This summary we did back in 2004 resurfaced recently. It’s still relevant and a useful summary of the system change that might be …
It has long been known by investment analysts that optimising risk and return (which is their job) is achieved by tracking the market. Experienced managers, analysts and data all consistently say that, if you want to invest in the stock market buy the index. And hold it.
Young bucks, and old, would like to beat the market. Some might do so for a limited time period. But no one has consistently done so. Why? Because to beat the market you have to consistently do better than everyone else. That is cocky and statistically very unlikely.
The opportunity to make better bets than everyone else has declined in recent years as computerised portfolio management and trading has grown and index investing has become the principal approach of behemoths which control sizeable fraction of global share trading, like BlackRock.
In addition, some data suggests that taking higher risks can in fact lower your expected return, as appeared to happen in the 2000s. We are now 9 years into a bull market with little regulatory reform, growing political uncertainty and upward pressure on interest rates (which might attract capital from equities to debt).
The people who beat the market are the ones who take fees (from you) for handling money, or have inside information.
There are reasons to choose a narrower portfolio of listed equities. You might want to restrict your investment to a country, region or industry, or avoid places or sectors. But to try to pick stocks requires a consistent focus and adaptability. If you are going to do it yourself, fine. But if you are paying someone else, they generally have an incentive to take risks with your money that they mightn’t with their own. And of course their fees eat in to your capital.
So, simply, if you wish to diversify your savings beyond property (your home usually) or debt (bank deposits etc) by putting some in the stock market be careful not to be blinded by the attraction of “expected return” ignoring the danger of risk, and the cost of fees. So buy a low load (i.e. low fees), index (i.e. market tracking) fund.
(If you wish to use your capital to make a difference you might consider directly investing in small businesses. This has become more accessible with crowd funding opportunities. Or you might invest directly in a local business or a sector for which you have a passion, for example Green, Ethical, Socially Responsible businesses. But all of these options demand more care (“due diligence”) and should be approached with awareness that you can loose all of your investment, and sometimes more if you sign up for that. )
And remember, most people make money by working, not gambling. Gambling is more likely to break your fortune than make it.
This article by David Webb is insightful and brief. You may have no interest in Bitcoin, however, his observations are relevant to banking and the financial system. For me, one conclusion is that it is immoral to support (buy) bitcoin, on the level of gambling, and, if you understand it as a pyramid scheme, morally worse than gambling because the scheme is destabilising and fraudulent (in that people don’t know what they are getting in to).
The original is here: Bitcoin: the World’s first decentralised Ponzi scheme You may sign up for Webb’s free newsletter, which is particularly relevant for Hong Kong financial markets.
Here’s a nice 6 minute video that puts us in the picture. The big picture.
It’s not the whole story, but its brief and is a super introduction and a refresher for old hands..
We are past the point of stopping disruption. It was 15 oC this evening. (Ireland, December) 13 oC would be OK, maybe in the realm of normality. But 15oC is not a symptom of normality.
And then there’s the data. We believe in data because we live off it. It is data that runs our lives, our businesses, our cell phones. And data shows us what’s going on, what’s behind the hype. So check out the movie and research some data. Change is happening. Adapt.
ZERI, initiated by the founder of Ecover, explains why the “green” economy must evolve to the “blue” economy and how …
Yesterday was an unusual day filled with seemingly inane chores that had to be done. I was arriving back home in the afternoon with groceries for guests and planned to turn the hay. I drove past a field adjacent to our where a tractor was spraying and turned in to the drive to be greeted by a distasteful, though recognisable, toxic smell.
Usually I’d just accept that that landowner had to spray to make a living, but I didn’t like the idea that our hay was being contaminated while it was looking so good. Unusually, I decided to take another angle, dropped the bags on the kitchen floor, said “Hi!” to guests and spun the car around back up to the field.
After working out which row the tractor was in I walked up to the driver, who kindly stopped and helped me get n touch with the landowner.
The driver said the spray was only to stop “disease”.
The landowner said it was only to stop “disease”.
They both said it was “OK”.
The contractor couldn’t come back on a still day because he had to empty the tanks since the pesticide had been paid for. The wind might die down so he could wait a bit. I knew the spray would still be sprayed, and would drift. Hopefully little would drift, though you could see a 20 metre tail behind the tractor and smell it quarter of a kilometre away.
I asked what it was. “I dunno. Let’s have a look.”
So we did. It was Imtrex.
“Wow. Look at the labels on it! Dead fish. Dead tree. Heart attack. C’mon! This can’t be good.”
It’s weird though. It’s being sprayed right on the ears of ripening barley, and we’re going to eat it. There’s poison on it , and we’re going to eat it. We’re killing ourselves and enjoying it.
We don’t make the connection between our demand for cheap, convenient food and lifestyles and the consequential impairment of diet and lifestyle. Our monolithic food chain, standardised automated production, controlled by capitalists is withering our soul and costing our health. Apart from the increased incidence of cancer which only affects a third or so of us, almost everyone is affected by the lower quality of food – processed, refined, packaged with a fraction of the dietary health benefits of real food, but extra poison.
Yet we all buy in to it. We all live the lie. The farmer can’t make ends meet if he doesn’t. (Ironically, I found out since that this “T3” third treatment for “disease” was being applied too late, as the ears were grown, and so wouldn’t improve yield, although the farmer could prove he sprayed the “treatment”.) We can’t make ends meet f we don’t play the pyramid consumption game. So we all turn a blind eye to our gradual suicide. It’s fairly painless anyway.
But it could be different. It would be different if we all chose differently. It doesn’t have to be much at first, but even little thoughtful choices make a difference. And they lead to bigger thoughtful choice. And when everyone starts choosing differently, the world changes fast. So whether you’re in the tractor, in the shop, regulating the chemical, making the chemical, or financing the chemical, don’t turn a blind eye. Think, and choose to change a little.
Because dying can be easy or hard, and withering from poison is not easy.
Over 500 experts contributed. The consensus is that progress and attention is lagging the need for change. If data is restricted to those with a decade or more of experience the picture is worse.
Progress is dominated by social entrepreneurs and NGOs while national governments’ and corporates’ performance is considered poor.
The lack of attention by governments and corporates is underpinned by their “clients” – voters and consumers – so clearly there remains among people generally a lack of awareness of the need and opportunity for system change. People don’t perceive the dangers of failing commercial and social systems and the disintegration of Earth’s natural environment upon which we rely.
Perhaps this is not surprising. Except for change agents and social entrepreneurs, people are not engaged with the problems of the world but instead stick to traditional mindsets and routines. (The SDG’s themselves are fundamentally flawed in their promotion of growth, as opposed to working within natural laws and the capacity of the biosphere.) Continue reading Time is running out: Behind the curve on SDGs
If you are an expert in your field you have a good idea of what is going on in that area. That’s how you make a living. Most of us express views about news and events that are outside our area of expertise especially if we think that they might effect us in some way, like politics and economics. The Presidency of the United States of America is one of those things.
Everyone will be talking about the new US administration in America today. Some will be earnest, some dismissive, some joyful, some sad or angry. Irrespective of your emotions or political leanings, its impact will affect you. Continue reading Where the world is going, today.
What? Not me. No way! Slavery is bad.
Yeah, but … you’re still part of the problem. We all are.
Here’s a piece of the big picture puzzle:
That food chain is run by big companies, big banks and rich owners. (You might be one without even realising it!)
It’s fuelled by people buying foods made with industrially grown vegetable oils. That means most products on the supermarket shelves, including all the big brands owned by companies like Nestle, Unilever, Pepsico, Heinz, Cargill, CocaCola, Kraft, P&G, … And the food chain is financed with money from big banks like Citi, HSBC, JP Morgan Chase, Deutsche Bank, BNP Paribas, Standard Chartered, Mizuho, Rabobank, …
The wife of a successful entrepreneur once remarked to me that she had pointed out to her husband that there will always be someone else with a bigger yacht in the marina. She was hinting that it’s fine to work, but there’s a point at which you ought to stop and spend a bit of time with your family and friends. She’s since divorced (for him it’s the second time!).
Another boating analogy was shared by The Economist recently in a comment about the asset management industry entitled Living off the people. As an asset manager, investing other people’s money, it was pertinent to my profession. The article offers a synopsis of the fund management industry and the challenges it faces today, the principal one being “Is there any use for fund manager’s at all?” The evidence has been around for decades, and now is being more actively referenced, that paying someone to beat the index is a fool’s game.
You can’t consistently beat the index, and if you have to pay someone to try, that’s going to cost you even more, so don’t even try. Just invest in a low fee index fund, like one offered by Vanguard. The article points out that a quarter of American billionaires work in finance and investment and concludes with a quote from a pre-war Wall Street mogul “Where are all the customers’ yachts?” Instead pay a computer pennies to put yo u on the efficient frontier.
We’re talking 20 years or so here.
In 20 years we’ll be facing Big Stuff. Climate change, weather volatility, species loss, clean air, clean water, … that whole environment thing will be getting much more serious and everyone will be dealing with it in some way or another. I’m hoping it’ll make Ireland a bit more like the south of France, and it might, but whatever else, it’s going to make the simple things in life more difficult. For most of humanity that will include feeding themselves and getting clean water.
So that will make food and land more important.
In 20 years we may well have passed “The Singularity“. That’s a term coined by futurists, often with a trans-humanist bent, which denotes the inevitable point at which technology development starts happening “by itself”. This occurs as humanity’s understanding of physics and biology enable the creation of thinking machines (computers) that emulate the brain, and then androids and cyborgs begin to be used in place of people.
Certainly in 20 years technology will have changed our world even more than in the past 20. Do not imagine The Singularity to be fantasy. We are close already. The mobile phone/computer in your pocket is old technology compared with neuro-computers being tested in laboratories. Robots are already becoming remarkably similar to C-3PO in looks and mobility at least. Today the consequences are being felt in most professions as AI (artificial intelligence) takes jobs away from humans. This is what we all wanted – automatic checkout, automatic cashier, automatic accountant, automatic lawyer, automatic vehicle … The challenge now being solved is automatic creativity.