Good reads from around the Web.
When engaged in the Fool’s Errand of active investing, one must always think relatively:
- Yes, the Eurozone looks troubled but it’s doing so much better relative to a few years ago.
- Yes, auto sales are very low in Italy, say, but more importantly they’re relatively low compared to the long-run average, so they should eventually mean revert.
- Yes some share looks expensive, but it’s relatively cheaper than the market.
… and so on.
As for passive investing, its appeal is founded on a principle of relativity. By aiming to get just the market return – minus the lowest possible costs – you’ll very likely do relatively better than most active investors who aim to beat the market but who pay a high price for trying to.
Combining these two lines of thinking is an article over at Morningstar about John Bogle’s concept of ‘relative predictability’ .
The author John Rekenthaler argues it’s Jack ‘Father Of The Index Fund’ Bogle’s least appreciated insight:
Relative predictability – a phrase that Bogle mentioned in passing to me, in a conversation last week – is something altogether different.
The relatively predictable asset is the asset that behaves as expected, given the performance of the financial markets.
Relative predictability has nothing to do with the usual statistics that measure absolute levels of risk. It cannot be measured by standard deviation.
Relative predictability is unrelated to volatility.
In its realm, cash can be highly risky and stocks can be fully safe.
Read on to discover its applications. The concept is a wonderful piece of investing philosophy that had me screaming “Yes! Yes! Genius!” as it cleared up a few fuzzy notions that I’ve been obsessing over for years.
Although if you get out more and have a rich home life, your mileage may vary…
Enjoy the weekend!
From the blogs
Making good use of the things that we find…
- Set it and forget it works – Rick Ferri
- Extraordinary claims require extraordinary evidence – Vanguard
- Evaluating debt ratios and pension ratios – UK Value Investor
- Will rising rates murder the US market? – Investing Caffeine
- Considering business risk – A Wealth of Common Sense
- On commodity pricing – The Value Perspective
- Where did all the US listings go? – Abnormal Returns
- Extreme investing – The Investor’s Field Guide
- Evaluating unicorns [$1bn tech start-ups] – Musings on Markets
- Success is even better after self-destruction – Mr Money Mustache
- The Escape Artist recommends… – The Escape Artist
- RIT’s portfolio: Warts and all – Retirement Investing Today
Product of the week: Degiro is a new-to-the-UK broker that offers share trading for less than £2, reports the Telegraph. Think that’s cheap? Pah, it enables you to trade US shares for €0.50! However it doesn’t yet offer ISAs and the firm operates under Dutch regulation.
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
- Bernstein: Currency hedging is performance chasing in disguise – ETF
- Roche: The world is not one homogeneous index – Marketwatch
- Fisher: This bull market could rage for years… [Search result] – FT
- …though these two investment trust managers are “alarmed” – Citywire
- Terry Smith: Bet on companies that have already won – Telegraph
- Some momentum investing candidates in the UK – Telegraph
- 13 expensive British shares that might just be worth it – Interactive Investor
Other stuff worth reading
- A home, or a tax-efficient financial asset? – Guardian 1 and Two
- ThisIsMoney’s The Investor Show name checks Monevator – ThisIsMoney
- Property prices to rise 25% over the next five years, says RICS – ThisIsMoney
- Why pension freedom is still a way off for some [Search result] – FT
- The “baffling” new £5,000 tax-free interest rule – ThisIsMoney
Book of the week: As a long-time Tesla shareholder, I’ve already drunk the Kool-Aid. But I’m still finding plenty to marvel at in Ashlee Vance’s biography of Elon Musk. I suspect it’s not exactly a Tell All, but there are enough unflattering anecdotes to keep credible the otherwise unbelievable tales of building space rockets, dreaming of trips to Mars – and reinventing the automobile industry as almost a side-project.
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- Note some 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”. [↩]