What caught my eye this week.
The IT Investor has a honeypot of a post up this week for active investing junkies. He’s dived into his investment trust data to sieve out what he’s calling ‘double doublers’ – investment trusts that doubled their share price in the first half of the last decade, then did it again in the second.
It sounds spectacular – it is – but qualification requires ‘only’ about a 15% return a year. You could have got a slightly better return from a US S&P 500 index fund, and many passive investors did.
Here are IT Investor’s top five double doublers:
What’s particularly galling is I owned four of these five trusts at some point in the last decade – but I hung on to none of them for anything like ten years.1
The curses of active investors are indeed many and various. They’re not just down to the fact it’s a zero sum game, which guarantees net disappointment for average pot of money, after costs and fees. There’s also the way that even when you get it right, sooner or later it turns into wrong.
Well maybe you sell too soon. Or maybe you realize you should have bought more. Or dozens of variations on the theme. Stock picking is not a hobby for anyone who occasionally brings a box of old love letters down from the attic to tearfully wonder what might have been.
But it’s not a game for those who wouldn’t even keep the letters of their old flames, either. If you’re that rational, buy the market!
I did it my way
Despite all this, until we grow bored or are physically restrained, some unfortunates like me will always be there to continue the quixotic quest of trying to beat the market. If you want more ways to understand why, Robin Powell tackles the subject in a guest post on Humble Dollar this week.
Robin cites Meir Statman, a finance professor at Santa Clara University, who gives several good (/bad) reasons including this particular bugbear of mine:
Many investors, Statman says, frame their returns relative to zero, rather than relative to the market return — the performance they could have earned by investing in a low-cost index fund.
“A 15% annual return is excellent,” he says, “but it is inferior when an index fund delivers 20%.”
It’s been at least a decade since I’ve taken seriously any active investor who doesn’t benchmark properly. Yet go to a meet-up and you’ll find they abound.
Perhaps that’s because as the wonderfully-named Professor Statman says, many of us:
…need to feel that we’re better than average.
And nobody active investing to that end wants a number telling them otherwise!
Have a great weekend.
How pensions will help you reach financial independence quicker than ISAs alone – Monevator
Also tons of interesting quirks, counters, and variations discussed in the comments – Monevator
From the archive-ator: Keep it simple, stupid – Monevator
Note: Some links are Google search results – in PC/desktop view you can click to read the piece without being a paid subscriber. Try privacy/incognito mode to avoid cookies. Consider subscribing if you read them a lot!2
HMRC says three million people still have not filed annual tax return – Guardian
Lloyds, Halifax and Bank of Scotland to charge up to 49.9% interest on overdrafts from April – MoneySavingExpert
Property sellers face reduced tax deadline [Search result] – FT
The Wolf of Wall Street’s Jordan Belfort sues film’s producers for $300m – Guardian
Pensions boost for Britons living in the EU [Search result] – FT
China’s falling birth rate threatens economic growth [I think lower birth rates everywhere are positive, personally] [Search result] – FT
Products and services
Visualizing the expanse of the ETF universe [Infographic] – Visual Capitalist
Get £20 for free from RateSetter when you invest just £10 for a year [Affiliate link] – RateSetter
How to buy the freehold if you’ve bought a leasehold property – ThisIsMoney
How fees eat into passive fund investments [Search result, rather quixotic £500 experiment] – FT
Cosy cottages for sale [Gallery] – Guardian
Comment and opinion
Wealth is what you don’t spend – Morgan Housel
The day the market crashes [Podcast/video] – Motley Fool US
“I earned £72,000 as a circus performer last year” – Guardian
This climb is different? Putting fears about tech firm scale into perspective – Of Dollars and Data
How older entrepreneurs are boosting their pension income – ThisIsMoney
Preparing for lower returns from US stocks [Look out! Plot twist] – The Irrelevant Investor
Rich and run out of room in your tax shelters? Consider a family investment company – Finimus
Here’s why you should rebalance – Morningstar
Naughty corner: Active antics
Four-letter words of investing – Anand Sridharan via LinkedIn
Ted Baker’s collapse is a lesson in the dangers of too much growth – UK Value Investor
France is making start-up friendly reforms to lure tech talent – CNBC
Kindle book bargains
The Looting Machine: Warlords, Tycoons, Smugglers and the Systematic Theft of Africa’s Wealth by Tom Burgis – £0.99 on Kindle
The Making of a Manager: What to Do When Everyone Looks to You by Julie Zhuo – £0.99 on Kindle
Economics: The User’s Guide by Ha-Joon Chang – £1.99 on Kindle
Off our beat
Doomsday Clock moved to 100 seconds to midnight; closest to catastrophe ever – Sky News
Punctuality is the single best indicator of success – Inc
Productivity advice for the weird – Ramit Sethi
Why you’re doomed to techno-befuddlement by the time you’re 70 – Bennallack
When in doubt, make soup – Raptitude
Do you love doing the same thing over and over? Here’s why it doesn’t make you boring – Guardian
Waterworlds: The magic of New South Wales’ ocean pools [Interactive/Multimedia] – Guardian
“When economists want to understand the most significant economic events in history, they rarely focus on the important narratives that accompanied those events.”
– Robert Shiller, Narrative Economics
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- I currently own only Lindsell Train off this list.
- Note some articles can only be accessed through the search results if you’re using PC/desktop view (from mobile/tablet view they bring up the firewall/subscription page). To circumvent, switch your mobile browser to use the desktop view. On Chrome for Android: press the menu button followed by “Request Desktop Site”.