Good reads from around the Web.
While naughty active [1] investors like me can always find something to excite us (cheap income trusts [2], anyone?), the passive investing slog can be a repetitive one.
Excellent passive investing basically involves setting up your ‘machine’ and then fueling it with cash. If you’re monitoring it and tweaking it too much, you’re doing it wrong.
That makes blogging about passive investing difficult – many of our brightest and best pupils leave us on graduation. Not good for growing a readership!
But it also presents a challenge for passive investors, who might eventually forget why they choose this road.
That’s one reason why we happily bang out the same old tunes every few weeks about cheap funds and trying not to be be too clever.
It might be repetitive to read, but then so is jogging and eating porridge for breakfast and a host of other things that are good for you.
Vitamin data
Another good pick-me-up is a burst of powerful data.
As passive specialist Rick Ferri said recently [3]:
The long-term data comparing active funds to index funds shows actively managed mutual funds underperform in all asset classes and all investment styles. There is no ambiguity in the results, and there’s nothing new to report here. The data has been saying the same thing for decades.
But, we’re only human.We forget, and lies are constantly being told that cause us to second-guess our resolve.
It’s a good idea to revisit the data at least once a year just to remind ourselves why we believe what we believe: that we should continue to invest in index funds rather than active management.
Ferri cites two new studies that demonstrate the superiority of passive investor for most people. All good stuff.
However it’s often said that a graph is worth 1,000-words of promotional guff from the active fund management industry, and Ferri shares a beauty:
[4]Percentage of active managers underperforming over five years to 2014
Source: Rick Ferri [3]
The data shows clearly that most managers fail to beat the market over a five-year period.
Funny how the advertising doesn’t, eh?
From the blogs
Making good use of the things that we find…
Passive investing
- A ‘better’ portfolio doesn’t win all the time – Bason Asset Management [5]
- Should you time the markets when experts can’t? – Rick Ferri [6]
- The smart questions clients ask – The Reformed Broker [7]
- A history of US bond market corrections – A Wealth of Common Sense [8]
Active investing
- Share prices and analysts’ opinions have diverged – The Value Perspective [9]
- Smaller companies, smaller margins – Investor Field Guide [10]
- 6 takeaways from the Berkshire Hathaway meeting – Clear Eyes Investing [11]
- High priced (not high valued) US stocks – Oddball Stocks [12]
- We’re in the early stages of a bond bear market – Calafia Beach Pundit [13]
Other articles
- Test drive of a petrol car by Tesla Club Sweden [Funny*] – TCS [14]
- Dig a well before you are thirsty – The Escape Artist [15]
- Transferring a company pension to SIPP – Part 1 [16] & Part 2 [17] at RIT
- Assessing the risks to your financial security – Can I Retire Yet? [18]
- Does high hedge fund manager income matter? – Pragmatic Capitalism [19]
- Gone fishing – Om Malik [20]
- Old friends build row of tiny houses next to each other – Lighter Side [21]
*Disclosure: I have owned Tesla shares since $30-odd, so am surely biased.
Product of the week: Even institutional fund managers like Neil Woodford and George Luckraft have been getting into peer-to-peer lending by buying shares in P2P Global, an investment trust that focuses on the sector, reports the FT [22] [Search Result]. There’s a 6-8% target yield and potentially low correlation to other assets on offer, but the sector is still relatively young and there could be hidden risks.
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 [23]
Passive investing
- How to find the cheapest and best tracker funds – ThisIsMoney [24]
Active investing
- Hedge funds paid the usual fortune for mediocre returns – NYT [25]
- UK-focused firms soar on Conservative victory – ThisIsMoney [26]
- It’s bonds that are overvalued, not stocks – Wall Street Journal [27]
- Two ‘winter portfolios’ do the business – Interactive Investor [28]
- Lots of trends have reversed recently – Bloomberg [29]
Other stuff worth reading
- The personal finance implications of the Tory win – ThisIsMoney [30]
- …the wealthy breath a sigh of relief [Search result] – FT [31]
- A big rate rise would sink buy-to-let in most regions – Telegraph [32]
- Rejected for a mortgage due to pension contributions – Guardian [33]
- As cognition slips, financial skills can go – NY Times [34]
- Three positive principles of performance – Forbes [35]
Book of the week: The chaps behind ‘freakonomics’ – a decade-spanning flotilla of pithy blog posts and various books that explain mysteries like why someone would write a blog every Saturday morning for seven years for a pittance – have a new book out. You don’t need to be an economist to know that the title – When to Rob a Bank [36]
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- Note some 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”. [↩ [41]]