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Weekend reading: What a drag* it is getting old

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What caught my eye this week.

How are you feeling? Pretty comfortable? Enjoying the stock market recovery? Ready for a relaxing weekend?

Well I’m here like the Angel of Bad Breath to cause a stink with the following miserable graph, which comes courtesy of The Retirement Field Guide via Abnormal Returns:

The graph shows how after the age of 60, financial literacy decreases by about 1.5% a year.

As author Ashby Daniels says:

Nobody likes to think about getting older. Even less so, nobody likes to think about the decline of their mental health.

But the harsh truth is that as we get older, our cognitive abilities decline. This is especially true with regard to personal finances.

In an era when we’re being charged with taking control of our finances as never before – from how we save for retirement to how we invest our pensions – this seems to me a wrinkled grey elephant in the room.

Older and not wiser

Even worse of course is that we don’t want to admit to any decline. Just as we’re all better-than-average drivers, so we’re destined to believe we’re on top of our finances long after we’re not.

And let’s face it, older people aren’t exactly receptive to being reminded of these issues. My mother already thinks young people have it in for her generation by questioning its stance on Brexit.1 It’s easy to guess how they’d take to being told they don’t know best what to do with their own money.

I’m saying “they” but I appreciate not a few of you are in this older age group. Besides, I know what I’d say if confronted for the first time at 75 by someone saying they needed to take control of my investments (er, “f…lounce off!”) so we’re all in this together.

Clearly there needs to be more discussion – not least on our own site – as to how to guard against the potential downsides of poor decision-making in our later years. Children should be involved before they’re needed if they’re around, capable, and willing. If they’re not all three, there’s a role for trusted friends or professionals.

Many of us may aspire to remain mentally agile Warren Buffett types at 90 – that’s long been my goal – but it’s not in our gift to make it so, however many crosswords we do and new languages we try to learn.

“I’m mismanaging my own money”

Incidentally, this decline also has a potential impact on asset allocation decisions and other aspects of portfolio management that you rarely see referenced in the literature.

At the least it’s a tick in the box for underwriting your minimum income requirements with a simple annuity.

I also wonder if I should better incorporate it into my arsenal in my on-running guerrilla war against the “Screw income, total return is all that matters, sell capital each year!” passive orthodoxy.2

I’ve noted in previous skirmishes that calculating how much to withdraw and selling down your capital each year might seem a fine plan at 45, but it could be terrifying prospect for a mentally slipping and frightened 80-year old.

Monevator contributor The Greybeard has pondered this quandary, too.

Perhaps relying on a portfolio of income generating funds dumping cash into a current account (i.e. not even bucketing) would also be beyond me in that state but it seems intuitively to be a lower hurdle.

Again, what a shame (most) financial professionals don’t have the same reputation as say doctors. There’s an obvious need here. But not an all-encompassing obvious solution.

Enjoy the weekend, whatever age you are!

*A drag on your returns. Geddit grandpa? What, you’re only 26? Oh, it’s sort of a pun.

p.s. I’ve closed the poll in our great debate about whether to include your house in your net worth number. In the end 54% of you voted yes and 46% said no, with nearly 1,200 readers voting. The comments on that article were excellent, too – well worth a read if you’ve only seen the post over email. Thanks to everyone who chipped in!

From Monevator

Possibly more than you ever wanted to know about bond index funds – Monevator

We updated our broker table, and there’s a couple of new entries – Monevator

From the archive-ator: Gold as an asset class – Monevator

News

Note: Some links are Google search results – in PC/desktop view you can click to read the piece without being a paid subscriber. Try privacy/incognito mode to avoid cookies. Consider subscribing if you read them a lot!3

Did grandad have it easier? FCA to study financial divergences between generations – FCA

Bank of England raises growth forecast; warns more rate rises probably needed – BBC

Fresh HMRC tax crackdown on freelance contractors [Search result]FT

First-time buyers benefit from weak house price growth – Guardian

Millionaires flee the politics of their homelands [3,000 left Britain last year]Bloomberg

UK call centre to trial four-day week for hundreds of staff – Guardian

The world’s richest institutional investors, ranked – Institutional Investor

Universal credit regulations ruled unlawful by High Court – Guardian

There’s a premium nowadays on professionals who’ll be available 24/7 – New York Times

Products and services

Equity release: how to squeeze money out of your home [Search result]FT

Future of 1p and 2p coins secured ‘for years to come’ – BBC

Ratesetter will pay you £100 [and me a cash bonus] if you invest £1,000 for a year – Ratesetter

Track your portfolio with Rebo [In Beta, the creation of a UK money blogger]Liberate Life

Checking out the UK’s first till-free grocery store [Search result]FT

Out of the ordinary houses for sale [Gallery]Guardian

The inside story of Amazon Prime – Vox

Comment and opinion

Wrong approach – Humble Dollar

Lars Kroijer interviewed by Meaningful Money on how to invest [Video] – via YouTube

Is ‘direct indexing’ set to disrupt the ETF market? – Wealth Management

How to invest given that investing is a commodity – Bone Fide Wealth

Useful and overlooked skills – Morgan Housel

Should we tax frequent flyers more heavily? – Simon Lambert

Becoming a financial advisor could be a great career move for will-be mums – The Belle Curve

Are investors paying lower – or just different – fees? – Morningstar

Psst! Wanna buy a wind farm? – DIY Investor (UK)

Glass half-empty becomes glass half-full – Investing Caffeine

Brexit

Brexit has drained £30bn from UK-domiciled funds, says Morningstar – Investment Week

The local elections looked like a kick against Leaving, but media not sure – via Twitter

Theresa May also claims people voting for non-Brexit parties is a mandate for Brexit – BBC

Remain Voter website aims to help Remainers vote tactically in Euro elections – Remain Voter

Get Voting app should get you on the electoral roll with minimum fuss – Get Voting

Buy a £1.7m villa in Cyprus and qualify for a Golden Visa to stay an EU citizen – ThisIsMoney

Kindle book bargains

So Good They Can’t Ignore You by Cal Newport – £0.99 on Kindle

Nudge: Improving Decisions About Health, Wealth and Happiness by Richard Thaler – £1.99 on Kindle

Zero to One: Notes on Startups by Blake Masters and Peter Thiel – £1.99 on Kindle

The Personal MBA: A World Class Business Education in a Single Volume by Josh Kaufman – £1.99 on Kindle

Off our beat

The minimizing coin – Seth Godin

The gambler who cracked the horse race betting code – Bloomberg

The $70bn quest for a good night’s sleep – Fast Company

The story of London’s tech start-up scene, as told by those who built it – Wired

Fancy graphs showing how the world’s population is changing – Visual Capitalist

She was “the queen of the mommy bloggers”. Then her life fell apart – Vox

The errors that I don’t see – Of Dollars and Data

Turns out coffee pod machines are [sort of] good for the environment – Wired

Let sleeping co-workers lie – Slate

How Uber changed Silicon Valley [Search result]FT

Scientists find cocaine in river shrimps in Suffolk – BBC

And finally…

“When I was a kid my father told me there were two kinds of people in the world: smart people and wise people. Smart people learn from their mistakes. Wise people learn from somebody else’s mistakes.”
Brendan Moynihan, What I  Learned Losing A Million Dollars

Like these links? Subscribe to get them every Friday!

  1. No, not every young person. No, not every old person. But a valid generalisation. See: https://twitter.com/SkyData/status/746700869656256512 []
  2. Which includes my own co-blogger, who I have immense respect for so obviously I’m teasing a bit with my language here. Also as I’ve said many times, living off income is a richer retiree’s game, and it leaves a lot of cash on the table when you die. []
  3. 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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{ 55 comments… add one }
  • 51 Ben May 6, 2019, 8:16 pm

    @dearime

    I think you’re being unduly harsh, the inverted commas indicate a somewhat non standard usage as parsing usually refers to something purely textual.

    Google gives the definition:
    parse
    /pɑːz/
    verb
    resolve (a sentence) into its component parts and describe their syntactic roles.

    Is it not reasonable to resolve (a web page) into it’s component parts?

    Re search.
    If I search for ‘fruit’ on Sainsbury’s website it will blindly give me any product containing that word. So rather than giving me apples and oranges and such, I get fruit salad (sweets), or fruitilicious shampoo or fruit of the loom t shirts. Now matching text strings is easy, you don’t need to know anything about the products, no human intervention needed.

    To start matching fruit with apples and oranges, you have to understand what a fruit is, and that apples and oranges are fruits. That starts getting difficult fast, because that’s a human judgement, so you need someone to categorise everything. That takes man hours and lots of computing power.

    That’s probably why you think search is rubbish, it makes no attempt to understand what you want, it just blindly gives you the best textual matches.

  • 52 W Neil May 6, 2019, 8:34 pm

    @dearieme, rubbish search functions. Ben can reply with a more expert answer, but in the meantime from a combination of experience and intuition, I think in most cases it comes down to the website administrators and developers not tagging the resulting web page with the correct combination of words and phrases likely to be entered by the user.

    It takes time and effort and some intuition to second guess what people may enter in order to search for a specific item or area of information, and to do it properly results in a good long list of key words and phrases to tag as triggers to return that page as a result. You really need to include misspellings and related words too.

    Most website owners don’t bother, and searches are, as you say, rubbish.

    One of the things that put Google where it is now is that its people really understood and refined these techniques to improve their search results.

  • 53 Tommy Robinson2 May 6, 2019, 8:54 pm

    Hi, bit of a request for help. I’ve been asked my several Muslim colleagues about halal investing. As you guys all know , as you know everything about investing what are the low fee options.

    Also, I’m ashamed to admit , I have some vegan friends too.

    I eat meat, drink milk and love a tracker fund !

    What can my halal and vegan friends invest in. I know Aberdeen has an option. Please feel free to recommend an article you have already produced on this topic.

    To be honest, I’ve told them to ask the scholars. But I have few ethnic European friends. And vegans don’t like to think they filled “scholars” please help

  • 54 The Investor May 7, 2019, 12:12 am

    @dearieme writes:

    Thanks, Ben. I see now that the writer didn’t mean parse so he put inverted commas around the word as a way of advertising to the reader that he couldn’t be bothered to explain himself.

    The writer has posted as of this one 4,093 comments on this website, most in response to queries, and written well over a million words in articles bothering to explain himself.

    You on the other hand have just griped and moaned for more than five years.

    I went through a period deleting your grumpy comments in the past, then relented when I decided perhaps you and @neverland had a role as some sort of vaccination.

    Revisiting that decision now.

  • 55 The Investor May 7, 2019, 12:22 am

    p.s. My comment previous comment was in fact an explanation/response to your query! It’s was half a dozen comments before your latest grumping. But perhaps you’re having trouble parsing etc.

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