Good reads from around the Web.
One reason I’m still blogging about investing eight years after I began is because I keep learning new stuff even while trying to explain what I think I already know.
But another reason is because it reminds me of what I actually do already know.
Investing is not like electronic music or frontier physics – you don’t need to keep reinventing the wheel.
But you do need to remember that you don’t need to keep reinventing the wheel.
Sticking to a few stratagems will get you a long way, as Darrow Kirkpatrick explains in his short course on investing:
You can commit a large chunk of your life to becoming a better investor, if you want.
You can read articles, devour books, and enroll in classes. Some people, myself included, will take that full plunge.
But in the end, most experienced investors arrive back where they started, with just a few simple principles in hand.
His post quotes me alongside the likes of Warren Buffett and Harry Markowitz, so Darrow clearly isn’t infallible. 😉
But his short course is well worth the price of admission – a cup of tea, and ten minutes of your time.
And while we’re doing homework (or ‘revising’ for most of us, I hope) your next stop could be Michael Batnick’s clear overview of how to think about long-term returns.
Why? Because, as Batnick writes:
Past performance is absolutely not predictive of future results.
Data can be manipulated!
Sticking with an investment plan during a bad year (or a series of bad years) is what will make them successful.
The results of diversification are predictable even if the results of an investment are not.
His full refresher is at Enterprising Investor.
Have a great weekend (and C’mon Aussie C’mon!)
p.s. This may have been around for a while, but check out the Financial Times‘ error page. Who says financial geeks can’t have fun? (Er, various exes of mine…)
From the blogs
Making good use of the things that we find…
Passive investing
- Biff could’ve just bought stocks – The Reformed Broker
- A simple way to improve returns – Maven Capital Partners
- The myth of downside protection – Evidence-based Investor
- Dave Ramsey doubles down on bad investment advice – W.C.I.
- Underperforming is even worse than high fees [Research] – Cornell
Active investing
- Move to the beach and live off the interest? – AWOCS
- Long-term FTSE 100 and FTSE 250 forecasts – UK Value Investor
- Has Dunelm been the perfect retail roll-out? – Richard Beddard
- Avoid low-yielding government bonds [Back test] – Meb Faber
- Valuing the ride sharing business – Musings on Markets
- Perhaps frequent trading isn’t so bad, if you’re good? – Alpha Architect
- The whole should be greater than the parts – The Value Perspective
Other articles
- Investing lessons from Downton Abbey – The Escape Artist
- Real estate and the fallibility of tangibility – Investing Caffeine
- Hard work is overrated, most likely by you – 99u
- Some thoughts on ethical investing – Keeper of the Cauldron
- A contrary view on compound interest – Simple Living in Suffolk
Product of the week: The Post Office has launched a new credit card offering 27 months of 0% interest rates on new purchases, says ThisIsMoney. Remember you should ideally only use such credit cards when you don’t need to, and are just taking advantage of the interest-free period for some reason. (e.g. I’m considering using one to borrow about 5% of what I already have in cash and cash-like assets.) You must pay the card off in time to avoid interest at the full whack! Not a game for personal finance dilettantes.
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
- Jack Bogle’s 5 rules for equity investing [US but relevant] – AARP
- Swedroe: Do these active value investors add value? – Advisor Perspectives
Active investing
- Merryn: Investing in oil is a slippery slope [Search result] – FT
- Peer-to-peer startup TrustBuddy goes bust, delists – Telegraph
- 18 high-yielding investment trusts – ThisIsMoney
- Latest mini-bond offers 10% in a bet on London property – ThisIsMoney
- 5 tips from an unapologetic fund-picking active manager – ThisIsMoney
Other stuff worth reading
- Bargain supermarket sweeping – The Guardian
- Warren Buffett’s Millionaires Club [Search result] – WSJ
- My first million: Richard Corrigan – chef [Search result] – FT
- Why is the cost of energy so high in Britain right now? – Telegraph
- Interview with rogue trader Kweku Adoboli [Podcast] – FT
- Giggs & Neville are heroes of housing, but it’s not enough – The Guardian
- How an F student became American’s most prolific inventor – Bloomberg
Book of the week: I read an interesting interview this week with the world’s second greatest living comedian, Stewart Lee, at Exeunt Magazine. If you’re a fan of his or just of any great stand-up comedy (i.e. you’re a person of taste who just hasn’t seen him yet) then his sort-of biography – How I Escaped My Certain Fate
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- Note some 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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Great post TI. I’m certainly guilty of making it more complicated than it needed to be as I learnt and I’m now starting to think how to get back to basics across both general investing and reaching early retirement quickly. Those basics are not much more than:
– Techniques to earn more;
– Techniques on how to spend less; more powerful than earning more IMHO
– A simple diversified investment portfolio (Vanguard LifeStrategy anyone?);
– A portfolio with low expenses; don’t forget about wrapper expenses
– A portfolio tax efficiently invested;
– Go fishing (or is that watch the Rugby…)
Who is the world’s greatest living comedian? In your opinion.
Nice wee article there about some of the nonsense that Dave Ramsey spouts. The blind devotion of his followers is quite concerning.
Technically speaking he’s the 41st best standup of all time
Many thanks for the mention and the link to the Stewart Lee interview in particular. I agree – bitter, twisted comedy genius (the persona, not the man – he’s just very clever indeed :-)). His piece last week was spot on.
Thank for the links, TI.
Some fascinating contrasts in there — from Ermine’s views on compound interest being less important than (late) savings rates [if i’ve understood him correctly] vs Biff [great use of current theme] vs FTSE100 will return 10% nominal vs Maven’s view on prompt payment.
Compound interest is often confused with reinvesting dividends: it is of course a different beast. Distribution policy of the company is a red herring and not the issue: the underlying ROCE is, regardless of whether that is expressed in terms of capital growth or income. A bit of income helps grease the wheels of reallocation but also grabs a bit of brokerage fees on the way through.
I really like the piece on hard work. I often remind colleagues that it is outputs and not inputs that are important. However, this is often taken as an invitation to neglect inputs. That is a mistake: most results are driven by showing up and doing the work. It is, nonetheless, a timely reminder to keep some balance and perspective and to eats ones frogs for breakfast, not dinner.
nice one on the eighth anniversary – where/how could i find the very first monevator article?
@RIT — Thing is, like me I suspect you love the minutia, or your version of it, and perhaps you couldn’t save and invest so aggressively if you weren’t so deeply involved in it?
@Rob — Daniel Kitson. When he arrived he was a prodigy. Now he’s been much imitated by a generation and a half of ‘alternative’ standups, he’s pushing in more artistic directions. But on a good night still peerless as even a compere.
@Mathmo — I totally disagree with @ermine on compound interest, but happy to share both sides of the argument.
@Cerridwen — Indeed, my lefty friends on Facebook are all over his Guardian articles.
@Rhino — Thanks! A couple of the early articles have been updated and republished, and there’s a few technical articles (e.g. How to Calculate Dividend Yields). I’d say the first ‘proper’ article on the site is this one:
http://monevator.com/how-one-relatives-pension-plight-taught-me-to-save-the-hard-way/
Sadly the relative concerned has since passed away, which only makes the message in that post ever more urgent to me.
I got confused by the Biff article, I have probably overthought it. 1) We have to assume that Biff *had* $10,000 (when was BTTF set? $10k in 1980 is something like $29k in today’s money according to one calculator). He then needs to have the confidence to invest this massive chunk of change for decades, confident that it will work out in the end. Safe to say I would have used the almanac as well 😉
@L – The point of the Biff article by Reformed Broker is to let people know that stocks are a better bet than gambling generally. Biff had the confidence to bet on sport results he knew would happen because the film-makers chose to use that idea, so the same would apply to stocks. He just needed a book that talked about which ones did best from 1955 onwards, the time he got the sport almanac that was taken back there from 2015. I imagine there are books about dividend aristocrats, companies that have raised dividends every year for many decades. Exxon and Coca-Cola would be obvious examples to buy from 1955 onwards.
I imagine that BTTF2’s makers chose sport betting because it is more understandable to the public and to themselves, while stocks are seen mythical strange things locked away in exchanges and brokers. Most of the public never talk about stocks except when a crash is on (I recently observed this on Twitter during the China meltdown, the media hysteria was fever-pitch). I have never seen a Vanguard advertisement anywhere, yet I see sports betting ads almost every day on the internet. It’s disappointing. Bitcoin is tediously promoted by the media because it’s “new” I suppose.
Even a popular film like Trading Places is based on speculation on commodity markets, completely useless to the audience in terms of learning about investing (making money from insider knowledge and unrealistic short-term price swings? Oh dear). 1995’s Forrest Gump implies that Gump invested in Apple in the 1970s and made a huge load, yet anyone who bought shares in Apple after the IPO in the early 80s did pretty terribly until the post-2001 iBoom. I’ve never seen Wall St but from what I’ve heard it’s about “ruthless killer deal-making” or some such nonsense. Are there any films that actually give good advice on how to invest sensibly?
@TI
Thanks for the link to the first Monevator ‘proper’ article.
So sad.
Really struck home!
Thanks again.
@magento — Cheers! Charlie Munger once said that given life’s vicissitudes it’s vital to not let one personal tragedy multiply into 3 or 4 due to some failure of the will. It’s still tough but I’m trying!
I don’t often reply (one of your many silent observers) the article you provided in the comments .. I’m fully with magneto on this .. I probably first started investing properly in 2008 and made a right hash of it .. Rbs shares anybody .. Took a while to get the take from this website but it’s my no1 go to site now (with some favourites on the fool who have inadvertently placed a light bulb above my head) … I really value what you do with this site .. I wish the financial rewards where more of the Martin Lewis ilk .. Best wishes and thank you … I just wished my partner would take a smidgen of interest … Sigh
The point abount compound interest is an interesting one (and I see TI has re-upped the compound interest millionaire calculator). My initial reaction to Ermine was disagreement, but the point about compounding is that it takes time, and much of our saving (given a typical life of expenditure at the start and better earning at the middle) happens too late to get a really good helping hand.
I’m over 20 years from state pension age. What might I expect? If we’re looking at 7% nominal returns then that’s (rule of 72: not mentioned above but best thing I ever read on compounding) four-fold on my current money. The stuff I save in my 50s will barely double, but might be the lions share.
Compare and contrast the calculation I did for a friend to illustrate the effect of costs on his child’s ISA. He went for 1.3% instead of my recommendation of 25bp. I expected the numbers to humiliate his selection, but in fact they showed only a modest difference: this was because I’d modelled a constant flow of cash into the JISA. It was still better to pay less, just not quite as much as I expected: most of the cash wasn’t in there long enough to feel the drag.
Solution: massive low cost Christening gifts and forget about it.