Smarter Investing: Simpler Decisions for Better Results (Financial Times Series)

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Most of Albion’s clients hold advisory permissions, a few hold discretionary permissions to allow them to rebalance and to facilitate any ongoing refinements to portfolios, and a small number use external DFMs to simply implement and rebalance the in-house investment solutions we help them to build and run. Last week we took a first look at what seems to be the most popular book with UK active traders – The Naked Trader. investing is “pay-offs you can survive with, along with chances of achieving them that you can live with” and to keep your costs down (( Tim doesn’t mention being tax-efficient, which can be just as important ))

We all have a born tendency to avoid risk. This fear was very useful in prehistoric times. In those times there was danger everywhere. It would have been better to run away to many times than to be grabbed by a sabre-toothed tiger. Fortunately, there are no more dangerous tigers lurking in today’s society. Cautious investors should err on the side of short-dated inflation-linked bonds. Although this is easier said than done. DIY investing has become easier than ever, thanks to lower trading commissions, free data and instant online trading But most of the other cuts from the 1st edition make sense, and amount to a sanding down of the material into the sleeker 3rd edition available today.Nowadays, there are all kinds of methods that you can use to invest smartly. Many people mainly use old-fashioned investment methods. They only buy bonds and shares at their local bank. A major disadvantage to this method of investing is the fact that you spend a lot on transaction costs. Moreover, the return is often no higher than a few percent on an annual basis.

investors underperform by possibly 6% to 7% pa (( These poor results were for the US and Germany – UK investors seem to be a bit better, underperforming by “only” 4% pa ))The main reason to read the 1st edition is for several lost passages on the behaviour of UK bonds between 1900 and 2004. We often get asked ‘are we too small (or too big) to work with you?’. It is not about size but about attitude. If a firm is focussed on financial planning, puts its clients at the centre of all that they do, and if they want to manage an inhouse investment proposition that is based on the evidence and theory available, then it is likely we will be a good fit. That is provided you like us and vice versa! Like our financial planning clients, we are looking to work with firms over the long term. Of course, nothing is certain and Hale’s underscoring of the investing vagaries is one of the great favours he does DIY investors. Not only will this approach give you an easier life, Tim believes that it will also maximise your success. Beauty Advent calendars are significantly pricier than chocolate ones, but they've become increasingly popular in the last few years as a way of bagging beauty products at a fraction of the normal cost. They often sell out early, but can also be heavily discounted later if they don't, so here's a round-up of some of the best I’ve seen.

techniques to control your “demons” (( I assume this means bad habits and psychological weaknesses )) He cites doubts over the counter-party risk and conflicts of interest that may compromise the structure of Exchange Traded Commodity (ETC) funds run by large investment banks. While this is clearly true in the aggregate, I firmly believe that it’s possible for the UK private investor to beat the market. Perhaps the most important question of all is: “Does the 2013 third edition contain new insights that may change a passive investor’s strategy?”

The answer to this question is surprisingly simple: today! It is much more expensive not to invest in the long term. Historically, you achieve a higher return on investments in shares than on your savings. On average, the annual return on shares is around 7 percent, while the return on your savings is now negative. More chilling still is the -4% real loss p.a. that occurred over the worst 30 years of UK bond investing history or the 47 years it took to recover the real purchasing power of your bonds lost during the bear market of the 1940s to 1970s. Tim says that when he was writing the book, his friends and colleagues asked him to keep it short, since they didn’t have much time. The benefits are extra diversification and yield, though Hale emphasises the importance of ensuring global bonds are hedged to Sterling. (There’s no point taking on currency risk in the portion of your portfolio that’s meant to cushion you against volatility.)