What caught my eye this week.
Josh Brown at The Reformed Broker [1] offered a fresh take this week on what long ago became a hoary debate: the alleged existence of a ‘bubble’ in passive investing.
We’ve covered this ground before [2], of course, from the misunderstandings in how index funds operate to the impossibility of passive investing distorting prices in a zero-sum game [1] – let alone of active funds in aggregate exploiting any (mostly non-existent) opportunities so created.
Josh now adds that rather than a newfangled mania that’s threatening global capitalism, passive investing is actually what we used to just call ‘investing’ before the 1980s made Wall Street and The City (sort of) sexy:
The popularity of passive investing isn’t new at all, it’s a throwback to the days of people focusing on their own work and careers, not trying to pick managers and become part-time market speculators.
You can never have a bubble in humility, apathy and passivity, which had always been the status quo up until the ’87-’07 period and is the more natural posture for investors to adopt for the future.
I agree. Indeed I’ve mildly argued with my co-blogger over the years when he’s slipped in a reference to alternative – yet still sleepy – strategies such as investing in mainstream global active funds or UK equity income funds for dividends as dangerous or destined to leave you eating baked beans in retirement.
In reality those approaches will probably serve you okay in your accumulation phase. They almost certainly won’t do as well as a pure passive fund strategy – you’ll be buying some fund manager a new sports car [3] for nothing – but if you save enough for long enough in a diversified range of sensible funds, you’ll get there. Just a little poorer.
It’s really the hyper-active, concentrated, ultra-expensive and ‘churny’ approaches to investing that can truly eat up your wealth.
Performance chasing allied to the sort of strategies employed, in fact, by many of the under-performing hedge fund managers who frequently bemoan the rise of index funds.
From Monevator
How will no-deal Brexit affect your investments? – Monevator [4]
From the archive-ator: Learn to get rich from a video game – Monevator [5]
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 [6]
Away from US large companies, the average global stock is in a bear market – Money Observer [7]
Japanification: investors fear malaise is spreading globally [Search result] – FT [8]
UK’s car manufacturing industry in its longest period of decline since 2001 – ThisIsMoney [9]
Global cities begin to shrink as inner areas empty out [Search result] – FT [10]
A £1,000 a year down in retirement: The women left short on pension credits – ThisIsMoney [11]
[12]
Investing in alternative assets via fractional ownership – Wealth Management [13]
Products and services
The cheapest 10-year fixed rate mortgage now charges just 2.29%… – ThisIsMoney [14]
…while Yorkshire BS joins Virgin in offering a 15-year fixed rate loan – Moneyfacts [15]
Ratesetter will pay you £100 [and me a cash bonus] if you invest £1,000 for a year – Ratesetter [16]
Are you sitting on a gadget gold mine? – ThisIsMoney [17]
Rich People’s Problems: Swimming pools — the deep money pit [Search result] – FT [18]
Why the Bank of Mum and Dad should think twice about equity release – ThisIsMoney [19]
Houses for horse-lovers [Gallery] – Guardian [20]
Comment and opinion
How David Swensen’s model passive portfolio performed in practice – Humble Dollar [21]
A down-market survival guide for pre-retirees [US but relevant] – Morningstar [22]
When is enough, enough? – A Teachable Moment [23]
No worries – Humble Dollar [24]
How to make work feel like play – RadReads [25]
The ‘Fire’ movement and the trouble with penny-pinching [Search result] – FT [26]
Getting married on a £1,000 budget – FI Fox [27]
Getting rich… with property – The Escape Artist [28]
Don’t need to downsize yet? Great, start now. – Next Avenue [29]
Tools for portfolio versus the tools we need – FIRE v London [30]
Naughty corner: Active antics
Good writers make better hedge fund managers – Institutional Investor [31]
Risk aversion is the big story, not the inverted yield curve – Calafia Beach Pundit [32]
Skewed expectations – Of Dollars and Data [33]
When will value stocks outperform growth again? – Klement on Investing [34]
Hypothetical value to real value – Fred Wilson [35]
The Permanent Portfolio with bolt-on trend following – Demonitized [36]
Brexit
Boris Johnson’s Brexit prorogation is constitutional cheating [Search result] – FT [37]
“A sick, cynical brutal and horribly dangerous coup d’état” – Stephen Fry [38]
Here’s Michael Gove [previously] on why it’s wrong to suspend Parliament [Video] – via Twitter [39]
Oh, here’s two more cabinet ministers saying same just weeks ago [Video] – Hancock [40] and Javid [41]
Sajid Javid cowers behind net curtains as Cummings ‘gets ready’ for the final act – Guardian [42]
Don’t hold back Hugh: Grant approaches national treasure status Twitter [43]
Reminder: What a no-deal Brexit could mean for Britain [Five charts] – Guardian [44]
Johnson warns MPs: don’t damage chance of Brexit deal/no-deal [Yes, he said both] – BBC [45]
Kindle book bargains
The Asshole Survival Guide: How to Deal with People Who Treat You Like Dirt by Robert Sutton – £1.99 on Kindle [46]
The Winning Formula: Leadership, Strategy and Motivation The F1 Way by David Coulthard – £1.99 on Kindle [47]
Essentialism: The Disciplined Pursuit of Less by Greg Mckeown – £1.99 on Kindle [48]
The Miracle Morning: The 6 Habits that Will Transform your Life before 8AM by Hal Elrod – £0.99 on Kindle [49]
Off our beat
Amazon fires show world heading for point of no return, says UN – Guardian [50]
The story of us – Wait But Why [51]
Next stop, Stockholm: one family’s European rail adventure – Guardian [52]
The only dependable source of happiness – Raptitude [53]
And finally…
“If you wake during the night, any thoughts and feelings you might have are from your Chimp and they are often very disturbing, catastrophic and lacking in perspective. In the morning you are likely to regret engaging with these thoughts and feelings because you will see things differently.”
– Dr. Steve Peters, The Chimp Paradox [54]
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