A few good reads from across the Web.

Some people should read more 1950’s science fiction to develop a sense of imagination, as well as to appreciate the impossibility of making accurate predictions about the future, even when you earn a living doing it.

The people to whom I’m prescribing a course science fiction (three times a week) are those people who will tell you there will be no jobs left in the western world by 2020 because we won’t make our own televisions, cars, or microwaveable meals.

“What will we do?” they lament.

More than a few of these blinkered thinkers – some of whom I count among my closest friends – are at the very upper-end of the intelligence spectrum.

In fact, I’d say intelligence is a curse when it comes to having a sense of the possible.

Smart people get used to logic, plans, causation and outcomes. But life doesn’t run much like that, and the development of human technology, society, and culture even less so. The pill, the smartphone, the personal trainer, the options trade, the £100 t-shirt – nobody foresaw any of that one hundred years ago. The biggest innovation of the next 20 years will probably also be something we’ve not yet even thought of.

Less clever people are regularly bemused by the world – as well as infuriatingly sanguine about human achievements to-date. Yet this sense of inevitability, that ‘they’ will invent something to sort out the problem, isn’t demonstrably less useful or even less accurate than the intricate fables to ruin that smarter people have been intoning since the Greeks.

This isn’t to say societies don’t fail, of course. They clearly do. But it’s very rarely for the reasons the gloomier predicted. History is more random than that, and we take steps to avoid the problems we can foresee.

• Monevator motto #23: Timebombs don’t explode.

Besides, even in the field of the futuristic, what goes around comes around. In Invasion of the body hackers, a very interesting piece of futuristic navel-gazing in the Financial Times this weekend, April Dembosky writes:

The concept of self-tracking dates back centuries. Modern body hackers are fond of referencing Benjamin Franklin, who kept a list of 13 virtues and put a check mark next to each when he violated it. The accumulated data motivated him to refine his moral compass. Then there were scientists who tested treatments or vaccines for yellow fever, typhoid and Aids on themselves.

Today’s medical innovators have made incredible advancements in devices such as pacemakers that send continuous heart data to a doctor’s computer, or implantable insulin pumps for diabetics that automatically read glucose levels and inject insulin without any human effort.

Healthcare is just one area ripe for tremendous new growth, even from its currently elevated position – the quest to preserve life has already begun to deplete the extraordinary wealth socked away by the Baby Boomers, and in 50 years time the Chinese and the Indian middle classes will follow.

[continue reading…]

With Amazon’s Kindle eBook reader spreading as rampantly as a greedy European rodent in a New World ecosystem, more and more books and magazines are being adapted and republished in Kindle editions.

These include plenty of Kindle books about money and investing, although there are still lots of frustrating omissions. UK passive investors might mourn the absence of a Tim Hale’s Smarter Investing in Kindle format, for example.

But let’s consider the good news story…

You’re eBooked

Amazon says Kindle – which the cyber book peddler produces itself – is now its best-selling product. Going on all the Kindles I see on the Underground here in London, I quite believe it.

The latest generation of Kindle solves almost all the problems of the old Kindles, and are really priced to sell:

• The Kindle 3G costs £152, and as its name suggests it enables you to connect to the 3G network as well as Wi-Fi to download data. (For free, amazingly).

• The standard Kindle costs £111, and is identical to the 3G model except for the absence of that 3G connectivity. Instead, you must use a Wi-Fi network.

For anyone with a home Wi-Fi network, the cheaper Kindle is a fine option; realistically you won’t want to download ebooks on-the-go much. One sneaky benefit of the Kindle 3G though is that you can use its rudimentary web browser on the 3G network for free, which may be handy, particularly if you’re traveling in Europe and want to avoid data charges on your phone.

Either way, the clarity of text on Kindle is amazing, the ability to add notes is fantastic, and carrying all your books with you wherever you go is something you don’t appreciate until you can do it. About the only downside is the bland typography, which upsets old print lovers like myself.

When Kindles first arrived I wondered if they were a tax on reading, but now I’m sold. I love paper books, but Kindle has the edge once you toss the romance of paper overboard. I don’t think there’s much if any money saved from going digital, but I do hate clutter and having too much ‘stuff’ and Kindle deals with that. Perhaps it will save me ponying up for an extra bedroom cum library in my future house purchasing!

A dozen Kindle books about money and investing

To the money shot! I’ve dug into the Kindle Store to hunt out the following publications (they’re not all books!) that you could consider for your Kindle.

1. The Snowball: Warren Buffett and the Business of Life

One of the best books you’ll ever read about investing, dressed up as a biography of a more bizarre individual than you probably imagine. I admire the man and the detail here – but Buffett was apparently so miffed by its candor that he no longer speaks to the author. More details from Amazon.

2. The Intelligent Investor

In-between speaking fluent Latin, writing his own plays, studying the classics and seducing the women of Manhattan, Ben Graham invented all the basic tenets of value investing. The Intelligent Investor is his classic introduction, and the 60-year old book will retain its popularity on in the eBook era. More details.

3. Common Stocks and Uncommon Profits

If Ben Graham is the father of value investing and Warren Buffett his most successful pupil, then Philip Fisher is the father of growth investing – and the author Buffett read as he started sneaking off the one true path laid down by Graham. Another timeless classic that’s essential reading for anyone whose heart is set on the dangerous game of stock picking. More details.

4. Enough: True Measures of Money, Business and Life

Not many people in the UK have read this brilliant book by Jack Bogle, the father of passive investing. It’s not really a how-to guide for passive investors (you can read our articles instead!) or even a case doing so – Bogle has made that argument many times. Rather it’s a thorough review of how the financial services industry repeatedly does wrong by its customers, culminating in the recent financial crisis. More details.

5. The Big Short

The Accumulator has recounted the lessons from The Big Short on Monevator, but this isn’t a book I’d just read to learn from. Like most of author Michael Lewis’ writings, it features an incredibly compelling collection of characters, too – you soon forget you’re essentially reading about maths geeks staring at spreadsheets most of the day. More details.

6. Anyone Can Do It

As I said when I reviewed it donkey’s years ago, Duncan Bannatyne’s best-selling biography is not beautiful writing. The entrepreneur’s story isn’t half as sexy as Richard Branson’s, either, with the (seemingly) surly Scot not getting going until his 30s, and beginning to make his fortune with an ice cream van. What it is though is fabulously readable and packed with practical insights into the mind of a down-to-earth rainmaker we can all learn from. More details.

7. Free Capital

I was surprised to find Free Capital on the Kindle store. A clearly written collection of profiles of 12 private investors who’ve made at least a million from the markets – several by ‘simply’ stock picking for their ISAs – the book is another to file under Inspiration, and is rare for its British focus. The fact that it’s on Kindle shows how the device is becoming ubiquitous. More details.

8. Eat that Frog!

This book isn’t about money or investing, but it is one of the best books on effectiveness and time management I’ve ever read. Mainly because it’s one of the shortest. Where most time management books drone on for hundreds of pages, Eat That Frog! steals their best ideas and repeats them in two. It’ll make you more efficient, and pays out that most precious commodity: time. More details.

9. The Financial Times

You can now get the Financial Times on Kindle, and as I write it’s priced at just under £18 a month – a decent discount to the paper edition. There’s a free 14-day trial, too. It all updates seamlessly and reveals the future of newspapers is surely digital, but the text layout isn’t perfect. In my opinion it’s the best business paper in the world, but then I don’t read German or Japanese! More details.

10. The Economist

Sticking with periodicals, The Economist is my favourite big picture read (although I also like Prospect for its wider cultural coverage) and a frequent edition to Monevator‘s Weekend Reading slots. The Kindle edition is fine, but a bit expensive compared to the other subscription options. More details.

11. The Greatest Trade Ever

If The Big Short doesn’t satisfy your cravings for a heady mix of credit crunch shenanigans and buccaneering moneymaking on the back of it, then this recap of how hedge fund manager John Paulson made $20 billion out of thin air surely will. More details.

12. More Money Than God

I confess, I’m fascinated by hedge funds, although I’ve never invested in one as a private individual – I think in practice retail investors are unlikely to do better long-term than if we simply buy an index tracker and save some cash, due to the high fees universally charged by hedge funds and the rarity of (and difficulty selecting) enduring out-performers. But in my daydreams I’d love to run one, and until then I aspire to manage a portion of my active portfolio like a hedge fund. More Money Than God recounts the most innovative hedge funds’ market-smashing capers. More details.

Have I missed one of your favourite Kindle books about money and investing? Let us know in the comments below – particularly if it’s a book targeted at the UK market, since most I know about and like aren’t on Kindle yet.

You want to invest in an index tracker, but doing a Google search for one is like parachuting out of a plane and into the thick of the Amazon jungle. You’re likely to sink up to your pith helmet in the swamp of choices, claims, and small print competing for your attention.

As a new passive investor taking your first steps in this environment, you don’t need a tracker – you need a map.

Waypoint 1 – Searching for an index tracker

Many investors select funds using the search tools of their broker. I prefer to use an independent fund-screener like Morningstar, since no one investment platform coughs up the whole of the market.

Refining your search requires differing tools and techniques depending on whether you’re looking for index funds or Exchange Traded Funds (ETFs). Here’s some handy search tips for both:

• Index funds
• ETFs

Waypoint 2 – Recognising your quarry

Picking out index funds from the morass requires sharp eyesight because they’re just lumped in with all the razor-clawed, actively-managed beasties we’re trying to avoid.

Life would be easy if search tools offered a handy ‘tracker-only’ tick box. But such an easily implemented, investor-friendly feature is mostly absent (although TD Direct have one in their Fund Screener). What we’ve got instead is the financial services equivalent of placing cheap, own-brand products on the bottom shelf of the supermarket aisle.

The most reliable tracker-spotting technique is to look for funds with the word ‘index’ in the title. As in ‘HSBC FTSE All Share Index fund’.

Not every fund with index in the title will be a tracker, but other clues can be found in the Ongoing Charge Figures (OCF) – sub 0.5% suggests a tracker – and in the fund’s factsheet (more on this below).

Adding to the profusion of confusion, identically named funds breakdown into sub-species such as:

• Institutional
• Non-institutional
• Accumulation
• Income

Institutional funds sport cheaper costs but are aimed at giant pension funds and the like. Beer money investors like you and me usually don’t get a look in.

There are weird exceptions to the rule. Some investment platforms have the muscle to make institutional funds available to retail investors en masse. So if you’ve spotted a particularly juicy looking institutional product, it’s worth searching for it via a couple of different platforms to see if you strike lucky.

As for accumulation and income funds, they are two different classes of the same product. The designation refers to the fund’s treatment of dividends.

• An income fund pays out dividends into your account, as you might expect.

• An accumulation fund retains dividends, using them to swell the share price. It’s the equivalent of reinvesting your dividends into the fund – a very good idea as that’s a major component of long-term investing returns. Accumulation funds also save you paying the dividend reinvestment charges your broker loves to levy.

Look out for acc and inc suffixes in a fund’s name (as listed by your platform) to spot the difference.

The ETF equivalent of an accumulation fund is generally called a capitalising ETF, while a distributing ETF pays out dividends like an income fund.

Waypoint 3 – Compare trackers

You can make sure a fund tracks the asset class you require by reading its Morningstar Fund report (click on the fund’s name in the fund screener to access). The report reveals important information on the fund’s benchmark, fees, performance, holdings and so on.

You can also quickly compare similar funds with Morningstar’s handy Fund Compare tool – enabling you to scrutinise characteristics side-by-side.

One important characteristic are fund charges. Smoke and mirrors are two of the industry’s favourite tools for diverting attention away from the impact of charges. Different layers of charges can make it hard to directly compare funds, but you can level the playing field with a Fund Cost Comparison calculator.

Waypoint 4 – Due diligence

Once a fund is ticking your boxes, it’s time for a trip to the individual fund provider’s website to immerse yourself in the literature. Take a deep breath and read all the documentation posted against that fund:

• Factsheet (click on the link to find out how to decode a factsheet)
• Supplements
• Prospectus (you’ll need a law degree to understand much of this)

Read as much as you can to gain a deeper understanding of the fund. The advantage of using a fund’s own website is that you’ll access the most up-to-date literature – hopefully weeding out some of the errors that bedevil aggregator sites like Morningstar.

The fund’s factsheet should also definitively reveal whether you’re dealing with an index tracker. A tracker’s stated profile or strategy should outline an objective that’s something along the lines of ‘tracking or matching its benchmark’. If you’re still not certain by time you’ve read all the documentation then the fund is probably not a tracker.

Waypoint 5 – Buy it!

All the hard work’s done and it only remains to place an order for your shiny new tracker with your fund supermarket or discount broker.

Make sure they carry it by searching their website using the fund’s ISIN code.

If your target fund isn’t listed on your dealer’s website, and you don’t want to use multiple investment platforms, then there’s one last hope: get on the phone. As Monevator readers William and Ben have noted: some platforms don’t list all available funds online, but they will deal in the missing products over the blower.

If you’re still stuck when it comes to picking index trackers then take a look at Monevator’s Slow & Steady model portfolio. It’s a good short-cut to a shortlist.

Take it steady,

The Accumulator