What caught my eye this week.
Every year the global bull market in equities and bonds continues, it gets harder to convince people that investing isn’t always so breezy.
Sure we had that setback towards the end of 2018. If you squint a bit, it could even be described as a crash. But the whole thing was over in a couple of months!
I read comments in the aftermath of that wobble from younger investors who were pleased they hadn’t sold out in a panic.
Good for them, genuinely.
But as trials go, the 2018 correction was a sprint, not a marathon.
Crash course
A proper prolonged crash will come again. That isn’t a reason not to invest – bear markets are part and parcel of enjoying the gains from shares – but it is a reason to make sure your portfolio is robust to all reasonable scenarios.
This new video created by Robin Powell for financial planner RockWealth provides a good primer for those who don’t know – or have forgotten – what a bear market looks like:
(If you’re reading on email and can’t see the video, please visit the post [1] on Monevator.)
Even I have to remind myself that in the years immediately after I began this website – in the depths of the 2007 to 2009 slump – I was accused of recklessness for suggesting readers continue to put money into shares.
If that’s hard to believe now, think of all those who say today they would never own bonds or REITs or gold – preferring to go all-in on equities.
Sure the expected return from bonds looks lousy (as it has for the past few years).
But if shares lose 30% in a year then you’ll soon hear from others who were delighted they had some money in other assets.
As John Lim – reflecting on the 30-year bear market in Japan – wrote for Humble Dollar [2] this week:
If the Japanese experience teaches us anything, it’s that stocks can be incredibly risky.
A Japanese investor who had some portion of his or her holdings in bonds fared far better than one fully invested in stocks.
If nothing else, it would have allowed him or her to sleep better at night.
Here’s a few more miserable reminders to vaccinate yourself against hubris:
- How scary can investing be? – Monevator [3]
- The day the market crashed [Podcast] – The Motley Fool (US) [4]
- Why I buy in bear markets – Monevator [5]
Don’t be too frightened to invest!
But don’t be too invested to avoid getting frightened…
Have a great weekend.
From Monevator
Note: In light of useful reader feedback, The Accumulator has updated and republished Part 3 [6] of his series on optimal use of your tax shelters. If you’re following closely you may want to re-read it.
How to choose an SWR for your ISA and your pension to hit Financial Independence fast – Monevator [7]
From the archive-ator: The Monevator millionaire calculator – Monevator [8]
News
Note: Some links are Google search results – in PC/desktop view you can click to read the piece without being a paid subscriber. Try privacy/incognito mode to avoid cookies. Consider subscribing if you read them a lot!1 [9]
Energy bills to fall for about 15m households as price cap lowered – Guardian [10]
Brits were ‘significantly’ less satisfied with life last year, ONS reveals – ThisIsMoney [11]
House prices rising at fastest rate in two years, says Halifax – Independent [12]
Spouses to receive an extra £20,000 if partners die without a will [Search result] – FT [13]
John Lewis and Waitrose may be forced to ‘close stores and cut jobs’ – ThisIsMoney [14]
[15][Click to enlarge the sell-off!]
Products and services
Are you ready to buy and own an electric car? [Podcast] – ThisIsMoney [17]
Amazon Choice label is being ‘gamed to promote poor products’ – Guardian [18]
Where first-time buyers hunt for homes: London, Luton, Reading, and Wolverhampton – ThisIsMoney [19]
RateSetter will pay you £20 [and me a cash bonus] within 30 days of your first £10 deposit – RateSetter [20]
Equity release: What are the options for older people? – Guardian [21]
You can now part-own a Ferrari via a tokenised blockchain – Bloomberg via MSN [22]
Direct indexing to kill ETFs? Not so fast – ETF.com [23]
Comment and opinion
The case for FIRR: Financial Independence, Redistribute Retirement – Humble Dollar [24]
Why Mr Motivator gave up on pensions and lives like there’s no tomorrow – ThisIsMoney [25]
Where are we in the property cycle? [Search result] – FT [26]
Movie déjà vu: Coronavirus – Investing Caffeine [27]
‘The biggest lie in personal finance’ [On FIRE…lights fuse, stands back] – Of Dollars and Data [28]
“For God’s sake, you’re scaring people to death” – A Teachable Moment [29]
Now never feels like the right time to invest – The Retirement Field Guide [30]
Trojan horse – Indeedably [31]
Meet America’s ‘Elite With No Savings’ – Summation [32] [hat tip Abnormal Returns [33]]
Graphic of the week: Extra!
[34][Click to enlarge]
Naughty corner: Active antics
The man who made a killing on the 1929 crash – Novel Investor [36]
Personal Assets Trust: Bear turned up to 11 – IT Investor [37]
Charles D.Ellis: The (easily misunderstood) Yale Model – Institutional Investor [38]
Can Orsted by the first green energy supermajor? [Search result] – FT [39]
Why John Kingham sold Aggreko in January – UK Value Investor [40]
Low volatility combined with momentum factor portfolios [Geeky] – Alpha Architect [41]
Tesla mini special
Is Tesla’s surge the greatest short squeeze of all-time? – The Reformed Broker [42]
Tesla is a stock-picking nightmare – or is it a dream? – Bloomberg via Yahoo Finance [43]
More: Why is shorting stocks so difficult? – Pragmatic Capitalism [44]
Tesla is nuts. When’s the crash? [Search result] – FT [45]
Politics
Mike Pence hints UK’s Huawei decision could jeopardise trade talks – Guardian [46]
Kindle book bargains
Bitcoin Billionaires: A True Story of Genius, Betrayal, and Redemption by Ben Mezrich – £0.99 on Kindle [47]
Zero to One: Notes on Start Ups, or How to Build the Future by Peter Thiel & Blake Masters – £1.99 on Kindle [48]
Walden on Wheels: On the Open Road from Debt to Freedom by Ken Ilgiunsd – £0.99 on Kindle [49]
Secrets of the Millionaire Mind: Mastering the Inner Game of Wealth by T. Harv Eker – £0.99 on Kindle [50]
Off our beat
How Google got its employees to eat their vegetables – One Zero / Medium [51]
Antarctica registers hottest temperature ever – CNBC [52]
Lex in depth: the $900bn cost of ‘stranded energy assets’ [Search result] – FT [53]
Again and again and again – Seth Godin [54]
Modern Arks: Designs for the new climate reality [Gallery] – Guardian [55]
And finally…
“The fight is won or lost,’ says Muhammad Ali, ‘far away from witnesses – behind the lines, in the gym, and out there on the road, well before I dance under the lights.”
– James Kerr, Legacy [56]
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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”. [↩ [62]]