Good reads from around the Web.
When my co-blogger The Accumulator and I debated why I am an active investor despite believing most people can expect to be better off by investing passively, I explained it was partly because I love it.
The big benefit of enjoying what you do is that it can be its own reward. While I’ve been fortunate enough to do okay for as long as I’ve been measuring my portfolio’s returns, there will be years when I will lag the market. The shortfall will be the price of my hobby.
But there’s another reason why I said my enjoyment of active investing is important to why I do it – and that’s because I believe it could be a source of edge.
When I first met Monevator contributor Lars Kroijer, he was surprised at my passion for investing. Many very well-paid professionals, Lars explained, don’t enjoy it at all in his experience. They do it for the money.
In my all-too-human quest for reinforcement bias, I was interested to read Warren Buffet tell MBA students something similar in a Q&A the other month:
Question: What are some common traits of good investors?
Warren Buffett: A firmly held philosophy and not subject to emotional flow.
Good investors are data driven and enjoy the game. These are people doing what they love doing.
It really is a game, a game they love. They are driven more by being right than making money, the money is a consequence of being right.
Toughness is important. There is a lot of temptation to cave in or follow others but it is important to stick to your own convictions. I have seen so many smart people do dumb things because of what everyone else is doing.
Finally good investors are forward looking and don’t dwell on either past successes or failures.
Sure, like a lot of folksy Buffett wisdom it is only good so far as it goes.
Enjoying investing doesn’t guarantee good returns, no more than liking Buffett’s favourite food of hamburgers means you can expect to end up a billionaire.
Far from it! But it might be a necessary ingredient for long-term outperformance.
I’m probably preaching to the converted here, whether you’re of a passive or active mindset – you’re reading a blog about investing, after all, and one that is not known for short pithy posts and cat pictures.
Clearly many Monevator readers get more than pure financial returns from their endeavours.
Traders gotta trade
By coincidence, I also recognised myself in a post entitled 17 Reasons Why Traders Love to Trade this week.
Like all hobbies – trainspotting, Warhammer battling, patchwork quilting – the appeal of active investing is mystifying to those who don’t do it. So they assume it must be down to money.
But if you just want the best chance of the most money, stick to passive investing.
From the blogs
Making good use of the things that we find…
- Do aggressive portfolios pay off? – Canadian Couch Potato
- Are emerging markets still an asset class? – A Wealth of Common Sense
- A [cynical] guide to creating a Smart Beta fund – Economipic Data
- The discovery of slowness – Value and Opportunity
- Postmortem of a poor investment: Balfour Beatty – UK Value Investor
- 10 signs of a perfect stock – Clear Eyes Investing
- Beddard: Nine top UK share picks for the future – iii
- Valuing UK housebuilders – Expecting Value
- Get rich by watching films (Part 2) – The Escape Artist
- Don’t sit 100% in cash like Mohamed El-Erian – Prag Cap
- Thoughts on the Safe Withdrawal Rate – Retirement Investing Today
- When to take a defined benefits pension – Keeper of the Cauldron
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
- A deep dive into Vanguard’s ‘robo-adviser’ plans – Institutional Investor
- Burton Malkiel: Sure, passive indexers can own a few stocks – Kiplinger
- Average returns are rarer than you think – Bloomberg
- However you measure it, active funds lag index funds – NY Times
- The alchemy of ETF liquidity is an illusory promise [Search result] – FT
- 11 UK shares that can afford their dividends – Telegraph
- Buy Europe as Draghi gets it all wrong [Search result] – FT
- How ETF trading is influencing the market – Barron’s
- Why this bull market has no famous managers – Bloomberg
Other stuff worth reading
- The left-wing history of Monopoly – Guardian
- Leverage made buy-to-let the best asset class over 18 years – Telegraph
- Why pension freedoms won’t trigger a property boom [Search result] – FT
- Couple’s £1.5m share certificates get lost in the post – ThisIsMoney
- UK housing turnover has collapsed [What about stamp duty?] – Guardian
- Sexy men encourage more risk taking – New Scientist
Book of the week: Want more Warren Buffett? Tap Dancing to Work collates his various writings over the years, or you can read The Snowball, a biography. He fell out with the author of the latter so it must be true.
Like these links? Subscribe to get them every week!
- 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”. [↩]