Good reads from around the Web.
I spent Friday at the London Investor Show. It was far busier – and very slightly more diverse – than a few years ago.
Sure, there was the usual preponderance of 50-something men with rucksacks and 20-something salesmen in suits. It’s always good fun watching the latter trying to decide if the former – invariably scruffy – are millionaires next door, or simply chancers who’ve come along to score free pens and biscuits.
But I did notice some guys in their 30s. And while there were literally as many young women in tight-fitting clothing giving out promos as women watching the presentations, there were at least some women watching the presentations.
I’ve been to events like this where it seemed women weren’t allowed in the building unless accompanied by a promotional stand and a bar code scanner. Surely feminism hasn’t truly won until women feel as entitled as men to lose their life savings on spivvy mining stocks?
Of course, women – superior investors, according some studies – could well be doing something more productive than listening to AIM companies explaining how wonderful they are. Something like passive investing on auto-pilot, say, while they spend their days earning an income or taking walks in the country.
Whatever, it’s clear that ‘hobbyist’ active investing remains the preserve of older men with, I imagine, as much money to lose as to gain.
I do wonder what draws these fellows to active investing. Have they not saved enough for retirement, and so see potential big wins as their only salvation? Or are they wealthier types who, like me, enjoy the pursuit as much as any pay-off?
Or do they just not know any better? Do they think picking individual shares is the only ‘proper’ way to invest?
I’ve read some articles suggesting that it’s the younger demographic who are more inclined to invest in trackers and ETFs.
Roll up, roll up!
All that to one side, the busyness of the show suggests to me that we’re closer to the middle or the end of this long bull market than the beginning.
I don’t intend to do anything radical based on my impressions – and I’m certainly not suggesting you do. Your time horizon and your risk tolerance should determine your asset allocation, not how many investors show up at some promotional jamboree in London. Any more radical changes in your exposure to shares are best saved for apparent extremes of over- or under-valuation, and I’m not saying things look super-frothy.
But I do think equity investing is more attractive to the mass market than it has been for many years. Bull markets attract people, whereas of course it’s bear markets that should logically draw them in.
I’ve long wondered what the audience for Monevator would be like if investing in shares ever became really popular again.
We may yet find out!
From the blogs
Making good use of the things that we find…
Passive investing
- Safeguarding your asset allocation – Oblivious Investor
- Index fund mislabelling creates problems – Rick Ferri
- True & fair cost calculator [Note: I’ve not tested it!] – Online Tool
- Most investors are under-diversified – Capital Spectator
Active investing
- Research: Small caps still outperforming [PDF] – Allianz GI
- An easy mistake made by dividend investors – Clear Eyes Investing
- Valuing new shares in a US athlete [!?!] – Musings on Markets
- In support of corporate euthanasia – Beddard/iii blog
- The ‘income sandwich’ porfolio – DIY Income Investor
Other articles
- A cheat sheet to re-inventing yourself – Altucher Confidential
- Investing as a hobby… – Abnormal Returns
- …though 99% of long-term investing is doing nothing – Dumb Money
- It’s cheaper to rent in Barcelona and commute to London – BBINWL
- A [flawed?] attempt to measure risk tolerance – Wade Pfau
Product of the week: Ethically-minded savers frustrated that the Co-Op Bank has somehow ended up in the hands of hedge funds are looking to Reliance, the banking wing of the Salvation Army, reports The Guardian. The top brass draw less than £500 each in annual bonuses and mortgage rates start at 2.49%, but it doesn’t do credit cards.
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
- Passive beats active: The science bit – Swedroe/CBS
- Choose assets, not shares – John Redwood/Telegraph
- Good stock advice doesn’t come from TV – Guardian
- Governments shouldn’t push indexing [V. silly article] – CNBC
- Fund giant Fidelity is launching ultra-cheap, Vanguard-beating ETFs in US – Investment News
Active investing
- How to invest in the energy market – Telegraph
- Investors flocking to hedge funds that don’t hedge – Alpha
- Why you’ll never be a Yale superman [Techie!] – FT Alphaville
Other stuff worth reading
- Beware: The age of bullshit investments is back – New Yorker
- Ten ways to cut the cost of driving – Guardian
- Coming soon? Paying in cheques via phone photos – Telegraph
- Comping: The hobby of doing competitions – MoneySavingExpert
- Britain is finally bouncing back – The Economist
Book gadget of the week: Amazon’s promo for its latest tablet – the Kindle Fire HDX
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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”.” [↩]
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Wonderful, so laptop prices should fall, then?
Thanks for this. I share your view that there may not be much upside to come in terms of valuations, but I won’t be selling out on any scale, unless we do see some take off from here.
I *think* I’m relaxed about notional equity losses as long as I feel that the dividend base is now reasonably stable. Famous last words . . .
If interest rates stay low, investing in shares may become popular amongst retiring baby boomers downsizing from expensive houses and using the proceeds to generate an income, probably via Equity Income funds held in ISAs.
There also be a one-off flow of investment into Investment Trusts as more folk become aware of their existence, more platforms offer them and post-RDR, more IFAs recommend them. Then fraud and scandals will follow.
I was wondering the other day why, if Investment Trusts are such a good thing and date back to the 19th century, Unit Trusts were invented. Unit trusts were created in the 1930’s in the aftermath of the 1929 crash. I am just reading http://eh.net/encyclopedia/article/bierman.crash ….
I should have added that I have nothing against Investment Trusts and, indeed, they form part of my portfolio.
Furthermore, the second paragraph above should have ended with the sentence “Twas ever thus.”
Am I a rare female reader of your blog then?
Suspect a large portion of women don’t have time (or cash) to go active stock chasing. They are chasing their children or partners around whilst holding down a job (probably part-time).
I am rare in being unpartnered and childless, plus being obsessed with being able to chuck my job in early.
I just spent 30 mins wondering and researching if I should go to a fixed price energy tariff – I don’t have time or inclination to be wondering about individual stocks as well!
I do have a few active funds from when I didn’t know any better but it’s index funds all the way now.
But I do try to remember how lucky I am – I have a well paid, relatively safe job and have always saved and been able to save.
A male relative of mine is in his mid 60s, in a minimum wage job and can’t afford to have NHS dental work done – his energy decisions are far more urgent than mine. How to give him money for Christmas without embarassing him?
> I’ve long wondered what the audience for Monevator would be
> like if investing in shares ever became really popular again.
Well, this active investor from across the pond who picks individual stocks and avoids all funds will continue to visit 🙂
@Grumpy Old Paul — I’ve been re-reading The Great Crash by JK Galbraith recently, and it’s pretty clear why the word ‘investment trust’ vanished from the US lexicon after that. (Though they do still have a few “closed-end funds”, as they more consistently call them). It’s surprising split-capital trusts didn’t do the same to investment trusts here. Perhaps the venerable old school trusts had sufficient momentum and goodwill to see the sector through.
I’m a big fan of investment trusts, but they do suffer from having to know what you’re doing with them. I personally believe that Unit Trusts are on balance better for the industry than for investors versus investment trusts, to answer your question, though there’s no doubt ITs have significant downsides, too.
@Sarah — You sound a bit like me (albeit I’m not revealing myself to be a female here!) I’m pleased to say we have a *lot* of female readers of Monevator — far more than the average investing website, I believe. Not sure why, possibly it’s my co-writer’s accessible style, possibly it’s the passive fund focus, and I think we’ve also been lucky enough to capture the attention of some smart groups of online women here and there who do refer to the site.
For anyone who thinks I was exaggerating, Ed at Stockopedia posted this image of his stand at the show yesterday:
https://twitter.com/Stockopedia/status/393833147496140800/photo/1
p.s. I’m curious why you still keep the active funds, if you’ve been converted to passive investing? 🙂 Not saying you’re doing anything wrong, just curious.
@George — Good to see you’re still checking in! I wasn’t suggesting Monevator’s audience would go down, though I appreciate the support. 🙂 I think in general the site would become more popular — some may defect to active investing but overall there’d be many more investors out there.
Plus there’s always my scurrilous raids into active territory, like my recent buy of the Edinburgh Investment Trust, to tempt the more active in…
@All — I missed this one yesterday. It’s a desert island portfolio approach from a US asset manager, but there’s lots to interest more active UK investors, too.
It’s basically asking “what assets look good value now if I can ignore the headlines?”
http://www.researchaffiliates.com/Our%20Ideas/Insights/Fundamentals/Pages/F-2013-10-Desert-Island-Portfolio.aspx
@The Investor,
I don’t wish to disappoint you but if investing in shares became really popular I don’t think your audience would increase massively. The majority of latecomers to the party would be looking for share tips to make huge amounts of money quickly and with no effort. They would be catered for by share tipsters and latter-day Bernice Cohens.
Most latecomers would have no knowledge or interest in the academic research which underpins many of your posts be it about portfolio construction or behaviour finance. The posts by you and your co-blogger are far too cerebral and balanced to have mass appeal. They also require readers to think and to quote Bertrand Russell ‘Most people would sooner die than think; in fact, they do so.’ .
Galbraith’s tome is on my reading list. The Berman paper is fascinating in its description of the US investment trusts: how heavily geared they were, how their portfolios were often not made public, how concentrated their portfolios were in utilities etc. We can learn lessons from history both at a personal and political level. It’s a pity that the subject is so under-valued.
@Sarah,
You sound a little like a younger,female version of myself. There is a risk of becoming obsessive about all of this financial stuff, especially if you live alone, have few distractions and no-one to gently make fun of your foibles. Be aware that you may live to have your regrets about not have seized opportunities and enjoyed life to the full when you were younger.
Personally, so far as finance is concerned, I concentrate on the big picture both as far as investment is concerned and also with regard to saving money. I’ll make some effort if I can make significant savings or make smaller savings which require little effort and entail no loss of quality of life but I’ll leave re-using teabags and the like to others. In my experience, that sort of thing doesn’t add up to a row of beans. But for people like your relative the picture is very different. Can you give him some help and advice? Give a man a fish….
I hated work too so I can sympathise there. For most people today, it’s far more difficult to make an early escape than it was 10 years ago when I scaled the razor wire. However, let me tell you I got far greater satisfaction from leaving the salariat than from paying off mortgages!
@GOP
I was that guy, ’98 to ’99 🙁 I still retain the jam-packed A4 folder of contract notes as a memento of what irrational exuberance looks like…
You’re the first person I’ve come across who isn’t using this phrase as a reason/excuse to carry massive debt and spend more than they earn 😉
“Galbraith’s tome is on my reading list.” It’s no tome; it’s light, brisk and very funny. He may have been a rotten economist, Galbraith, but he’s a marvellous economic journalist. I’ve read it three times – it never palls.
Why haven’t I moved the active funds money? – Oh dear – Um – laziness?
It’s not a lot of money luckily and I’d probably gain very little from moving it, plus it’s ISA protected – see it as my dip into speculation 😉
Although single I don’t actually live alone plus I am a manager so I get my foibles pointed out to me on a regular basis!!
I enjoy my life too – no reused teabags for me. I own a car (I’ll never be rich with one of those!) and I like to be warm and I go on holiday. But I’ve never been into stuff particularly – clothes, knick knacks etc. My biggest downfall is books and the public library relieves the cost of that addiction to a large extent (until the council can no longer afford them anyway).
I like gadgets too but bargain hunt on them.
I agree though that it can be hard sometimes to get the balance and remember that “there are no pockets in a shroud” but at the same time I don’t want to be 80 and afraid to turn on the heating either.
Better late than never,can sum up my situation
How I wish I knew about finance/investing aged 20 or even 40
Aged 47 still taking out 1k to 3k loans every few years a slave to debt.
First target was budgeting,stopping the loans(tick)
Second target,paying off debt(tick)
Third target paying off mortgage(will be mortgage free 2014)
Final Target(investing 2015)
Will swap mortgage payments for vanguard lifestyle fund isa
It’s been a slow process changing my financial situation,but I can only focus one target at a time.
ps.sarah–I would of thought a kindle is made for you
I bought a Kindle, but like Sarah am a big fan of my local library.
Cue interminable disagreements with my lovely wife over why I request books from the library when I could have them that day on my Kindle.
I’ll buy a Kindle book if the library doesn’t have it/if their copy is several editions out of date/if it’s out of print. I also seem to end up buying a lot of finance texts for the Kindle, largely because these are focused on the US and not always published here.
At the end of the day, however, it’s just a shiny way to get you to part with some more of your hard earned pennies. I’ll use it when it fits me, but not just because it’s ‘easier’!
One of my pet theories is to stop investing in equities if the FTSE All Share Index dividend yield drops below 2.5%. Its currently 2.7% but with forecast yield of 3% according to Digital Look.
I probably won’t sell at that point, but just put any new money into mortgage overpayments, and Cash ISAs/gilts/linkers if they are yielding higher than the FTSE and inflation.