Good reads from around the Web.
Are you lucky or skillful if you succeed at something? A pragmatic test – courtesy of author and banker Michael Mauboussin
I’ve held a tennis racket on about 10 days of my life on Earth, and I’ve got the ball over the net and legally within the sidelines about as often.
Tennis clearly requires skill.
Flipping coins to win with heads but then trying to lose by getting tails?
Sheer luck.
I mention this because I’ve seen great evidence of my investing skill recently.
You remember how I bought a bunch of oil stocks outside of my ISA, so I could use any losses I generated to offset my capital gains tax bill?
Well, I’ve already generated losses! Enough to offset that surprise gain.
Go me – my little portfolio has lost 16% in just three weeks.
Talk about skill, eh?
Eat that Warren Buffett!
p.s. In case it’s not obvious to some, I’m being ironic in this post. I get it. (Yes, that too. And that!)
From the blogs
Making good use of the things that we find…
Passive investing
- The hot hand fallacy – A Wealth of Common Sense
- We eat dollar-weighted returns – The Aleph Blog
- Are inverse ETFs a good way to reduce risk? – Oblivious Investor
- The path to better investing [Interview] – TEBI
Active investing
- The short, glorious life of a tech company – Musings on Markets
- Understand the maths behind ‘price targets’ – The Value Perspective
- US stocks: Risking dollars to make pennies – The Felder Report
- Could you really hold a 10-bagger? – The Irrelevant Investor
- 10 ways to destroy your portfolio – Investing Caffeine
- Debating Tesla’s valuation – SumZero
Other articles
- Serial financial meltdowns and the savings glut – Pimco
- Scenes from the future of wealth management – Reformed Broker
- What is The Path? – The Escape Artist
- Monthly financial decisions – Retirement Investing Today
- Simple rules to cut down on stuff – Under The Money Tree
- Lessons from dad: Part 1 – Getting Fired
Products of the week: The Telegraph has a great article showing how combining a bevvy of different bank accounts can earn you 7.5% a year on £20,000. Santander’s excellent 1-2-3 account is at the heart of the system, though it only pays 3%. The uplift comes from perks and bonuses elsewhere.
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
- Investing lessons from Vanguard’s Bogleheads – Kiplinger
Active investing
- In retirement, it seems, there are few guarantees [Search result] – FT
- A canary may be whistling in the junk bond coalmine – Dealbook
- Bleak future for hedge funds – Investment Week
- The story of the first high frequency trader – Medium
- Reasons to stick with the oil trade – Motley Fool (UK)
A word from a broker
- The outlook for energy and mining companies – Hargreaves Lansdown
Other stuff worth reading
- Buy-to-let super-landlords starting to sell up… – Guardian
- …even the infamous Wilsons! – Telegraph
- A far-flung frontier where homes aren’t goldmines. America. – Bloomberg
- Remortgage now? The question everyone is asking [Search result] – FT
- Meet the women who earn more – Guardian
- Jason Zweig: The real value of a home [Search result] – WSJ
- How to prove anything you want – Motley Fool (US)
- 5 steps to prepare for your declining financial ability – WSJ
- Dress the part: Enclothed cognition – New York Times
Amazon angle of the week: I buy all my Christmas presents on Amazon
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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”. [↩]
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Well at least I’m in great company 🙂 My HYP is full of big oil (RDSB and BP) and miners (RIO and BLT) all of which have taken a hammering.
Grocers, diggers, and oil are all down in my HYP. Loads of other stuff is up plenty enough to balance things out. Max 10% per sector lets you sleep at night. I remember when it was insurers causing me a worry (Aviva and Amlin for me) but they came good, so I’m just not worrying.
Similar problem here.
Good test of methodology handling a losing position..
Any fool can handle a winning position.
Looking at our records: see we started out in 2015 with 8% of stocks in Commodities. (Shakes head!)
Progressively reduced target percentage to 7% then 6% during the year while continuing to top-up/buy.
Will be thinking this position over during the weekend.
One thing for certain, will not be selling !!!
Probably will wait a little and then top-up again to a further reduced target, if we see further weakness.
Testing times.
Sadly I’m in the same boat. I went for Junior Oils as I’m only investing a small amount (£3k ish).
To be fair I’ve only been drip feeding small amounts in , and I still have some way to go, but I’m still about 12% down.
I still feel its was the right decision, it just my ( and your ) timing that’s off.
Ah, but you see as per my original post on buying the bunch of E&Ps, I’ve already sold! 🙂
I’ve locked in the tax loss and rolled the money into an E&P ETF with not perfect but good enough for government work correlation.
If that falls significantly before April I’ll sell that and roll back into the junior oils. (Yes, the costs are meaningful).
Another key point is as explained in the original article I’ve added much more energy related stocks in my ISAs on top of this. That is being managed with a *very* different mindset.
This is an unusual state of affairs for me, as previously discussed — I don’t recommend it. It’s to do with my annoying cgt this year. I bought the basket because I thought such falls we’re possible but I expected over months if it happened, not weeks! 🙂
@The Investor
@The Accumulator
Boring question but how are you keeping a track of your portfolios?
Is Excel the only answer when you have multiple pots?
@Martin — I use a unitized Google Spreadsheet: http://monevator.com/how-to-unitize-your-portfolio/
@ TI – “People accept that active managers can’t beat the market and it’s just not true.” He has no plans to abandon the stock market for other leisure pursuits. “It’s a fun exercise,” he says. “Beats the hell out of golf.”
http://www.wsj.com/articles/peter-lynch-25-years-later-its-not-just-invest-in-what-you-know-1449459844
The Felder Report link isn’t very motivational is it? 😉
The latest sell off is a bit of opportunity to top up on my two worst performing tracker ETFs, FTSE100 and an Emerging Markets tracker, both indices dragged down more due to hefty mining and oil exposure. However I’m already hugely overweight equities in my SIPP and need to rebalance by putting new money into bond funds over the course of 2016. Much as it feels wrong due to interest rates about to creep up (maybe!) I need at least some fixed interest in there to dampen volatility, plus there is always the terrible possibility of the Felder Report being proven right.
I still think commodity stocks will come roaring back by 2017. It will be tempting to pile into a natural resources investment trust nearer the time, but it goes against the rule I set to avoid sector-specific funds and trusts, with all the active decisions they entail.
Mauboussin’s rule of thumb is interesting and I’m inclined to go along with it.
However, I’d be interested in views.
Is this true always or sometimes : it must be a matter of luck if a player makes loser’s moves in a game of skill, but still comes out on top.
Well, we all know what Taleb thinks of this one.. It’s human nature to inflate skill when we win and blame luck when we lose. His is a compelling argument but I felt a tinge of personal regret running through it..
An interesting quote this morning on factors in the development of cancer, the director of Stony Brook Cancer Centre in New York on the recent Nature study.
“They can’t smoke and say it’s bad luck if they have cancer. It’s like a revolver, intrinsic risk is one bullet. And if playing Russian roulette, then maybe one in six will get cancer-that’s the intrinsic bad luck. Now what a smoker does is add two or three more bullets to the revolver. And now, they pull the trigger. ”
The problem is how much choice is there in extrinsic risk in investing.
“The problem is how much choice is there in extrinsic risk in investing.”
@ Minikins : a little head scratching! Can you develop the above thought? Thanks
@TI : decided over weekend to top up Commodity Income to 6% on Monday last. It was a struggle to commit. Now watch them fall again!
Difficult to determine the extent of dividend cuts that will be coming through in the next few years.
All Best
@magneto I’m afraid my critical thought processes are slightly wobbly this morning after a work Christmas bash/night out 🙂 I can’t even unpack what I wrote! Oh dear
Nice quote :), I am still laughing
”Buy shares tipped by crazy-sounding people on social media”
thanks for sharing 🙂