SOMETHING FOR THE WEEKEND
As a journalist who now works mainly in the investing space, I’m fascinated by the interface between those two very different worlds. Journalism.
The investing industry’s “sell side” needs the media. Asset managers in particular spend a fortune on advertising; indeed without those ads the money sections of national newspapers would probably no longer exist.
But as well as advertising space, the industry wants editorial influence too. Bluntly, it needs journalists to keep writing about its products. So it pays financial PR companies to bombard news desks with press releases to feed the insatiable demand for “stories” and “expert” comment; it funds glitzy awards nights where the winners are often the journalists and publications who’ve been the most “on-message”; and it offers journalists boozy lunches, tickets to sporting events and even junkets overseas. All of which is paid for, ultimately, by consumers.
The shocking truth about UK fund fees 1/3
It was back in 2011 that I left the general news beat and set my journalistic sights on the investment sector. What shocked me most about this industry as I began to look into it was how hard it was to work out exactly how much UK consumers pay to invest.
Amazing as it seems, five years later I still don’t know. Even financial professionals — advisers, consultants and journalists — who’ve worked in this field for far longer than I have are unable to put a figure on it. Many, frankly, don’t even have a clue.
I say I don’t know, but I’m getting closer to working it out, or at least working out who to go to for reliable information. For me, the person who has a better handle on this than anyone is Dr Christopher Sier, one of my fellow volunteers on the Transparency Task Force, who has been researching the cost of investing for many years.
The shocking truth about UK fund fees 2/3
Here are five other lessons to learn from Christopher Sier’s research.
The risk and rewards of evidence-based investing: Video 1/2
That risk and reward are related is one of the first things — if not, the first thing — that investors are supposed to learn. Markets reward investors for risk. Of course, there’s no guaranteed reward — otherwise it wouldn’t be risk — but, generally speaking, the more risk you take, the greater the reward you can expect over the long term.
But, being human, we often either forget, or choose to forget, this fundamental fact. It’s a tendency the investing industry loves to prey on with its seductive marketing and fancy-sounding, and frankly misleading, terms like risk parity, absolute return and downside protection. It knows that people choose to buy a product when they feel good about it, and who wouldn’t feel good about a fund that claims to offer greater reward with less risk?
The risk and rewards of evidence-based investing: Video 2/2
So, how do the returns of a portfolio that is tilted towards the different risk factors compare to those of a broad market index? This video that we’ve produced for Independence Advisors explains the sort of pattern you can expect.
Other TEBI posts you may have missed
Also worth reading
Bill Gross and the 40-year black swan (Ben Carlson)
Threats lurk where you’re not looking (Morgan Housel)
Adviser or validator — which do you want? (Barry Ritholtz)
Why do most women fear the stock market? (Claer Barrett)
What to do when nobody is buying stocks (Mitch Tuchman)
The joys of a minimal-effort investing philosophy (Jonathan Eley)
Paranoid is no way to run your personal finances (Carl Richards)