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What caught my eye this week.
Those of you who frequent the naughty side of town – indulging in active investing despite being clued-up followers of a website that urges a passive approach – will enjoy Conor Mac’s reflections over on Investment Talk this week.
Why doesn’t he just sell all his individual stocks and go buy an ETF, Conor asks?
He’s no dummy. He knows the odds against outperformance and understands that:
To a layman, an investor’s dedication to beating the market over their lifetime appears absurd. The trade-off, time spent doing other things, is huge.
We each have a finite amount of time on this earth. To spend countless hours which I assume add up to years of one’s life, only to underperform the market, may appear wasteful. Insanity is repeating the same thing hoping for different results. Consider the aggregate of individual investors trying to beat the market. Most will fail.
Thus, on the aggregate level, these people look crazy.
So why indeed?
But for the benefit of newer readers – please know that I’m not judging.
I’m an active investor myself, and long ago debated the reasons why with my sensible and purely passive co-blogger.
Five star generalisations
Moreover something I love about the active investors among our Mogul membership is how self-aware they (you?) seem to be too.
Of course we’ve filtered hard for this kind of member. Both by sneaking them in through the backdoor of a blog about using index funds and also by stressing Moguls will not be promising Five Stocks To Pay For Your Porsche or the like.
I’m also aware that more than a few Moguls members just wanted to send a few extra quid our way, despite being entirely passive investors themselves. For which, enormous thanks!
Anyway, the end result is I don’t get the impression that our members expect easy or even especially probable wins.
Rather, active investing for them is a challenge or a passion or a hobby – but one with the tantalising if slim potential to deliver life-changing results on the side.
Indeed it’s possible Moguls will turn out to be a multi-year version of Conor’s reflective post.
For my part, active investing – stock picking – has been an endlessly fascinating game, that’s also gamified my wondering about the world around me. For most of the time I was fortunate that it was more profitable for me, too, though as I’ve conceded elsewhere the last 18 months has been testing that one hard.
Perhaps for you there are different motivations?
Or more likely you’re one of the Monevator majority who’s sensibly all-in on a global tracker fund and you think we’re crazy.
Which is more than fine, too, if expressed politely. Broad church here!
Active addicts should go feel seen at Investment Talk. I hope the rest of you enjoy cracking into this week’s links below.
Best of luck to Wales, England, Scotland, and Ireland in the games today!
I once met a rich man walking along the cliff paths in Wales. As I rounded the corner of one of those endless coves that takes chunks out of the headland (and a bite out of your thighs) there he was, sitting on a bench.
You might be surprised to hear this rich man was eating fish and chips.
He looked very happy with himself.
Content, I’d say, rather than self-satisfied. But with the glint in his eye of one who has seen some of life’s secrets and tasted a few of its finer things.
His wife was with him, too. Similar age, almost as happy looking.
“Come on, we’ve left you space at the end,” this rich man said as I approached, and he shuffled along the bench a bit.
His wife handed me a portion of fish and chips.
“It doesn’t get any better than this,” the man said, looking out along the deserted path ahead and at the darkening water, which was offset by one of those rarer-than-you’d-like British sunsets.
And I believed him.
Because if there was one thing my father knew, it was how to be happy.
Eat yourself rich
Of course my father wasn’t financially very well-off.
Yet even if he had been, I’m not sure you would have known it.
As I’ve mentioned before, my dad was a frugalist when the word ‘frugal’ was the name of an obscure Muppet as far as most people were concerned.
Yet like my co-blogger The Accumulator, my dad didn’t seem to see his penny-pinching efforts as deprivation.
For one thing, he visibly got a kick from, say, finding a builder’s skip filled with what he called “perfectly good timber” – in reality something like discarded shipping pallets – and sneaking it away to make a garden trellis for my mother or a playhouse for my sisters.
But even more telling was how he enjoyed things.
I’ve eaten at some fancy places around the world (cheers, former work life!) but I don’t think I’ve ever seen anyone enjoy food more than my dad eating those Welsh al fresco fish and chips. Nor the straightforward curry he’d knock our socks off with on Sunday nights.
Enjoyed as much as him?
Certainly.
But not more than him.
Billionaire, millionaire, meh
I was thinking about all this while watching an episode of the historical gore-fest Vikings.
In it the Norse leader, Ragnar Lothbrok, gets some perks on account of being the top dog.
Ragnar has the biggest hut. The best furs. He gets to choose when the vikings set off to torch other people’s huts – mainly those of the English.
But otherwise – from a material point of view – Ragnar is not really living that differently from his fellow heathens.
The vikings all eat in a big communal hall. They drink the same potent brew, and see their children die from the same plague.
And as a price for his handful of material luxuries, Ragnar has far bigger concerns than the typical Jaako Sixpack. Half the population Scandinavia and, periodically, of England, are after his head.
This all made me think about what we can enjoy today exactly like a billionaire would – like a Ragnar Lothbrok would in our world – rather than dwell on what we’re missing.
For instance, I’m sure traveling in a private jet is far preferable to Ryanair.
But if me or a billionaire fancies a salty snack en route, then our Kettle Chips taste just the same (and any billionaire who is routinely reaching for Beluga caviar at 30,000 feet has bigger problems than I do).
Life’s what you make it, not what you make
This is not to decry all material goodies, or to make light of income inequality just because we all breath the same air (though that’s true).
It’s certainly not a reason not to save and invest.
Money does matter – but it also matters how you think about it, why you want it, and what you spend it on.
For example I’ve written before that young people should shop for clothes less and save more.
Young people are already so much better-looking than most of us with many more years on the clock. Why gild the lily at the expense of your pension?
And this principle of playing to your strengths – and enjoying what you have right now, or can enjoy for less – might help keep you on track when capitalism has its Fagin eyes on your wallet.
I’ve written elsewhere about my Live Like An Affluent Student Method ™ that served me well in my 20s and 30s.
But for now, here are 20 things you can enjoy just as much as Warren Buffett, Oprah Winfrey, or the King.
Think of it as a motivational pick-me-up.
A free one!
20 things you can enjoy as much as any billionaire
1. A can of Coke tastes no sweeter if you’re minted
You can’t buy better Coca-Cola, which is really the point of Coca-Cola.
2. Watching the Six Nations rugby in a friendly London pub
3. Listening to Henry Szeryng’s 1968 recording of Bach’s Partita for Violin Solo No.2 in D Minor (especially part V)
Music is a big one. Whatever you happen to like, for most of human history you needed to be rich and powerful to have someone play it for you at your whim. Now you can hear the best recordings ever made in milliseconds. More often than not for free.
4. The view from Westminster Bridge
If it was good enough for Wordsworth.
5. The novel Light Years by James Salter
You don’t get to read a better version of a novel just because you’re rich. You read the same novel as the rest of us. The obnoxious among the rich know this, and it rankles with them. It’s why, for instance, former US pharma bad boy Martin Shkreli bought the one copy of Wu-Tang Clan’s Once Upon A Time In Shaolin album, and why he tried to repeat the trick with a Kanye offering.
6. Dance like a nutter to Pharrell Williams’ infectious Happy
Or Come On Eileen, if you prefer.
7. Play LEGO with a cheerful three-year old
Kids don’t know or care that you’re rich. Or that you’re not. And not much in life is better than spending time playing with a little kid. At least until they get fed up and start crying, at which point you can return them to your sister. (Just me?)
8. Kiss someone new
If you’re already in a happy relationship, I’m not sure what to say. (Date night?) It’s one of life’s conundrums, isn’t it? But it’s the same conundrum if you’re rich.
9. Go to a London School of Economics lecture
They’re free. I’ve seen everyone from Paul Krugman to Dani Rodrik speak there. Once I said hello to the ex-deputy of the Bank of England, Charlie Bean. Your nearest big town will have somewhere similar. You don’t need an underground volcano lair to meet interesting people.
10. The Internet
The marvel of our time is pretty much the same for all of us, once you’re on a half-decent connection. Whether or not you’re a billionaire, your experience of TikTok is just as bad as mine.
11. Enjoy a Daisy Green flat white
Okay, I’m biased because I’m an investor in Daisy Green, but anyway I do think theirs is one of the best. I also believe great coffee is an affordable luxury that gets no better beyond around £4.50.1 And yes, I know about the latte factor and all that. I’m not saying drink a pricey coffee three times a day. I’m saying one cup of decent specialty coffee won’t kill your bank balance, and to the point it’s as good as a billionaire can buy. Trust me, I’ve even tried the underwhelming Civet coffee – the expensive one brewed from cat poo that’s now gone unethical.
12. Fish and chips near the sea somewhere
Had to include this after my introductory waffle. For the same experience go to the fish and chip shop in St. Dogmael’s near Cardigan in Wales. Other outlets are available.
13. Walk
I have friends who hate walking. They get bored or tired. Then look at their watch. Or have to go home so they can drive to the gym. These people are useful idiots I keep around to make myself feel better. Walking is one of life’s luxuries, and I’ll miss it when it’s gone.
14. Explore a new city
Related to walking: hunting about a new world city on foot and getting your bearings is one of life’s great pleasures. Sure, if you’re a billionaire you’ll see a different Paris or Melbourne to me. Eventually I might wish I could pop to the opera on a whim or eat every Monday at the best restaurant (although of course I wouldn’t, because then it’s boring). Regardless, the best part of a new city is when it’s still new and you turn around enough corners to find something beautiful you’ve never seen before.
15. Get the latest iPhone
Really, life is too short to use other phones. Google inventor Larry Page can’t buy a better iPhone than me – and not only because he is condemned to use some Android nonsense for corporate reasons.2 This is a serious point. There’s a big difference between a crap car and the latest Tesla – several tens of thousands of pounds. But there’s not much cost consequences in monthly terms between a bad phone and a brilliant one, and we’re talking about one of the most powerful devices ever made by man. (Indeed Apple probably knows it’s leaving a lot of money on the table by not offering £10,000 iPhones. Perhaps why it pushes all those blingy Apple Watch
16. The sea
It’d be nice to have a private island. But it’s not hard to find a deserted beach in the Med, even somewhere like Ibiza at the height of summer. And the biggest joy of the sea is that first wave of warm water that’s higher than you think. The one that knocks you back and makes you laugh like one of those happy three-year olds. Watching other people do it from your yacht is purely an optional extra.
17. Arguing with friends
I guess I’m meant to write “having fun with friends”. But it’s easy to have fun with strangers too, even for an introvert like me. (I was recently dancing like a loon with some to Pharrell Williams’ Happy, for example). Whereas it’s hard to enjoy a proper and honest disagreement that makes you both think afterwards with people you don’t know. For that, you need good friends.
18. Meeting up with a childhood chum and it being like five or ten or 40 years ago
Okay, this one is a bit more from the Disney aisle. But seriously, it’s great when it happens and I just do not believe it’s better if you do it in your luxury penthouse. (Very possibly it’s worse!)
19. Dogs
You can buy a purer breed, but you can’t buy a better dog. Same goes for cats.
20. Mindfulness
It’s all the rage now, isn’t it? But the point about emptying your mind of clutter to concentrate on being present is, well, the doing away with of clutter. The very rich might find it easier to make time for meditation, but I doubt it. They’re probably too busy instructing staff on how to clean the pool at the villa on the Amalfi coast for the 68th time.
Maybe I’m just jealous. Or just maybe I’m not?
Do you enjoy something that money can’t buy – or even if it can, that doesn’t cost very much? Add your suggestions below!
We’re in a dreaded sideways market. Drifting without drama, except that I can hear the faint hiss of a leak as the Slow & Steady portfolio deflates 0.33% this quarter.
If it wasn’t for having to write this update, I admit I’d be executing Operation See-No-Evil. Not even looking at the market for months, maybe years, until this glum period passes.
Passive investing is the name of the game – and it does not encourage actively urging on your portfolio from the sidelines like Ted Lasso shouting impotently at his struggling team.
Still, check-in I must.
Almost inevitably we can see it is government bonds – and property – that are holding us back this quarter:
The Slow & Steady portfolio is Monevator’s model passive investing portfolio. It was set up at the start of 2011 with £3,000. An extra £1,200 is invested every quarter into a diversified set of index funds, tilted towards equities. You can read the origin story and find all the previous passive portfolio posts tucked away in the Monevator vaults.
The Slow & Steady’s overall return after almost 13-years is 5.9% annualised. Let’s call that 3% after inflation.
Respectable, but I can’t help but wonder how many of us won’t go absolutely loopy if our portfolios continue to spin their wheels for the next several years.
How likely is that? How long will we have to wait for the gloom to lift?
Let’s see how many lost decades UK investors have endured down the years.
Lost decades
Most people’s investing fate will be dominated by their equities, not bonds. And the good news is there are few decades when stocks actually go backwards. The even better news is that the follow-on decade is often spectacular.
The table below shows the lost decades that beset World equities, the rebound that followed, plus the year the portfolio turned positive again. (See the ‘Back in the black’ column).
Note: returns are real annualised total returns. In other words, they show the average annual return (accounting for gains and losses), are inflation-adjusted, and include the impact of dividends.
World equities: lost decades since 1970
World equities have suffered two lost decades in the past half century:
| Lost decade | Ann return (%) | +10 years (%) | Back in the black |
| 1970-79 | -5.8 | 11.1 | 1984 |
| 1999-2008 | -0.9 | 8.5 | 2009 |
Data from MSCI, compiled by Monevator
The stagflationary ’70s were not an era for checking your stocks six times a day. Six times in the entire decade would have been too much.
But look at the 11% annualised return over the next ten years! That’s more than double the historical average of 5%. If you avoided self-destruction during the wilderness years then you were richly rewarded during the go-go 1980s.
Quite a few Monevator readers will have made their investing debuts during the next lost decade, which followed the Dotcom mania of the late ’90s. I remember colleagues frothing down the pub about their newfound riches and how “the Internet has changed everything”.
It had and it felt like it was raining money.
Then the rains failed.
Looking back the annualised returns from 1999 to 2008 weren’t dreadful. The Noughties were a decent decade. But they were spit-roasted by the Dotcom Bust and the Global Financial Crisis (GFC).
Thankfully confidence was restored by a V-shaped recovery from 2009. The 8.5% annualised returns scooped up over the next ten years helped establish DIY investing as online platforms proliferated.
It may be a tougher sell now though, as a portion of those gains were probably borrowed from the future via high valuations. Such frothiness may have to be paid for by several mediocre years to come.
UK equities: lost decades since 1825
What about shares here in Blighty? UK equities have only posted four lost decades in two centuries:
| Lost decade | Ann return (%) | +10 years (%) | Back in the black |
| 1907-16 | -0.2 | 4.1 | 1924 |
| 1943-52 | -0.06 | 12.4 | 1953 |
| 1965-74 | -5.4 | 7.8 | 1975 |
| 1999-2008 | -0.7 | 6.5 | 2009 |
Data from Rule Britannia,1 JST Macrohistory2 and FTSE Russell, compiled by Monevator
UK equities didn’t suffer a single lost decade from 1825 to 1907. Those really were the good old days.
Even with the first entry in our table, 1907 to 1914 was actually a raging bull market until World War One derailed everything.
The following ten years were sub-par, but not terrible when you consider the Spanish Flu pandemic that killed millions and the economic depression that settled across Britain and the rest of Europe.
World War 2 is a real eye-opener, given the scale of real-world destruction. The market recovered quickly as post-war inflation dissipated. Returns from 1953 to 1962 are the best of those following the entries in our Lost Decade tables.
Take heart
So don’t feel despondent dear reader. Clearly things have been much worse for some of our investing forebears. We’re far from lost decade territory right now.
In truth, lost decades are not that common, but long stretches of down years are. They’re not a sign that anything is broken. They may well herald that the best years in your particular investing lifetime are yet to come.
Looking at stock market returns through this lens reminds me investing is a long-term game – and that it can feel even longer!
It can take many years of grinding before we enjoy the hoped-for rewards.
New transactions
Every quarter we blow £1,200 onto the market dice and hope to roll a six. Our stake is split between seven funds according to our predetermined asset allocation.
We rebalance using Larry Swedroe’s 5/25 rule. That hasn’t been activated this quarter, so the trades play out like this:
UK equity
Vanguard FTSE UK All-Share Index Trust – OCF 0.06%
Fund identifier: GB00B3X7QG63
New purchase: £60
Buy 0.246 units @ £244.28
Target allocation: 5%
Developed world ex-UK equities
Vanguard FTSE Developed World ex-UK Equity Index Fund – OCF 0.14%
Fund identifier: GB00B59G4Q73
New purchase: £444
Buy 0.804 units @ £552.29
Target allocation: 37%
Global small cap equities
Vanguard Global Small-Cap Index Fund – OCF 0.29%
Fund identifier: IE00B3X1NT05
New purchase: £60
Buy 0.158 units @ £378.69
Target allocation: 5%
Emerging market equities
iShares Emerging Markets Equity Index Fund D – OCF 0.21%
Fund identifier: GB00B84DY642
New purchase: £96
Buy 54.201 units @ £1.77
Target allocation: 8%
Global property
iShares Environment & Low Carbon Tilt Real Estate Index Fund – OCF 0.17%
Fund identifier: GB00B5BFJG71
New purchase: £60
Buy 29.241 units @ £2.05
Target allocation: 5%
UK gilts
Vanguard UK Government Bond Index – OCF 0.12%
Fund identifier: IE00B1S75374
New purchase: £324
Buy 2.603 units @ £124.46
Target allocation: 27%
Royal London Short Duration Global Index-Linked Fund – OCF 0.27%
Fund identifier: GB00BD050F05
New purchase: £156
Buy 150.87 units @ £1.03
Target allocation: 13%
New investment contribution = £1,200
Trading cost = £0
Take a look at our broker comparison table for your best investment account options. InvestEngine is currently cheapest if you’re happy to invest only in ETFs. Or learn more about choosing the cheapest stocks and shares ISA for your circumstances.
Average portfolio OCF = 0.16%
If this all seems too complicated check out our best multi-asset fund picks. These include all-in-one diversified portfolios, such as the Vanguard LifeStrategy funds.
Interested in tracking your own portfolio or using the Slow & Steady investment tracking spreadsheet? Our piece on portfolio tracking shows you how.
Finally, learn more about why we think most people are better off choosing passive vs active investing.
Take it steady,
The Accumulator
- Acheson G, Hickson CR, Turner JD & Ye Q (2009) Rule Britannia! British Stock market returns, 1825-1870. [↩]
- Òscar Jordà, Katharina Knoll, Dmitry Kuvshinov, Moritz Schularick, and Alan M. Taylor. 2019. “The Rate of Return on Everything, 1870–2015.” Quarterly Journal of Economics, 134(3), 1225-1298. [↩]