Weekend reading

Good reads from around the Web.

A research company called Megane Faber wins my lesser-spotted post of the week award this Saturday for You are not a good investor, its disassembling of the vanities of stock pickers.1

First, the article calls up a fascinating study – The Capitalism Distribution – which examined stock returns from the top 3,000 stocks in the US from 1983-2007 and found:

  • 39% of stocks were unprofitable investments
  • 19% of stocks lost at least 75% of their value
  • 64% of stocks underperformed the index
  • 25% of stocks were responsible for all the market’s gains

Megan Faber notes:

Simply picking a stock out of a hat means you have a 64% chance of under-performing a basic index fund, and roughly a 40% chance of losing money.

Ah, but we stock pickers have no use for a hat! We select shares carefully!

Sadly, whatever I think of my skills and whatever you know about yours, we can say with certainty that most people are terrible at managing an active portfolio.

This is brutally shown in a follow-up chart from Business Insider, which uses data from BlackRock and the famous Dalbar Study of investor returns:


Incidentally, check out the return on homes.

I told you guys homes have been better investments for most people, but you insisted on making it into a debate about house prices… ;)

(This is US data but I’m sure the edge would be apparent in the UK, where we’ve had even stronger property booms.)

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Budget 2013

Budget roundups:

  • Budget 2013: At-a-glance guide – BBC News
  • At several more glances – BBC News
  • High earners lose out from tax changes [Search result]FT
  • Other winners and losers – Telegraph
  • What it means for you – LoveMoney
  • Get a third opinion – The Guardian

 Budget 2013 calculators:

  • An income focused Budget 2013 calculator – Telegraph
  • This one factors in spending – BBC News

From the blogs

Making good use of the things that we find…

Passive investing

Active investing

Other articles

Book of the week: Here’s a reading list for ISA investors. How many of these investing classics have you read?

Mainstream media money

Note: Some links are to Google search results – these enable you to click through to read the piece without you being a paid subscriber of the site.

Passive investing

  • Common diversification myths, part 2 – Mint
  • Largest US pension fund considers going passive – Investment News

Active investing

  • Is a stock market bubble brewing in the US? – Swedroe/CBS
  • How to invest in diamonds [Search result]FT
  • Taking stock of Apple – Fast Company

Other stuff worth reading

  • Six scary post-budget graphs – The Spectator
  • Will Help to Buy be used for second homes? – The Guardian
  • Cyprus’s banks: Too big to guarantee – The Economist
  • Britain’s 10 most affordable cities – Telegraph
  • Should my estranged wife by dodging all the bills? [Search result]FT

Product of the week: Barclaycard has launched a new 0% balance transfer credit card with no interest to pay for 26-months. The Telegraph says that’s the longest 0% initial period the UK.

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  1. Full disclosure: I am such. For my sins.

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