Good reads from around the Web.
Most of us know passive investing in index funds is the best way forward for the vast majority (even if some of us continue to pick stocks for kicks, or just out of sheer pigheadedness…)
Passive investing is the least effort and the lowest cost way to invest, and yet it’s also the most likely to deliver nearest to the market’s long-term returns.
However there’s a snag, which is that there are not hundreds of inspiring passive investing books out there filled with witty one-liners.
Active investors can turn to Warren Buffett quipping about being like an over-sexed guy in a harem in a bear market, or Peter Lunch warning that you should invest in companies that any idiot can run, because “sooner or later, any idiot will run it”.
Passive investors? They have Vanguard literature boasting of a 0.01% cut in annual charges.
Oh, and Smarter Investing
While I agree his Best Book Ever is the number one route map for UK passive investors, I’ve never managed to read more than three pages without dozing off.
Get a quote
I’m biased, but I’ll add that my co-blogger, The Accumulator, is slowly amassing a nice collection of witticism about index investing. Perhaps one day they’ll be collated by a fan overburdened with time for future generations to enjoy.
Until then we can turn to the American Enterprise Institute. It sounds like a spoof corporation from a 1970s dystopian movie, but the Institute gets a thumbs-up for bringing this quote to my attention:
“Building a portfolio around index funds isn’t really settling for the average. It’s just refusing to believe in magic.” – Bethany McLean of Fortune
I also liked this one:
“I own last year’s top performing funds. Unfortunately, I bought them this year.”– Anonymous
There’s even one from the aforementioned stockpicking legend, Peter Lynch:
Thereʹs something to be said for the dart‐board method of investing: buy the whole dart board.” – Peter Lynch, Fidelity Magellan
However the list is not comprehensive, and it does boast a few bore-fests. For example they missed a trick by not including this quote from the master:
“By periodically investing in an index fund, the know-nothing investors can actually outperform most investment professionals.” – Warren Buffett
Perhaps we should do our own roundup of insights about index funds someday, with a focus on the snappy. Having such quotes to hand is not just for fun – distilled wisdom can be a useful touchstone in a tight spot.
Know any great one-liners about passive investing? Please share them in the comments below.
Note: Occasional Monevator contributor Lars Kroijer is on Moneybox this morning! You’ll be able to listen again to his discussion about low cost investing on the radio show’s webpage.
From the blogs
Making good use of the things that we find…
Passive investing
- The risk of short-term bond funds – Rick Ferri
- More to risk tolerance than age – Oblivious Investor
- Is index fund investing overrated? – Barbara Friedberg
- Diversification smooths the cycles – A Wealth of Common Sense
- From 45 funds to just 1 tracker [US but relevant] – Budgets are Sexy
- Investing behaviour: The final frontier – Millennial Invest
Active investing
- L is for Loss Aversion – The Psy-Fi blog
- Warren Buffett’s earliest investments – Base Hit Investing
- Hedge funds can’t afford to hedge this market – The Reformed Broker
- How I evaluate financial companies – UK Value Investor
- Value doesn’t protect you during market falls – Greenbackd
- Why stocks can go down on strong earnings – Investing Caffeine
Other articles
- I’m a business, man! – Under the Money Tree
- Have you saved enough already? – White Coat Investor
- A sobering demonstration of UK portfolios in drawdown – RIT
- Retirement is a rave? Whatever next – Simple Living in Suffolk
Product of the week: Mortgage rates are creeping up from the bargain basement as the markets start to price in an interest rate hike, says The Telegraph. All the same, you’ll still only pay 1.58% for a two-year fix with the West Bromwich Building Society. That’s below inflation.
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
- Vanguard cuts dilution fee on some funds [Search Result] – FT
- Win by doing less – Housel/Motley Fool US
- Portfolio return assumptions [Nerdy!] – Institutional Investor
- How to protect us from ourselves – Swedroe/ETF.com
Active investing
- Beware of backtesting and data mining – Wall Street Journal
- How debt seduced us and killed off innocent equity – Telegraph
- John Lee: Reflecting on a 40-year shareholding [Search result] – FT
- ‘Just 150 people’ will control UK funds [Search result] – FT
Other stuff worth reading
- High London prices make a long commute more tempting – Guardian
- Warning! The £250,000 beach hut story is in – Guardian
- Cost of being a pensioner is £10,387 a year – Telegraph
- Contact-less payment wristbands trialed in Spain – Guardian
- Sleep as a competitive advantage – New York Times
- Warren Buffett’s Boswel, Carol Loomis, retires – New York Times
Book of the week: Richard Beddard flagged up Excess Returns
Like these links? Subscribe to get them every week!
- Reader Ken notes that: “FT 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”.” [↩]
Comments on this entry are closed.
The great temptation with investing is to do something often doing nothing is the best thing to do
As I get older I’m getting better at doing nothing
When did Vanguard cut their dilution fees? Does this also apply to spread on ETFs?
Guess who just switched from Vanguard funds to ETFs in a big way!
“Genius may have it’s limitations, but stupidity is not thus handicapped” -Elbert Hubbard (1856 – 1915)
Okay, not relevant but it makes me smile 🙂
Simon
Don’t just do something, stand there!
“Forget the needle, buy the haystack” (Jack Bogle)
1. I like this from Bogle on investing in funds: “You get what you don’t pay for.”
2. Were you hungry when you wrote this? “Peter Lunch” (sic), para 4
“the most likely to deliver nearest to the market’s long-term returns”: but I don’t have a long-term.
I have a random question: Should I under-invest in the U.K. since I’m already exposed by living here?
@gadgetmind. Vanguard reduced its pre-set dilution levy on 11 funds on 30th June. See https://www.vanguard.co.uk/institutional/inst/articles/insights/vanguard-news/vanguard-reduces-pdl=on-11-funds.jsp
Kylie Minogue on choosing a fund manager:
I should be so lucky – lucky, lucky,lucky’
Thanks for the shout – hilarious quotes 🙂
“If investing is entertaining, if you’re having fun, you’re probably not making any money. Good investing is boring.” – George Soros
@J. Money just read your article and I’m very impressed. Pretty much completely overhauling your investment ideology and process. Very brave move.
Hey, thanks man – appreciate that. Took me a while to finally grow a pair and take action but very happy I did so 🙂 Now challenging other parts of my life/finances to see what else I can overhaul – it’s addicting!
Index investors a.k.a. “Lemmings with attitude”!
Good stuff guys, thanks for these! 🙂
A couple of quick replies:
@Dearieme — Perhaps it’s not clear to you as it is to me moderating these comments over the years, but you have left a long string of questions/points over the past months sort of bemoaning the reality you’ve found yourself in, regarding risk/reward/yields/rates etc.
The fact is we are where we are. If you haven’t got a long enough time horizon to take too much risk with equities, then you need to hold less equities until you reach an appropriate level of risk you’re prepared to take. If yields are low on government bonds or cash, then they’re low for everyone. If you want to add extra yield (corporate bonds, say) then you have to take the risk of those bonds underperforming.
If all this means you’ll have a lower income in retirement than you expected, then you’ll either have to cut your cloth or take more risk, or smoke many cigars and eat bacon sandwiches and take up bull running to get rid of the tail risk of living beyond your money. 😉
I don’t mean to be negative, but there is no golden answer. It is not possible to go back to 2000 and buy gilts at 6% or what have you right now.
The issue with trackers versus active funds is not whether you have a long time horizon. It’s what is the best way to get exposure to the market return.
If you pay an active manager to try to do better because you’re not satisfied with the market return (not necessarily by picking superior shares — perhaps by trying market timing or asset allocation or similar) then you are again merely swapping risks around.
@Oscar — Interesting question. You could turn it on its head though, and say should you over-invest here because you want to reduce currency risk, as you’ll probably want to spend Sterling eventually. Most investors are woefully over-exposed to their home market, as you probably know.
The market always recovers.
Companies don’t.
@Oscar_Cunningham
I would take this furher: Should I under-invest since I’m already exposed by living?