Good reads from around the Web.
Lots of amateur investors daydream about being the next great stock picker – a contrary-minded Buffett for the 21st Century.
But very few people are wired right (or perhaps that should be wired wrong…)
For most, being a contrarian investor gets no further than reading a magazine article about being a contrarian investor, and then investing in whatever shares or funds it suggests.
And that just isn’t going to cut it over the four or five decades of a lifetime of buccaneering investing.
As Patrick O’Shaughnessy of Millennial Invest wrote this week in a piece on the virtues of cheap yet scary-looking companies:
To buy into a terrifying portfolio, you need to have a contrary mindset.
This mindset is almost sociopathic, because it requires not just ignoring the crowd, but actively trading against it.
Most people can’t do that. They run with a herd even when they think they’re standing apart from it.
That’s surely for the best, given that more than seven billion of us are trying to get along on this little planet.
Gold given the finger
The wannabees come and go.
Remember when any mention of gold brought out dozens of precious metal bugs to call you an idiot, no matter what you wrote?
For all the noise they mostly seemed to think the same thing – that the dollar was about to collapse, and that a Neo-Aztec Kingdom of Gold was set to emerge from spare bedrooms and basement PC dens across the land. Conspiracy theorists who’d buried Krugerrands under their lawns would inherit the earth.
We’re still waiting.
Who knows, things are precarious enough that even I wouldn’t write off the gold bugs’ predictions entirely. But one thing I’m sure of is that the love-in for gold a few years back was as contrary as feeling a bit sad when Robin Williams died.
Look at this graph of the assets amassed at the height of gold mania by the US gold tracking ETF – ticker GLD – as posted by Ben Carlson on A Wealth of Common Sense:
At that peak in summer 2011, GLD became the largest single ETF in terms of assets – bigger than even the mightiest S&P 500 tracker.
But since then, Ben says:
…the fair-weather gold investors have been shaken out, and then some, in the latest drawdown.
Although the GLD fund’s performance is down by a quarter, the total assets invested in GLD are down by 60%.
In other words, GLD’s assets have shrunken far, far faster than the gold price.
Meanwhile the SPY stock market index tracker has returned 60% in gains, and it’s doubled in terms of assets.
This isn’t a post to say that stocks will always beat precious metals, or that you should race out and buy the S&P 500.
(If anything it makes me want to trickle money into a gold ETF!)
It’s more a reminder that like teenage goths who feel they’re uniquely dark snowflakes but all seem to shop at the same branch of Emos ‘R’ Us when you see them outside a Marilyn Manson concert, so any investor who has gone off the beaten-track mob-handed is likely not blazing a trail but heading for a cliff.
This stuff is hard, for all of us.
Yet another reason for most to be passive investors and opt out of the guessing game entirely.
From the blogs
Making good use of the things that we find…
- What does it mean for something to be ‘priced-in’? – Oblivious Investor
- What’s an investor to do about bonds? – A Wealth of Common Sense
- Passively active investing strategy – Under the Money Tree
- Why Buffett didn’t need Disney – Base Hit Investing
- Trading rules to contain the big risks – Beddard / iii blog
- Buybacks are a question of value, not morality – The Value Perspective
- Big Q&A on deep value investing – Abnormal Returns
- Flying on auto-pilot – DIY Income Investor
- What is supposedly profit-less Amazon worth? – Musings on Markets
- Building a personal margin of safety – Abnormal Returns
- Living a local life – Mr Money Mustache
- How to break up with your wealth manager – The Escape Artist
- Financially foolish old fogeys – Simple Living in Suffolk
- Financial practice makes perfect? – Retirement Investing Today
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
- Legal and General slashes tracker fees – CityWire
- Ken Fisher: Passive investing is hard – Money Observer
- Schwab to launch free ‘robo-adviser’ service in US – Reuters
- I dumped Richard Branson’s tracker to save £2,000 – Telegraph
- Graph showing how yields on most assets have fallen since 2007 – Telegraph
- Bargains on offer as great Euro-hate continues [Search result] – FT
- Why I don’t own bank shares [Search result] – FT
- Gold mining stocks are one of the few cheap sectors… – Morningstar
- …though they may be a value trap – ETF.com
Other stuff worth reading
- Sod the savers: David Cameron wants low interest rates “forever” – Telegraph
- Tony Benn’s inheritance tax dodge (and how you can do it, too) – Telegraph
- Flow Energy set to give away its revolutionary boilers – ThisIsMoney
- Santander to launch lifetime interest-only mortgages… – ThisIsMoney
- …and the demand for these rest-of-life loans is growing – Telegraph
- Pension tips for the self-employed – Telegraph
- The trouble with modern friendships – The Guardian
Book of the week: I’m enjoying Stress Test, by the former US Treasury Secretary Tim Geithner. True, it’s riddled with passive aggressive score settling, but this laconic bitchiness is part of its charm. I think it’s also more educational to revisit the crisis with a few years’ perspective.
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- 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”.” [↩]