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Weekend reading: New year, old habits

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What caught my eye this week.

The New Year is the day we all start behaving better – whether it be quitting smoking, eating more vegetables, jogging, or simply resolving to stop putting your dog’s waste in a plastic bag and then flinging it up into a nearby tree to hang like a toxic fruit bat. (Okay, perhaps nobody resolves to stop doing that. They should!)

Do we keep behaving better? Rarely.

I sometimes make New Year’s Resolutions and they seldom work. I’ve been resolving to read more books for as long as I remember. But whatever method I try, the instant delights of the Internet have soon sucked me back under and I’m lucky if I’ve finished a novel by February.

I read a book a day in university!

In another universe, I’m incredibly well-read now. In this one, well, at least you guys benefit via this weekly link list.

Ready, steady, gain

Perhaps one reason I do badly with New Year’s Resolutions is because I invariably start the year off on a naughty foot.

No, I don’t smoke cigars whilst quaffing champagne from the bottle. That’s all out my system by Boxing Day.

However I do lovingly re-set various aspects of my active portfolio tracking spreadsheet back to zero. By doing this, I start the year with a clean slate and a fresh chance to beat the market by December 31st.

This is only half bad. As part of my ongoing active investing experiments, I track my returns precisely. My portfolio is unitized – there’s none of this “I assume dividends cover expenses, and I guess I should count that bonus money I put into an ISA in April but it’s a faff” that you see in some online portfolio reviews.

No, I count every penny in and out like some miserly Noah. I track all my gains, losses, and costs, and I compare myself to four real-world benchmarks, over the short and long-term.

So far so reasonable.

Precisely tracking your returns can be a bad idea if you’re a passive investor. In fact I think most investors would be better off following a sensible passive strategy and not tracking their returns at all if the alternative is getting too obsessed and fiddling with their portfolios. It’ll probably only harm their results.

However if you’re an active investor, tracking is vital. Many private investors delude themselves about their performance, because they don’t know it. They see some winning shares in their broker accounts and think they’re not half-bad at picking stocks. They never work out where they’d be if they had just lobbed the lot into a global tracker fund.

Even if you’re actively investing for fun as much as profit, you need to know your returns. A dartboard without any numbers to score by is just a wall you throw darts at.

With that said, there’s very little to justify overly-focusing on returns over any particular single year. And there’s even less reason to do so from January to December. (At least for American investors that matches their tax year! April to April would make a little more sense in Britain.)

Of course you do need to know annual returns if you want to compare yourself to active funds; something that was very important to me for a while.

But even then it would be better to calculate the appropriate figures once a year, rather than watching as I do my performance versus my benchmarks with every passing day. Now a little ahead, now a little behind, now back in the lead again – it’s like one of those plastic horse racing games you used to find at seaside arcades.

Nevertheless I’ve resigned myself to this procedure for as long as I’m active investing. It’s part of my process now, however irrational. It may even be marginally beneficial that I reset the annual return column on each of my holdings (obviously I track the long-term loss/gain on purchase in another column) as a way to avoid any anchoring biases.

Human error

I know I shouldn’t watching things too closely; the knowledge is strong, but the flesh is weak.

As a result I’ve tried a lot of different ways to obfuscate my portfolio performance in the short-term, or on a quick view. I’ve experimented with everything from hiding the real pound values of holdings in my master spreadsheet to hiding the gains and losses, to creating ‘layers’ that blend the moving parts of the portfolio to try to stop me focusing on short-term winners or losers.

I’d write about all this, but I don’t want to encourage anyone. Perhaps when my passively pure co-blogger The Accumulator is back full-time I can indulge this side of things again.

For now: It’s a new year, and the game is afoot! Exciting. Yes I should change my habits… but then again I should probably read more books, too.

Happy new year and good luck with all your resolutions – except for that silly one to read fewer investing blog posts.

Pfft! A little of what you fancy does you good.

From Monevator

Nine underrated tools to help you achieve Financial Independence – Monevator

From the archive-ator: Estimating expected returns in your financial plan – Monevator


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

UK CEOs make more in first three days of 2019 than average worker’s salary – Guardian

House price growth weakest in six years due to Brexit fears… – ThisIsMoney

…though sales of £10m+ homes tripled after Referendum, on weak pound – Guardian

London divorce judges are curbing ‘meal ticket for life’ rulings [Search result]FT

Bereaved partners are unnecessarily paying tax on inherited ISA savings – ThisIsMoney

Hedge funds’ hopes for 2018 dashed amid closures – Financial News

Reckless caution: 56% of savers say their risk appetite is low or zero – Money Marketing

UK trains packed to near double capacity, disruption hits 17-year high – Guardian

Long-term US bonds beat the US stock market over past 20 years – Financial Samurai

Products and services

Millennials queue for hours for the new 26-30 Millennial Railcard – BBC

Why overpaying your mortgage is a better bet than saving in 2019 – ThisIsMoney

Ratesetter will pay you £100 [and me a cash bonus] if you invest £1,000 for a year – Ratesetter

Annual household bills rise on average £150 after a year of hikes – ThisIsMoney

The cost of childcare across the UK – ThisIsMoney

Homes for New Year’s renovation projections: In pictures – Guardian

Comment and opinion

Larry Swedroe: There are no safety flags in investing – ETF.com

Forgotten bear markets – A Wealth of Common Sense

10 valuable personal finance lessons learned in 2018 – The Simple Dollar

Sequence of returns revisited, and other uncertainties – The Retirement Cafe

Merryn S-W: The best financial advice hasn’t changed in 300 years [Search result]FT

Wunderwaffen: Part II – Demonetized (via Abnormal Returns)

Rich People’s Problems: How to fly first class for free [Sort of. Search result]FT

A reminder that equities are risky [US markets but relevant]Musings on Markets

Dividend income portfolio reviews – Fire V London & Retirement Investing Today

For stock pickers: There’s still a case for owning quality tech shares – GMO


Prices rising at fastest rate in six years; BRC warns of worse if no-deal Brexit – Reuters

Kindle book bargains

Creativity, Inc. [Must read!] by Ed Catmull – £1.99 on Kindle

Barbarians at the Gate by Brian Burrough and John Helyar – £1.99 on Kindle

Start Now, Get Perfect Later by Rob Moore – £0.99 on Kindle

Turning the Tide on Plastic by Lucy Siegle – £0.99 on Kindle

Off our beat

How not to be stupid – Farnham Street

Chinese censors are first taught the truth so they know what to ban – New York Times

“I met my boyfriend 12 years after giving birth to his child”BBC

How to develop better habits in 2019 – Ryan Holiday

Five books that explain why it seems the world is so fucked – Mark Manson

And finally…

“He gave a talk in which he argued that the way they measured risk was completely idiotic. They measured risk by volatility: how much a stock or bond happened to have jumped around in the past few years. Real risk was not volatility; real risk was stupid investment decisions.”
– Michael Lewis, The Big Short

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  1. 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”. []
{ 44 comments… add one }
  • 1 Fatbritabroad January 4, 2019, 10:49 pm

    Not sure i agree entirely with the article about paying your mortgage rather than saving. While there are no SAVINGS accounts that pay more than 2.6% you can save 3000 with tsb at 5%, nationwide 2500 at 5% and regular savers with both at 5%. (admittedly the santander has been withdrawn) there’s also tescos at 3%. Most people won’t pay any tax on that interest.
    I’ve now got 40% equity and as such have fixed for ten years at 2.59% and switched to standard repayments for the first time and am investing in s and s and a bit of p2p spread across multiple platforms.

  • 2 Fatbritabroad January 4, 2019, 10:51 pm

    And yes I realise the 5% regular savers don’t give you and annual 5% return but using multiple ones give you an effective 5%on that proportion

  • 3 The Investor January 4, 2019, 11:10 pm

    @Fatbritabroad — Hi! Remember that paying down a mortgage is the equivalent of earning an un-taxed higher interest rate, too. 🙂 I agree that with very small mortgages and small savings amounts it might be marginal / sub-optimal, but once you’re up into six-figure mortgages, which most are, having £7-8K in 5% interest regular savings accounts probably won’t move the dial much. (Disclosure: Haven’t done the precise maths! 🙂 ) You might overpay purely for the simplicity and automation benefits.

    With that said I broadly agree very low mortgage rates can also be a reason *not* to overpay the mortgage, if you think you can do better elsewhere over the medium term and can handle the risk… but that isn’t likely to be with cash.

    Most importantly, paying off the mortgage is really as much about risk reduction and psychological benefits as trying to find the optimal return over the next 3-6 months. The benefits of this will vary from person to person.

    (We’ve had near hate mail from time-to-time over the years for suggesting it may be better to invest rather than overpay a mortgage, even though effectively many/most decent wage-earning people do this without even realizing it by running a mortgage while saving into an ISA or pension rather than not saving/investing for 10-15 years while they clear the mortgage. I think having a low-rate mortgage and investing for the long-term in equities is fine; having personal loans or credit card debt another matter!)

  • 4 Fatbritabroad January 4, 2019, 11:28 pm


    you’re effectively leveraging aren’t you. My mortgage is 280k so large but is just over 3 times salary and just over 2.5 times joint so It seemed a good time to start to build none pension wealth at 38 as I will have around 200k in my pension by this time next year but relatively little long term savings outside of this (I’ve always saved alot in pensions even before finally earning decent money 6 years ago but never really saved long term outside of this until finding your site, RIT and the FIRE community). I’m leaving myself a little short on cash atm for me(still about 3 months spending so not dangerously so) but I’m trying to get to 100k in investments by this time next year.

    Again I’ve always agreed re loans but I’m not sure in all situations its not potentially a good idea. E. G. I’ll have got rid of my silly lease car by dec and either bought a second hand for cash or I am now considering a loan for part of it as the rates are so low at 2.7% and can be paid off at anytime with no penalty.

  • 5 dearieme January 4, 2019, 11:53 pm

    The position of the cursor on my screen mean that I read one of the resolutions as “dating more vegetables”.

    Desperate times, desperate measures.

  • 6 Fatbritabroad January 4, 2019, 11:57 pm

    @dearieme at least you can rely on them to turnip 🙂

  • 7 James January 5, 2019, 12:25 am

    be careful with having 200k in your pension at age 38. Life time allowance can easily be busted and then you face higher tax, put in 200k into a compound interest calculator with your expected rate of return to retirement age. Its quite a lot.

  • 8 Marked January 5, 2019, 3:08 am

    James #7

    But the LTA is going up at CPI per year too, and from memory already at 1055K from April 2019. Meaning up 30K and 25K respectively they’ve been increasing it. Not long till it gets to the 1800K from the mid noughties!!!

  • 9 Deltrotter January 5, 2019, 8:09 am

    First post, although I have read this excellent site for a number of years.

    I wanted to simply say thank you for the links to the Kindle books you post each week. They are fantastic.

  • 10 Fatbritabroad January 5, 2019, 10:03 am

    Thanks James yes I’m keeping an eye on that. I intend to retire early as well. It’s about 141k now after the falls but i get a large bonus 2020 which I will put in.

  • 11 allthegoodnamesaretaken January 5, 2019, 12:32 pm

    “I wanted to simply say thank you for the links to the Kindle books you post each week. They are fantastic.”

    They’ve been a disaster for me. I can’t see them piling up unread on the shelves like I can physical books 🙂

  • 12 Brod January 5, 2019, 1:50 pm

    I’m with the pay-off-the-mortgage-early crowd.

    We paid down from about £176k to @£75k in 6 years. We’ve got an off-set mortgage and have around £70k in the savings account so for now it doubles as an emergency fund. Now my wife’s working again, no. 1 priority will be to cover the remainder.

    It’ll be a great feeling.

  • 13 keble January 5, 2019, 2:20 pm

    “Five books that explain why it seems the world is so fucked” – a brilliant quick read.
    This will help fuel Mr & Mrs Grumble’s natters at keble towers for a day or two!

  • 14 Pomf January 5, 2019, 4:43 pm

    If you’re a higher rate tax payer the best thing is to ramp up the pension savings and leave paying off the mortgage, just use the lump sump to pay it down when you hit pension age (55-57). Returns in the pension are free of tax so assuming they match your mortgage interest rate you effectively get to pay off your mortgage for nearly half the cost as you saved 42% tax and NI on the way in.

  • 15 old_eyes January 5, 2019, 4:51 pm

    @The Investor. Since a recent iOS update, I am having trouble reading the site on an iPad. The text is all there, but the layout and styling are missing. Maybe just me, but you might want to check.

  • 16 Boltt January 5, 2019, 6:54 pm

    My ipad’s Formatting has been off for a few weeks too. Only seems to be this website.

  • 17 The Investor January 5, 2019, 8:20 pm

    Hmm, thanks guys. Will take a look. We had to do a bunch of stuff moving to HTTPS so maybe something was thrown out of whack.

  • 18 allthegoodnamesaretaken January 5, 2019, 9:00 pm

    Looks fine on my ipad with safari and chrome. Which browser are you guys using?

  • 19 Boltt January 5, 2019, 10:06 pm

    Just safari – I tried clearing cookies and blocking cookies and it’s back to normal.

  • 20 The Investor January 5, 2019, 10:09 pm

    @Boltt — Good to hear. I’m guessing the stylesheets and images needed rebooting.

  • 21 old_eyes January 5, 2019, 10:43 pm

    @The Investor @Boltt. Hah! That fixed it. Should have thought about that. Happy New Year!

  • 22 dearieme January 6, 2019, 2:18 am

    The site looks very odd in an ordinary window in my Safari browser, but entirely normal in a Private Window.

  • 23 Ermint Twizel January 6, 2019, 4:35 am

    In regards to Mark Manson’s books. The quote on “The coddling of the American mind” reminds me very much of Neitzsche’s similar statement. “To those human beings who are of any concern to me I wish suffering, desolation, sickness, ill-treatment, indignities—I wish that they should not remain unfamiliar with profound self-contempt, the torture of self-mistrust, the wretchedness of the vanquished: I have no pity for them, because I wish them the only thing that can prove today whether one is worth anything or not—that one endures.”

  • 24 JimJim January 6, 2019, 10:01 am

    Happy new year all!
    I’m most definitely in the pay off the mortgage early camp. Probably because I’m a Yorkshire-bred sort. When I first got a mortgage, it was 1991. In 1992 the rate was 16% and although we were both working and the loan value was (relatively) small it hurt lots! (interest only and endowment, remember those!!)
    By 1997 we had up-sized and shifted Counties. Re-mortgaging to an Intelligent Finance offset product (I.F) The rates were nearer the long term average by then but the painful memory of paying 16% of wealth I did not own was fresh in my mind and the offset mortgage was right up my street.
    Why offset worked for us?
    1. Psychology. Having the power to reduce the loan by saving and avoiding tax on savings interest. Being able (in I.F) to set up “jars” for “holiday”, “Car”, “Untouchable” (the last one was just that and turned into the largest before we finished the mortgage. Knowing that, should interest rates rise again, it would not be quite as painful. Knowing that in an emergency, other more expensive debt could be avoided.
    2. It did what it was intended to do. Even though we effectively lost a salary into the household for four years due to a long term illness and had a surprise child (we would not be without her BTW), We cleared the mortgage early, with more than 3 months emergency savings left in the “jars” (which they paid us interest on) by January 2012
    3. While all this was going on, we continued (probably naively), with the endowments. at this point we were not missing the money and the thought of risking money was something beyond us at the time. (we had a few “accidental” shares through gifts and de-mutualisations, but not amounting to more than a small hill of beans). This then allowed us to take more risk when the endowments matured.
    I know this was not an optimal path. I perhaps could have been wiser and avoided many fees and been the richer for it. But the psychology of a cushion of comfort when you know things could get and you are leveraged to buy a house was well worth the downside in my circumstances.
    Unpredictable things in life WILL happen, having suspension in your savings plans helps.

  • 25 ermine January 6, 2019, 4:16 pm

    Paying off the mortgage early (before 55) was the second biggest PF fail I made, second only to buying a house at the top of the market. If you are actually going to pay it off (as opposed to paying it down in a offset/flexible arrangement) at a time of low interest rates then I beg of you to think again. Ask yourself what you know that our host didn’t when he asked Can you afford NOT to have a big cheap mortgage?

    Sure, a mortgage is debt and there’s a hell of a feelgood factor to be had in being debt-free. But do it before 55 and you may be paying an awful lot for that feel-good factor in opportunity cost, and at the same time perhaps turning HMRC down on their offer to help you pay it off. Particularly if you are going to actually retire (ie stop working or earn notably lower than the personal allowance) before the age you can access pension savings, a flexible mortgage can help you smooth your income greatly pre and post pension age. Just make sure you won’t need to be qualified for the mortgage once you have stopped working – no string of short-term fixes for you over that period. The home loans industry absolutely despises people with no/low incomes, and has no concept of people with capital. ‘cos if you had capital you’d splurge it into your house, because as any fule kno houses are the single best investment in the UK.

  • 26 JimJim January 6, 2019, 5:23 pm

    @Ermine. .. What you said may fit your circumstances entirely and I agree, mortgage rates are, and have been ridiculously low for ridiculously long and a free gift if you are earning. A quote from the article you mention…

    “This is not for everyone. Borrowing to invest, even via a mortgage, greatly increases the risks. Also, these low mortgage rates won’t last forever, so you shouldn’t overstretch”

    In my circumstances, more property is firstly not necessary and would un-balance my portfolio which is, by accident, too property heavy anyway, and secondly I do not need to take even that small risk. ( I am not a fan of bricks and mortar it has liquidity problems and letting sucks ass! to use an Americanism (although letting out helped us travel the world for a gap year shortly after we were wed))
    My first property sold at a 20% loss. I bought at the wrong time for the market but the right time for a roof over my head. My next one has done much better thank you very much but is still, primarily, a roof over my head and a nice one at that, not too big but we love it. I would still recommend the experience as it helped me get into the discipline of saving, I doubt we shall see 16% mortgage repayments anytime soon but as I am in no need of any leverage count me out.

  • 27 charlie January 6, 2019, 5:26 pm

    Same for me on iPad when I use the chrome browser. It still renders properly in Safari.

  • 28 Brod January 6, 2019, 5:46 pm

    And another reason to pay the mortgage early is that I have a longer period of benefiting from ROI on my capital, an imputed rent of 3 or 4% (and we all know rents and house prices can never fall, don’t we?)

    And that’s guaranteed. As my portfolio is down 9% from peaks, not to be sniffed at.

    But at the end of the day, I’m very happy making a probably sub-optimal investment decision as it protects my wife and young family. Which is why I’m in this game after all.

  • 29 Fatbritabroad January 6, 2019, 6:24 pm

    For me I’ve realised I need and want more liquidity. I have about 210k equity in the house and another 140k in my pension that I can’t do anything with. Up until this year I only had about 30k outside of this.

    I’m not reducing my pension payments yet (possibly I should but I’ll review when i get to half a million which should be in ten years or so) as the hrt break is too good but I’m also not increasing with pay rises like I used to and am now concentrating on savings outside of pensions instead of blowing everything over an above an emergency fund which Is what I used to do up to about 5 or 6 years ago.
    Fortunately since then I found fire and have been investing so have done ok but wish I’d have had more to put in

    I have a low emergency fund (for me anyway) at the moment but still just over 3 months worth at about 11000 and currently about 87k in investments as I’m loathe to leave more than that in cash. I’m building the 11k up to get rid of my lease car or at least pay a decent deposit for a good second hand one and get a short term cheap loan for the rest. Everything else is being invested. Minimum 650 a month into s and s and SAYE (mostly Saye at the moment) work plans plus any extra I can over and above this. I have a loose goal for 200k in non pension investments and I’ll then start hammering the mortgage. We’ll potentially downsize by then anyway as I’ll be nearly ready to pull the plug at 48-55 with around 1 million in pension and investments . I can then choose what I want to do. Carry on working or do something else. What a wonderful feeling that will be.

  • 30 The Investor January 7, 2019, 1:17 am

    @deltrotter — You’re welcome, cheers!

    @all — Re: Paying off the mortgage versus paying into a pension, clearly the tax-relief advantaged maths will often be attractive (and I’m certainly not suggesting it’s a bad idea, in moderation or properly considered) but remember there’s a massively different risk profile when your investments are inside a wrapper you can’t touch for 20-30 years versus when they’re outside. In a worst case scenario (say rates rise, you divorce, you lose your job due to illness etc) you could be unable to meet your mortgage payments or at least struggle to do so, yet have assets inside the pension that you could have used to either meet your repayments or to pay down the mortgage if they’d been outside, perhaps in an ISA. But they’re not.

    i.e. The tax arbitrage comes with a big cost in terms of liquidity.

    Appreciate we all realize this, but anyway IMHO it’s a reason for moderation in all things.

    (E.g. I’d have a chunky cash offset or at least substantial assets in accessible wrappers such as trackers in an ISA rather than going full-throttle into a strategy based on locking all my money in the pension for the lump sum 20-30 years down the line and not paying down the mortgage at all until then, and having no other cash/resources).

    I’ve now got a relatively massive I/O mortgage these days (compared to when I wrote the article @ermine mentions above 🙂 ) and I spend a lot of time thinking about the new risk profile issues it brought with it. (Should write an article on it, but of course I’d have to finish the “why I bought a flat” roadblock first. 😉 )

  • 31 eddieosh January 7, 2019, 9:58 am

    Not exactly new news (nearly three years old) but this article I just stumbled upon makes pretty interesting reading given the current fears of a recession. http://www.philosophicaleconomics.com/2016/02/uetrend/
    Can’t comment on the GTT strategy (G&Ts are more my thing!), would be helpful to know what others think.
    I’ll be keeping on eye on the FRED chart to see how things develop.

  • 32 Glenn January 7, 2019, 11:40 am

    Very interesting comments.
    We’re 29, became mortgage free last year thanks to crypto. Mortgage was at 3.3%. We were sitting at around 30% LTV thanks to some inheritance used to buy the house in the first place.
    Last autumn we decided to borrow roughly double the amount of the previous mortgage (60% LTV) at 2.7% on a 10 year fix, to buy 3 BTLs.
    All now tenanted, after all costs and allowances for voids, maintenance, insurance, agent fees etc they are giving us pre-tax profit of around £950pcm.
    I just figured we were crazy not to borrow on a long term fix and take advantage of (long term) price appreciation from 4 houses rather than our 1 house, while hopefully netting a profit each month along the way. 30+ year time horizon is all we care about.

  • 33 The Rhino January 7, 2019, 11:46 am

    Brexit drama on Ch4 tonight 9pm, ‘Brexit, an Uncivil War’

    This is relevant and quite interesting,

  • 34 The Investor January 7, 2019, 6:20 pm

    @The Rhino — I’m kind of dreading it. I am sure I will be drawn to / relate to the Cumberbatch portrayal of Cummings, which will likely leave me even more annoyed than going in!

  • 35 dearieme January 7, 2019, 7:47 pm

    @eddieosh: but why should we believe the US unemployment figures? Isn’t there a large fictional component that purportedly corrects for something-or-other? If such correction are not time-consistent, what then?

  • 36 Fatbritabroad January 7, 2019, 9:03 pm

    Yes monevator that’s exactly what I’ve realised now I’ve probably been too fixated on pension and house so I’m trying to address the balance now re liquidity

  • 37 Mathmo January 8, 2019, 1:05 am

    Happy New Year, TI and thanks for the links as ever. Love seeing the comparison of equities and bonds graph and then I see it anchored in Dec 1999. Are we really nearly there? I forecast a lot of charts this year from not-equities pointing out how good their relative return is — and then next year equity sales guys using 20 year returns all of a sudden.

    And then I wondered if anyone else anchored their results in a particularly bad bit of trading to flatter their results. Ah yes TI reset his 2019 scoresheet right in the middle of this blip. I’m onto you… Feynman exhorts us not to fool ourselves, for we are the easiest people to fool. 😉

    Really enjoyed the how not to be stupid article — lovely stuff. Different from the usual stupidity I exhibit in investing and more the day-to-day stupidity I show-off in my driving. Tremendous.

  • 38 Andy January 8, 2019, 10:24 am


    Very interesting debate as always. I am especially interested in the pension vs pay down mortgage debate.

    I am lucky (or unlucky) enough earning just over 125k so all of my tax fee allowance is clawed back and 25k of my salary is subject to of 60% tax (ouch and unfair….). Anyway I assume in this position everyone would pay any excess into pension?


  • 39 Mathmo January 8, 2019, 11:26 am

    Someone earning £125k has an average tax rate of about 40%. Someone on 40k has an average tax rate of around 23.5%.

    Pension contributions (subject to limits, both annual and LT) would seem like a very sensible tax arbitrage for a 125k earner.

  • 40 old_eyes January 8, 2019, 4:16 pm

    I can also recommend “Barbarians at the Gates”. Operates at almost a thriller level of intensity and page-turning.

    I am attracted for some reason to business disaster books. It is the way you can see why people are doing what they are doing, coupled with the hideous realisation of what is going to happen next. I particularly like “The Smartest Guys in the Room” by McLean and Elkind. The story of Enron’s rise and fall.

    It is a great example of what can happen when smart people start dissociating from what the business is supposed to be delivering and become obsessed with gaming the rules. One activity that left you stunned and wondering “what were they thinking” was to export energy from California to another state and re-import it at a higher price to meet the energy deficit. An even more mind-boggling trick as I recall was to re-import on a grid link that lacked capacity and would be disrupted. They got paid compensation for the energy they could not import and were able to sell it elsewhere.

    That and the games they played with mark-to-market accounting were breathtaking.

    So a good read and available second-hand for the common £0.01 + P&P ( I get a lot of my business books that way – very useful if it might not be a keeper).

    Treating serious things as a game takes me neatly on to Brexit – an Uncivil War, which I watched last night. Another example of a very serious set of decisions being treated as an intellectual game by many of the participants. As a piece of TV drama, it was excellent with Benedict Cumberbatch doing his usual fine job. Although I am not sure how accurate it was. Carole Cadwallader and the film-maker had a debate in the Guardian today in which Carole objected to both some of the characterisations and the skating over the rules breaking.

    What it did make me think was how what AggregateIQ and Cambridge Analytica were able to do changes the political landscape; possibly permanently.

    If every voter is getting tailored and targeted facts, issues, policies and promises, and these are not generally visible at the time, how can we judge campaigns? At least US-style attack ads are on TV and you can form a judgement of the politics and principles of those behind them. If what is being whispered to me is private and different to what my neighbour is hearing, what is a political campaign any more?

    And if everyone is getting a different story, what happens after the campaign is over. Part of the problem with Brexit is clearly that contradictory facts and promises have been given to different groups by the same Leave campaign. Since there was no coherent vision of what was being proposed, you end up with different factions shouting at each other about the version of Brexit that they were promised.

    I can see how you can use these tactics to secure a win in a referendum, but I have no idea how you put the body politic back together again. Looking at the portrayal of Cummings in the film and reading some of his recent blogs, you get the impression that he wanted to smash the existing consensus partly to prove he could do it, and putting a new consensus together was somebody else’s problem (and the fact that they have failed to do so is evidence to him of their stupidity and that he was right). I find it hard to warm to someone who thinks like that.

    Lastly on the pension or pay down mortgage debate. Someone commented that they paid down mortgage because that felt more comfortable. I think that is right. Your own psychology is key to saving and investing; in many ways it is the only thing that matters. If you have understood the options and their risks, it is your psychology that will decide for you. And that is right because you have to live with the decision and be able to sleep at night.

    During my mortgage paying days I was also saving into a company pension scheme, but when there was a bit more slack in my finances I paid down mortgage rather than save/invest. I could have done better by fixing the mortgage and investing, but I had experienced the big spike in interest rates and had a father who was an unsuccessful businessman who had gone bust with major implications for the family.

    I was very happy to bear the cost of the lost opportunities to get rid of that mortgage and have peace of mind.

    You can inform yourself of the arguments, but good old monkey-brain emotions will drive the decisions.

  • 41 Scott January 8, 2019, 5:19 pm

    Very early in the financial crisis, I remortgaged at two-thirds LTV, and since then have been paying base rate +0.74% on an interest-only basis.
    Soon after, I paid off another third, leaving me at one-third LTV. Not the best decision financially, but I found it comforting (at that time anyway.) If I knew then what I learned later about investing, I’d likely have put the lump-sum in equities instead.

  • 42 Alan Points January 8, 2019, 5:58 pm

    That’s it though isn’t it – hindsight says equities would have been better.

    How would you have felt if base rate has gone up to 5 or even 10% and you went for the equities option?

  • 43 dearieme January 8, 2019, 6:22 pm

    @Andy: you might find the following useful, now or in the future.


  • 44 Mr Blue Shoes January 9, 2019, 12:08 am

    Thanks again for all the links Investor. I eagerly look forward to your post every week.

    The subject of leverage is one that I wrestle with in my own mind and seem to come to a different conclusion depending on my mood.

    The situation I have found myself in is one where I have borrowed money to buy a car and improve a property that I bought even though I have investments that could be sold to fund the things. I now can’t salary sacrifice as much as I’d like in to my pension because I need to sustain a level of income to pay the loans on a monthly basis. This has focussed my mind that the debt has led to a lack of flexibility and my focus now is to pay the debt down.

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