Good reads from around the Web.
I enjoyed the rundown by the anonymous author of Retirement Investing Today of all the things he got wrong when he first planned his journey towards financial independence.
From his (underestimated) capacity to save to (overestimated) annual charges, the first Excel spreadsheet he produced was full of errors.
Don’t you love it when people admit their mistakes? Their credibility instantly soars in my eyes.
Anyway, there’s one landmine that RIT sidestepped, and that has made all the difference.
Looking back I made a lot of errors in those early 2007 days.
With so many errors did I actually get anything right, I hear you ask?
Given I’m less than a year from financial independence as I write this post, I think I got one thing very right.
I started.
Bravo, RIT.
And happy Easter everyone.
From the blogs
Making good use of the things that we find…
Passive investing
- Smart Beta Crash Coming? – A Wealth of Common Sense
- The problem with average – The Irrelevant Investor
- Why do we bother? – The Evidence Based Investor
- Expected returns [Canadian but relevant] – Canadian Couch Potato
Active investing
- Looking differently at Morrisons – The Value Perspective
- Berkshire Hathaway is safe and cheap – Base Hit Investing
- Cutting losses with Fisher’s three sell rules – Investing Caffeine
- The S&P 500 still looks expensive – UK Value Investor
- Weird portfolios have more potential – The Investor’s Field Guide
Other articles
- Billionaire nerds make the world better – Mr Money Mustache
- Pocket money rate cuts – Principles and Interest
- How to avoid the short-termism problem – Pragmatic Capitalism
- Uncertainty in retirement plans [US but relevant] – C.I.R.Y.
- Would you regret retiring abroad? – SexHealthMoneyDeath
- Where the wealth was all along – Raptitude
- “Freedom to” is what retirement is about – Simple Living in Suffolk
Product of the week: The tax-free Rent A Room allowance rises to £7,500 from April. Experts in the Financial Times [search result] say that’s increasing the appeal of Rent A Room mortgages, such as the one offered by Bath Building Society.
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
Passive investing
- Swedroe: Don’t bother timing the return premiums – ETF.com
- 86% of active fund managers under-perform [Search result] – FT
- Index funds and the curse of benchmarks – Morningstar
- Bogle warns you won’t make much from US assets – MarketWatch
- [Beware] talk of crash in $3 trillion ETF industry – Interactive Investor
Active investing
- Donald Trump lost money in 18 of his 21 hedge funds – ThisIsMoney
- Time to invest in agriculture? – Telegraph
- Structural illiquidity in today’s bond market – Business Insider
A word from a broker
- Value versus growth investing – TD Direct
- Dividends: Winners and losers – Hargreaves Lansdown
Other stuff worth reading
- Boomers vs Gen Y: House buying in 1982 vs 2016 – Telegraph
- Young drivers love black box car insurance – Guardian
- Affordable housing crisis engulfs all cities in Southern England – Guardian
- How pension savers have fared, post-freedoms – Guardian
- Boat racers typically want to work in finance – Bloomberg
- How bubbles spread like a zombie virus – Bloomberg
- Present bias in spending – Scientific American
- The glory of compound interest – USA Today
Book of the week: As the Governor of the Bank of England during the financial crisis, Meryvn King would have an interesting story to tell. However from the interviews I’ve seen with him over the past few days, I’m not sure what to expect from his new book, The End of Alchemy
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- 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”. [↩]
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I think W.H. Murray the famous scots mountaineer nailed the point..
“Until one is committed, there is hesitancy, the chance to draw back– Concerning all acts of initiative (and creation), there is one elementary truth that ignorance of which kills countless ideas and splendid plans: that the moment one definitely commits oneself, then Providence moves too. All sorts of things occur to help one that would never otherwise have occurred. A whole stream of events issues from the decision, raising in one’s favour all manner of unforeseen incidents and meetings and material assistance, which no man could have dreamed would have come his way. Whatever you can do, or dream you can do, begin it. Boldness has genius, power, and magic in it. Begin it now.”
I’m halfway through the End of Alchemy at the moment and from what I’ve read so far, it’s worth the money. Mervyn King makes it clear straight away that this book is not a memoir of his time at the Bank of England during the financial crisis. The book in general is an analysis of the financial system and how the current model does nothing to address systemic risk. His primary and most noticeable proposition is a fundamental adjustment over time in the role of the central bank to a “pawnbroker” model: where the BoE agrees a specific haircut on the assets on their balance sheet in advance.
All in all, I really like this book so far. It’s a comprehensive and collective book on the purpose, history and future of the financial system in a well written and easily understandable manner. There’s a lot of things inside that are thought-provoking and warrant interest.
(shameless plug but I’ll post a full review on my blog once I’ve finished it 🙂 )
Oof, Bogle doesn’t pull his punches. “Adjusted for inflation .. Bogle thinks a balanced portfolio will return 1.5%, barely increasing purchasing power.” Less fees etc and you’re at 0% for the next decade.
Being a forced seller (or buyer) would be my largest mistake to avoid in future. Beware if moving overseas, in particular.
my big regret is that I didn’t start 5 years earlier, but at least I started!
It could have been a lot worse I could have started now, and been really struggling to retire comfortably at 67.
Berkshire Hathaway. I agree it is a good value now. The question is: what will be the future of the company without Buffet?
Can anyone help me? How can I upload my profile picture?
Why Buffett’s big-cap Berkshire Hathaway will outperform Russell 2000 (small-cap stocks): http://www.marketwatch.com/story/why-buffetts-berkshire-hathaway-is-still-a-better-bet-than-small-cap-stocks-2016-03-08
The secret of any success like value investing: “Discovery consists of seeing what everybody has seen, and thinking what nobody has thought.” – Albert Szent-Gyorgyi (Hungarian Nobel Prize winner)
@Gregory — Register the email address you use here for Comments at Gravatar.com. 🙂
@The Investor — Thanx. I will try.
Happy Easter Monevator! Thanks for the blog, I really appreciate it!
Happy Easter all and thanks for the long weekend links, TI.
The Irrelevant Investor explores the nature of volatility and how big the standard deviations are of annual returns. And worse — stock market distributions are “tailier” than Normals so you get to assume that you see 20-sd from time to time when Normals just give you 3-sd. The underlying process might be Markovian (dependent on where it is) or worse, but either way it’s clear that today’s movement is not truly independent of yesterday’s. So you can’t really do traditional probabalistic analysis. He’s fairly quick to jump to the idea that therefore the average isn’t useful (12% average annual return, 20% standard deviations). But the step he fails to show is what happens to that standard deviation over longer time periods. For independent variables, the standard deviation drops like the root of the number of samples but the mean remains (geometrically) the same. So a 9-year view is 3 times less variable than a 1-year view, but the mean growth is the same. So while one-year returns are swamped by standard deviations, out at 10 years, they are roughly 2-sd, and at 30 years, they dominate. Time doesn’t just give us compounding — it gives us smoothness.
Ermine has published his magnum opus on work this week. It’s worth a read (make sure you have a cup of tea and Easter egg to hand) — even if only to figure out which bits don’t chime with your own experience. It’s a particular view (introverts hate work but love retirement). While it is clear that FI shortening the time that you spend doing something you hate (working) from 35 to 25 years is a good thing, that does still feel like 25 unhappy years to me, which would be better filled with 30 years of happy introvert-friendly work. There’s a lot which is the product of its time and employment in a large corporate, and a world view that comes from “working for the Man”. Do we still do that? I think the opportunities not to do so are certainly more varied. And ultimately I disagree with the fundamental conclusion — for me, FI isn’t about freedom from work, it’s about freedom from compulsion to work. Certainly worth a read and much to think about.
TEBI this week rightly sings the praises of Monevator and its ilk. Why do they do it? They are the last dam against the tide of BS which a bloated and profitable industry can afford to flood its moat with to repel invaders. Bravo.