Good reads from around the Web.
We’re all investing nerds at Monevator, so we love to dive into the minutia.
Take The Accumulator’s recent wide-ranging review of the various ways passive investors might get a slight edge over the market through return premiums – only to conclude at the end that perhaps it wasn’t worth the bother, anyway!
I love that we’re at a point where we’ve covered all the basics and can now indulge in these amuse-bouche.
But I also worry that newcomers might get the wrong idea.
Passive investing in broad index funds is extremely simple to implement, and it has the best shot of delivering what 98% of investors who stick with their plan require.
All the rest is so much noodling.
That’s one reason why I try to occasionally remind everyone that it doesn’t matter much what tried-and-tested asset allocation approach you pick, provide it’s cheap, sensible, and somewhat diversified.
Some asset mixes will of course prove more profitable than others over the long-term, but you almost certainly can’t know which in advance.
Another reminder comes from Canada’s finest index investing export – the Canadian Couch Potato – who has just revealed the 2014 returns for the various passive portfolios he tracks.
And this year, like most years, they all did about the same, returning from 9.8% to 10.8%.
Now if you’re already rushing over to see how to change your portfolio to be more like that 10.8% marvel, then you’re missing the point.
Next year the fortunes might be reversed. Or the year after. And anyway, it’s the 10-30 year return that matters.
As the Couch Potato himself says, the important thing is to just do it:
The point is not that cost is unimportant.
But if you’re just getting started and you’re intimated about building an ETF portfolio (and I’ve heard from many readers in this boat), a balanced fund is great choice, even if it isn’t the absolute-lowest-cost option.
The point is it’s easy to set up a portfolio to do 99% of what you need.
Indeed, Vanguard’s LifeStrategy funds make the entire thing trivial.
In contrast, I had a conversation with a good friend last night who again asked me how he should get started with investing.
I am not exaggerating when I say I’ve had this conversation with him for nearly a decade. He wants to get started, but he wants to do it best. So he puts it off until he has the time and interest to research it all properly (as he sees it).
A time that never comes.
Action paralysis has a cost. As Tadas Viskanta put it over at Abnormal Returns:
The pursuit of ever better outcomes is likely to lead to progressively worse outcomes.
Don’t worry. Be happy!
Reminder: The deadline for self-assessment tax returns is fast approaching. Act now to keep HMRC off your back, warns The Guardian.
From the blogs
Making good use of the things that we find…
- The danger of one-year performance numbers – A Wealth of Common Sense
- Grandma’s investing lessons – F5FP
- What matters [US tax stuff but still relevant] – White Coat Investor
- Good discussion/debate on passive investing [Nb: Year old] – Y Combinator
- Good times teach only bad lessons – The Reformed Broker
- Will the US market suffer a hangover in 2015? – Investing Caffeine
- Three years into building a HYP – Retirement Investing Today
- Investing consistency – Oddball Stocks
- Reversion to the mean trumps extrapolation – The Value Perspective
- Investing advice for a new son – Clear Eyes Investing
- …more investing wisdom for children – The Psy-Fi blog
- Shopping with Tom and Jerry – The Escape Artist
- FAQ on how to become an idea machine – James Altucher
- 2015: The year of win – Under the Money Tree
- Get your brain back in 2015 – Mr Money Mustache
Anti-products of the week: Many cash ISAs are paying just o.1% reports ThisIsMoney in its roundup of the worst offenders. It might not seem worth moving your cash for just 2% a year, but after five years of near-zero interest rates, the cumulative impact has been significant.
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
- Beating the market seems to be getting even harder – Market Watch
- Swedroe: Owning individual stocks is riskier than many think – ETF.com
- Dividends can power long-term returns – ThisIsMoney
- John Lee: Hoping for a more eventful 2015 [Search result] – FT
- 2014 hedge fund winners [Nb: Average did just 1.6%!] – Bloomberg
- Housel: Don’t spout your hindsight bias around here – Motley Fool (US)
- Fears of a property slowdown hit UK housing shares – Telegraph
Other stuff worth reading
- 5 money lessons from Downton Abbey – CNN
- Britain’s self-perpetuating property racket [Search result] – FT
- Some banks are granting 100% mortgages to students – Guardian
- 500 miles in a delightfully dull self-driving car – Wired
- We must leave these fossil fuels buried, warns new research – Guardian
- How being active keeps us young – Washington Post
Book of the week: I don’t have any new investing books to point you to this week, but I can say Light Years by James Salter is the first novel I’ve been gripped by for years. Stunning, melancholy, sad, true.
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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”.” [↩]