SOMETHING FOR THE WEEKEND
Fiduciary principle
We’ve reached a critical juncture in the history of investing. All around the world consumers are demanding a better deal.
Of course, specific details differ from country to country but, broadly speaking, the problem is the same — here is an industry that is riddled with conflicts of interest. There’s a powerful coalition of intermediaries, including fund managers, ratings agencies, consultants and brokers, who are compensated for pushing expensive and unnecessary products.
Independent evidence overwhelmingly demonstrates that the less you pay to invest, the greater your net returns will be. The industry knows this all too well. But because it benefits from the status quo, it does all it can to maintain it. It does this largely with the help of its vast PR and advertising budgets, but increasingly through political influence as well.
Overconfidence..
As a fan of British tennis I’m having to pinch myself at the moment. For all my life we’ve been a laughing stock; a Brit reaching the second round at Wimbledon has been a cause for national celebration. But now we’re the Davis Cup champions and, after more heroics from Andy Murray against Japan at the weekend, we’ve made it through to this year’s quarter-finals.
We have though been conditioned over the years not to get too carried away, especially as Serbia and Novak Djokovic lie in wait in the next round.
Overconfidence is part of the human psyche. It serves us well in so many ways. But it’s very destructive in other areas of our lives — investing being a perfect example.
Attention Millennials..
With apologies to our older readers, this post is not for you. It’s aimed at Millennials — particularly those born since 1985.
I’m sure you’re tired of older generations telling you what you should be doing. But if you’re not yet saving for retirement, start now. And if you are already saving, try to save more.
Ben Carlson..
Staying on the subject of Millennials, there’s no shortage of good content online aimed at young investors. Michael Batnick, Michael Piper, James Osborne and Patrick O’Shaughnessy are among the best bloggers working in this space.
Someone you really should follow is Ben Carlson. Let’s just say that Ben’s blog, A Wealth of Common Sense, is very aptly named. Here are two of his best recent posts:
Why bottom fishing is so difficult (Ben Carlson)
Investors can make perfectly rational decisions and still end up losing money (Ben Carlson)
Mark Hebner..
Another investment writer worth following is Mark Hebner. Mark runs Index Fund Advisors in California, and he and I have recently collaborated on a major online video project (which you’ll be hearing about very soon). I found these two posts of his particularly informative:
What part, if any, should high-yield bonds play in a portfolio? (Mark Hebner)
Diversification helps you manage risk AND expands your opportunities (Tom Allen & Mark Hebner)
Also worth reading..
The industry:
Fees are falling, but the industry still wants to flog us the most expensive products (Ellie Lan)
Index funds vs hedge funds: 8 years in, Buffett’s bet is holding strong (Andy Clarke)
The financial media has its own economic interests at heart, not yours (Dan Solin)
The value of advice:
A hierarchy of the value a financial adviser provides (Michael Kitces & Bob Seawright)
Sensible investing:
Busting the myth of market timing (Simon Moore)
How do you estimate your risk tolerance? (Monevator)
Are investors too obsessed with dividend income? (Josh Brown)
Patterns are the fool’s gold of financial markets (Michael Batnick)
Have we forgotten lessons from the dotcom bubble? (Mark Hulbert)
One investor’s short-term risk can be the basis for another’s long-term gain (Craig Lazzara)
Finally, other TEBI posts you may have missed..
Asset management — the one industry that was never Thatcherised
Beware over-hyped products that seem too good to be true
Casting out sin — passive investing for Catholics
Transparency — the time for talking is over
Investors are paying for concerts and sporting events they never go to
Robin is a journalist and campaigner for positive change in global investing. He runs Regis Media, a niche provider of content marketing for financial advice firms with an evidence-based investment philosophy. He also works as a consultant to other disruptive firms in the investing sector.
