- Monevator - https://monevator.com -

Weekend reading: New year, old habits

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 [1], I track my returns precisely. My portfolio is unitized [2] – 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 [3] 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 [4] fund.

Even if you’re actively investing for fun [5] 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 [6]

From the archive-ator: Estimating expected returns in your financial plan – Monevator [7]


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 [8]

UK CEOs make more in first three days of 2019 than average worker’s salary – Guardian [9]

House price growth weakest in six years due to Brexit fears… – ThisIsMoney [10]

…though sales of £10m+ homes tripled after Referendum, on weak pound – Guardian [11]

London divorce judges are curbing ‘meal ticket for life’ rulings [Search result]FT [12]

Bereaved partners are unnecessarily paying tax on inherited ISA savings – ThisIsMoney [13]

Hedge funds’ hopes for 2018 dashed amid closures – Financial News [14]

Reckless caution: 56% of savers say their risk appetite is low or zero – Money Marketing [15]

UK trains packed to near double capacity, disruption hits 17-year high – Guardian [16]


Long-term US bonds beat the US stock market over past 20 years – Financial Samurai [18]

Products and services

Millennials queue for hours for the new 26-30 Millennial Railcard – BBC [19]

Why overpaying your mortgage is a better bet than saving in 2019 – ThisIsMoney [20]

Ratesetter will pay you £100 [and me a cash bonus] if you invest £1,000 for a year – Ratesetter [21]

Annual household bills rise on average £150 after a year of hikes – ThisIsMoney [22]

The cost of childcare across the UK – ThisIsMoney [23]

Homes for New Year’s renovation projections: In pictures – Guardian [24]

Comment and opinion

Larry Swedroe: There are no safety flags in investing – ETF.com [25]

Forgotten bear markets – A Wealth of Common Sense [26]

10 valuable personal finance lessons learned in 2018 – The Simple Dollar [27]

Sequence of returns revisited, and other uncertainties – The Retirement Cafe [28]

Merryn S-W: The best financial advice hasn’t changed in 300 years [Search result]FT [29]

Wunderwaffen: Part II – Demonetized [30] (via Abnormal Returns [31])

Rich People’s Problems: How to fly first class for free [Sort of. Search result]FT [32]

A reminder that equities are risky [US markets but relevant]Musings on Markets [33]

Dividend income portfolio reviews – Fire V London [34] & Retirement Investing Today [35]

For stock pickers: There’s still a case for owning quality tech shares – GMO [36]


Prices rising at fastest rate in six years; BRC warns of worse if no-deal Brexit – Reuters [37]

Kindle book bargains

Creativity, Inc. [Must read!] by Ed Catmull – £1.99 on Kindle [38]

Barbarians at the Gate by Brian Burrough and John Helyar – £1.99 on Kindle [39]

Start Now, Get Perfect Later by Rob Moore – £0.99 on Kindle [40]

Turning the Tide on Plastic by Lucy Siegle – £0.99 on Kindle [41]

Off our beat

How not to be stupid – Farnham Street [42]

Chinese censors are first taught the truth so they know what to ban – New York Times [43]

“I met my boyfriend 12 years after giving birth to his child”BBC [44]

How to develop better habits in 2019 – Ryan Holiday [45]

Five books that explain why it seems the world is so fucked – Mark Manson [46]

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 [47]

Like these links? Subscribe [48] to get them every Friday!

  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”. [ [53]]