingly obvious.

    However personally I would think that if I had been won over to the argument for a single global equity fund, then dithering about the switch isn’t really very intellectually consistent?

    From Lars’ perspective, either you think you have Edge in the market or you don’t. If you think the FTAS is oversold / due a catch up that isn’t reflected in the market, then you’re claiming Edge. If you have Edge (which Lars would say almost nobody does) then don’t go passive, and keep beating the markets. 🙂

  • 12 The Investor June 10, 2015, 11:20 am

    @david — That has to be comment of the month. The first line sounds like an allusion, but I can’t place it. 🙂

  • 13 @algernond June 10, 2015, 10:33 pm

    @Steve, @Investor – my SIPP is all VWRL (Vanguard all-world) at the moment for the equity portion. I’ll be getting a lump sum from a transfer soon, and I am considering putting into ISF (iShares FTSE100). But not because I think I have edge, but because of it’s 0.07% fee compared to VWRL’s 0.25% fee…

  • 14 Steve June 11, 2015, 10:45 am

    @TI – That is an incisive comment, thank you. Thinking it over, I don’t believe I have edge, but I do believe the market price is subject to volatility and I’m in the unfortunate position of having to crystallise the value to my FTAS holdings by choosing a point to sell them. My inclination now is to sell out (say) 10% a month over 10 months, that way I will at least hopefully get a better ‘average’ price for my FTAS holdings at the cost of a few extra dealing fees. I think you’re right, it would be inconsistent for me to hold them for the long term if I don’t believe I have edge.

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