Good reads from around the Web.
First, the article calls up a fascinating study – The Capitalism Distribution – which examined stock returns from the top 3,000 stocks in the US from 1983-2007 and found:
- 39% of stocks were unprofitable investments
- 19% of stocks lost at least 75% of their value
- 64% of stocks underperformed the index
- 25% of stocks were responsible for all the market’s gains
Mebane Faber notes:
Simply picking a stock out of a hat means you have a 64% chance of under-performing a basic index fund, and roughly a 40% chance of losing money.
Ah, but we stock pickers have no use for a hat! We select shares carefully!
Sadly, whatever I think of my skills and whatever you know about yours, we can say with certainty that most people are terrible at managing an active portfolio.
This is brutally shown in a follow-up chart from Business Insider, which uses data from BlackRock and the famous Dalbar Study of investor returns:
Incidentally, check out the return on homes.
I told you guys homes have been better investments for most people, but you insisted on making it into a debate about house prices… 😉
(This is US data but I’m sure the edge would be apparent in the UK, where we’ve had even stronger property booms.)
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- Budget 2013: At-a-glance guide – BBC News
- At several more glances – BBC News
- High earners lose out from tax changes [Search result] – FT
- Other winners and losers – Telegraph
- What it means for you – LoveMoney
- Get a third opinion – The Guardian
Budget 2013 calculators:
From the blogs
Making good use of the things that we find…
- Focus on Norway, not Cyprus – Abnormal Returns
- 10 tools for building a high-yield portfolio – UK Value Investor
- Always ask: What has changed? – The Value Perspective
- Damned if you do, more damned if you don’t – Investing Caffeine
- You, investor! You’re really a trader – iii blog
- Stock picking: Just do it! – Howard Lindzon
- You have learned absolutely nothing – The Reformed Broker
- What does early retirement really feel like? – Financial Samurai
- Help to Buy = Moral Hazard – Simple Living in Suffolk
- Reader study: This one needs no help – Mr Money Mustache
- On investing time horizons – The Aleph blog
Book of the week: Here’s a reading list for ISA investors. How many of these investing classics have you read?
Mainstream media money
Note: Some links are to Google search results – these enable you to click through to read the piece without you being a paid subscriber of the site.
- Common diversification myths, part 2 – Mint
- Largest US pension fund considers going passive – Investment News
- Is a stock market bubble brewing in the US? – Swedroe/CBS
- How to invest in diamonds [Search result] – FT
- Taking stock of Apple – Fast Company
Other stuff worth reading
- Six scary post-budget graphs – The Spectator
- Will Help to Buy be used for second homes? – The Guardian
- Cyprus’s banks: Too big to guarantee – The Economist
- Britain’s 10 most affordable cities – Telegraph
- Should my estranged wife be dodging all the bills? [Search result] – FT
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