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The snowball and the paper trail

A Shell share certificate dating from 1981, but looking ancient.

A heatwave struck London the week I decided to revamp my home office. I usually enjoy assembling flat pack furniture. Less so in a DIY sweatshop.

Perhaps the resultant lethargy is one reason why I’ve been lingering over the paperwork the rearrangement brought to the surface.

Bundles of old bank statements. Letters confirming the opening of savings accounts that paid 7% interest. A document I’d kept confirming my entitlement to 228 HBOS shares when Halifax turned itself into a bank. A decade and a half of summaries of Legal and General tracker funds.

I’m going to shred and recycle most of this stuff. But I have mixed feelings about doing so.

Unreal returns

Investing can be such an ephemeral thing.

When you first put money into funds or shares and see it fluctuate like a statistic in a video game, the pounds and pennies you’re winning and losing seem entirely concrete.

But soon enough it’s not real money anymore. It’s ‘halfway to a house deposit’ or ‘not enough yet to compound to retirement’ or ‘thirty swanky holidays you could have had instead’ money. It’s ‘doing well’ or ‘must try harder’.

I’ll often smile as I pounce on a yellow sticker-ed bargain in Waitrose, delighted to save 50p on some fancy soup. But I no longer bat an eyelid when my portfolio fluctuates by thousands over lunchtime as I eat it.

Different rules apply to that money. For now it has become a score or a staging post towards a goal, or a marker against a market that as an active investor I’m always trying to beat.

Other people talk about paper profits, or losses not being losses until you sell. Such mental accounting may be a trick or a trap, depending, but in any event it can only happen once you can stop seeing your portfolio as entirely real money.

I believe most of us who are natural savers – grown-up children who could easily forgo eating a marshmallow – are good at abstracting money like this.

In contrast, people who can’t save even when on healthy incomes are probably bad at compartmentalizing. They only see real money they could be spending.

Similarly, people who struggle with risky assets are perhaps too prone to seeing their ‘pension pot cut in half’ and ‘tens of thousands wiped out’.

Such things rarely cut so deeply when your portfolio is – in some abstract sense – not real money. When, rather, it’s in this special universe of long time horizons, distant goals, and where volatility that would have you calling the police if it happened to your bank account or in your wallet is expected and welcomed for giving you the chance to buy more cheaply.

We evolved as hunter-gatherers. At most, our ancestors might have salted away a bit of woolly mammoth jerky for the hard times.

Those of us who happily tuck away multiples of our income for a future we may never see are probably the weird ones.

Paper assets

Maybe back in the days of beautiful share certificates people felt less disconnected from their investments?

You can read old stories of investors carefully inspecting their shareholdings before returning them to their bank’s safety deposit box. Once upon a time you had to physically carry your certificates into a broker’s office to complete a transaction.

It’s easy to see how things change in a world where you can sell a six-figure holding via your smartphone in a few seconds.

Which is probably why these old letters and statements have struck a nerve. As a (naughty) active investing junkie, I’m used to knowing my portfolio’s value up to the last second. So it’s a melancholy feeling to find an old note from a broker confirming I’ve opened an account that’s now as familiar to me as doing my teeth – but that was once a leap of faith for a 20-something version of me.

I’ve got more options now because of the decisions he made. In truth, I’m well ahead of most of the goals he set.

But equally a bit of me wants to go back in time, take £200 from the savings he invested, and instead send my young self out into the turn-of-the-century night to have fun when nothing hurt the next morning and most of my friends were single and fancy free.

Intangible assets

As I said, I’ll probably shred most of this stuff. I’m not even sure I like the feelings they’ve brought up. Besides, a few key documents should deliver a Proustian moment without taking up several feet of London living space.

Filing them has little practical justification, either. Most of my accounts are paperless now, so this random repository is not comprehensive. I know brokers urge you to print and store everything, but whenever I’ve had a query, I’ve solved it online. That’s how this forgotten and neglected stuff got forgotten and neglected.

Also I keep a (very irregular) investment log that reminds me of the arc of my story, if not every detail. So most of this ephemera is surplus to requirements.

Yet I have mixed feelings about destroying the paper trail. Maybe because even far from Wall Street, investing so easily feels like a fugazi

Note: The title of this article refers of course to Alice Schroeder’s biography of Warren Buffett, The Snowball. It’s well worth a read.

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{ 20 comments… add one }
  • 1 Trevor June 22, 2017, 12:59 pm

    In regards to throwing away old documents, it is every individuals decision, however considering the PPI incident it may be worth keeping hold of any and every document as you never know what might crop up in the future. This is just a thought picked up from http://blog.moneysavingexpert.com/2013/08/12/dont-throw-bank-statements-away-after-six-years/

  • 2 P June 22, 2017, 1:10 pm

    > entitlement to 228 HBOS shares when Halifax turned itself into a bank

    I had ~ £1000 in a Halifax account for years before this but they decided I didn’t qualify for shares.

  • 3 Neverland June 22, 2017, 2:17 pm

    “The past doesn’t matter. The universe is indifferent.”

    Don Draper to Peggy Olsen, Mad Men Season Two, The New Girl

  • 4 Brain Unwashed June 22, 2017, 3:39 pm

    I know what you mean. I have boxes of paperwork from old accounts that I’d love to bin, but something is stopping me. I thought about somehow logging all the statements in a spreadsheet so I can remind myself ‘how I got here’, but how long would that take and does it really matter? Still, there is always the niggling doubt that maybe one day I might need this or that bit of information and once I chuck it, it’s gone.

  • 5 Fremantle June 22, 2017, 3:52 pm

    Bonfire of the vanities!

  • 6 YamiKuriboh June 22, 2017, 4:04 pm

    If you want to read a Buffett biography I would recomment ‘Buffett: The Making of an American Capitalist.’ The Snowball focused far too much on his (boring) family and no where near enough on his actual investments and thought processes. Munger is also pretty much an after thought in the book.

  • 7 Mick June 22, 2017, 4:10 pm

    I’m trying to sort out an aged relative’s finances. They didn’t throw away all the defunct paperwork, and it’s horrendous trying to figure out which accounts are still active and which were closed years ago. We’ve spent months getting power of Attorney over accounts that were closed years ago.
    Since then I’ve thrown out all my paperwork for closed accounts, and rely on my spreadsheet notes to say ‘account closed, money put into our Barclays account’ and keep a note of the account number. That seems sufficient…

  • 8 Optimistic June 22, 2017, 6:03 pm

    I use Devonthink on a Mac to scan in all my paperwork and I then shred it immediately*. The software “reads” the document through OCR and after a training period can pretty well automatically file it in the appropriate folder and you can then search for anything by a snippet of information, works really well !!! ( uses fuzzy logic and can suggest matches where the searched word does not appear but it believes that it is relevant, scary but effective)

    A little Fujitsu Scansnap scans both sides of a document , rather like a fax machine, so its really quick, there is a downside that I have shredded and scanned in the wrong order a couple of times…..well the shredding bit came first and the scan didn’t happen !!!!

    I am sure there are other types of software for the same type of process, but it is really effective and meant I was able to dispose of huge amounts of old paperwork and no longer keep any paperwork, with the exception of a couple of recent utility bills in case of needing to prove ID. (This has reduced the amount of space in my home office significantly) It goes without saying that one needs to keep lots of offsite backups.

    12,000 documents takes about 10gb of space so fairly efficient for storage space, 14 million words…….

    No connection to Devonthink apart from being a customer.

  • 9 Karl Steiner June 22, 2017, 7:11 pm

    I remember trading my first shares back in 1987. I had an actual paper certificate that I had received from my grandmother as a gift upon graduation from college. It was for Cincinnati Gas and Electric, if I remember correctly. I had to go into the broker’s office and hand the certificate to the broker along with some actual paper work. I got a paper check back a few days later. I have no idea what the commission was or whether I got a good market price. However, I do recall the feeling that I was holding a tangible asset, particularly when I left it in the car for a few minutes. Nowadays, I don’t get that feeling at all when I stare at my account page on the computer screen. As you say, maybe that’s a good thing.

  • 10 Ric June 22, 2017, 10:33 pm

    Thanks for the article TI.

    I’m with Mick above. Last year my farther lost his epic battle with cancer. Since then I’ve been helping my mother sort out probate. It took 6 months of my lift (almost full time as I’m a FIRE retiree so don’t work) just to get an idea of which accounts are still open and how much is in them. The spreadsheet is 204 rows long (one row for each account). Most rows are for closed accounts, but of course you aren’t sure they are closed until you have seen the evidence or contacted the company involved. I’d guess he had saved every piece of paper going back to the 1960s (and a few bits to his childhood in the war).

    I’ll admit some of the older stuff was fascinating, but playing detective to work out which company took over which in the 1980s and if the share certificates are worth anything now is a desperately soul destroying task. Furthermore it has destroyed my office-standard cross-cut shredder (not exactly new, but nevertheless…)

    So my strong suggestion to anyone who cares is to shred most things, and in particular anything that is more that seven to ten years old that is not related to a currently owned asset (like those old fashioned share certificates or deeds to a house). It will clear your work area, and could save a loved one up to six months of their life!

  • 11 The Borderer June 23, 2017, 3:06 am

    After my Father passed away, we went through his papers to discover a life assurance policy written in 1922 for the sum of £19, 12 shillings and 6pence. It was written in the most beautiful copperplate.

    When we eventually contacted the descendants of the original Life Assurance company, they gave us £50.00 on the proviso that they could frame the policy and display it.

    Goes to show it can be worth keeping old documents?

  • 12 Sean June 23, 2017, 9:22 am

    I was fortunate, when I dealt with my father’s estate, that his small mountain of paperwork so he must have been getting rid of paperwork for old closed accounts.

    My own mountain of paperwork is much larger than his due partly to the number of savings accounts, SIPPS and S&S ISAs I hold and partly due to my reluctance to get rid of anything.

    To make things easier for my two executors I do at least try to keep paperwork for open accounts in a separate room from that for closed ones and I also clearly mark the latest document of each closed account so that it can’t be mistaken for an open one.

    I do also try to purge most of the older documents for the closed accounts.

  • 13 Brod June 23, 2017, 10:24 am

    Paper is dead!

    Check and shred!

    ¡Viva la Revolución!

  • 14 hosimpson June 23, 2017, 2:11 pm

    “I believe most of us who are natural savers – grown-up children who could easily forgo eating a marshmallow – are good at abstracting money”
    Yes. Thanks for this.
    Every once in a while I question myself. Then I take a look at my mortgage balance vs savings outside of pension and calm the fuck down. If I really were money hoarding, surely I’d have more to show for it by now.

  • 15 Jonny June 23, 2017, 8:13 pm

    I tend to file old paperwork indefinitely, though I’d never thought about how it would affect others (on death).

    If any one knows a Windows/Linux alternative to Devonthink that they can recommend, do say!

  • 16 The Investor June 25, 2017, 11:16 am

    Thanks for the perspectives. I’ve got some experience of dealing with another person’s old paperwork and it does indeed help enormously to have a summary of what is live and what is not, produced by that person beforehand and ideally kept up-to-date. Even then though, you find old policies from 1950 and whatnot that have you scratching your head, but that might have just been kept for sentimental reasons! (And in fact it’s not horrendous to find them, I found, for the same reason.) Anyway, not sure this aspect of paperwork has a ‘solution’ as such, short of taking over years before the person’s demise.

    I hadn’t actually considered the idea of scanning the documents in. Quite interesting but to be honest not something I’m hugely likely to do. One good thing about being an obsessed active investor is I tend to immediately notice if anything is awry in any of my accounts, so arguably I may as well reap the benefit of that obsession.

    The big time I was hurt by not having paperwork of all my trades and so on was when Equiniti took over Selftrade and binned several years of trading records, and lumping those archived records it did keep into huge opaque PDF files you had to dig through manually. An absolute pain digging through those for CGT reasons. Luckily I don’t trade much outside of tax shelters for the same reason (CGT hassle) so it was doable, but still frustrating.

    I do keep records of every trade / market investment I make nowadays, as suggested above, which when you consider they can run to 800-odd in a year is quite a lot of record keeping! I don’t record all flows into savings accounts, perhaps I should. I do keep and update regular a master spreadsheet showing where everything is, which I archive a snapshot of once a month.

    Anyway, I’m clearly not a master maven at this stuff. Hence the post I suppose! 🙂

  • 17 Factor June 25, 2017, 12:50 pm

    @Mick (7) – “We’ve spent months getting power of Attorney …..”

    If you genuinely want to spare your loved ones what can often be a hugely time-consuming and brain-bending hassle, with the possibility of allied financial detriment for them, and you haven’t already done something about it, then I strongly recommend that you take a look here https://www.gov.uk/power-of-attorney/make-lasting-power.

    The two types of LPA (as they are known) are a) Property and Financial Affairs, and b) Health and Welfare.

    Silky smooth site navigation plus online forms completion make things very simple, and the whole process should take you personally no more than an hour, although you may then have to post the forms to the other people involved for their signature(s).

    TIP, if you opt for payment of the required fee (currently £82 each for the two LPAs) by card, the (faultlessly polite and helpful if you need to telephone) Office of the Public Guardian starts a 40 day clock ticking, and there are resulting complications if you then overshoot this deadline because perhaps there is a delay in getting all of the signatures in time. If, on the other hand, you opt for payment by cheque, you can take as long as you need to without there being any time pressure.

    If you are unfortunate enough to lose mental capacity without having made any power(s) of attorney, you obviously can’t then do it.

  • 18 Edmund Blackadder June 27, 2017, 10:25 am

    Sam thing happened with my grandmother, whose policy was dated 1939 (I think). It’s now framed in some HQ building.

    Quite nice, really.

  • 19 Nkanani June 28, 2017, 7:41 am

    I do have paper trail and software to track my life, I am more worried about the software component, given the various risks it has from the unknowns: harddisk crash, ransomware attack, and worst – hacking of active online accounts, impersonation, etc.! But, yes, we need to strike a balance, if one of them gives up, we may need to depend on the other to save the bits we can.

  • 20 Rob January 6, 2018, 10:27 pm

    The bit about sending your 20something self out for a night on the town struck a very wistful note…

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