What caught my eye this week.
I can’t really believe the chart below from JP Morgan that circulated around financial Twitter this week.
US investors are seemingly so prone to woefully bad attempts to time markets and other kinds of trading mishaps that they earned just 2.9% annualized over the past two decades:
That’s barely ahead of cash.
Hey, Mr Average Investor
Reading the small print reveals the graph is based on data fromDalbar Inc. That company’s work has foregrounded the so-called ‘behaviour gap’ for many years.
The behaviour gap describes how poor active choices by investors – such as trying to time markets, or to chase hot investments – means that most ultimately receive a far lower return than the broad asset class data implies.
The Dalbar study is also subject to regular debunking. I’m not even sure where we are with that right now. But JP Morgan apparently believes Dalbar is still credible.
Or maybe JP Morgan has something to sell. Unfortunately I don’t have access to more than that screenshot, so I can’t give you its official pitch. Perhaps it’s taken from Why You Should Entrust All Your Money To Us To Manage, Mortals, where it’s presented as evidence? Who knows.
What I can say is that if the average investor in conventional assets has really seen just a 2.9% return over 20 years, then you can see why so many of them chased rock JPGs and SPACs and GameStop at the height of the bull market in 2021.
I mean, what did they have to lose?
(Okay, apparently 2.9% a year.)
We can do better guys! Read my co-blogger The Accumulator and do as he does. Or do as our model passive portfolio does. That’s nearly 9% a year over the past 11 years, with just a handful of trades per quarter.
Or invest in an all-in-one index fund. Anything but 2.9% a year.
Have a great weekend all!
FX fees on investments, and how to crush them – Monevator
Mortgage risk: a checklist – Monevator
From the archive-ator: Are you richer than your kids, or poorer than your grandkids? – Monevator
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UK interest on debt payments hits record £7.6bn in May – Guardian
While inflation now at 9.1% as prices rise at fastest rate in 40 years… – BBC
…leading shoppers to set a £30 limit at the till and other behaviour changes – BBC
…and sinking UK consumer confidence to a record low – EuroNews
Payment Systems Regulator to investigate post-Brexit card fees – PSR
Bank of England withdraws mortgage affordability stress test – Reuters
Ray Dalio says stagflation is coming – Institutional Investor
Fear of death tends to decline with time, and other interesting findings on aging – AARP
Brexit gonna Brexit mini-special
A candid assessment of Brexit from a Leave voter, six years on – The Independent
The deafening silence over Brexit’s economic fallout [Search result] – FT
LSE: Brexit hit UK’s competitiveness, reduced productivity, and lowered Brits’ real wages – CityAM
The Brexit dividend will be higher inflation risk for years to come – Bloomberg
Products and services
Cheapest mortgage deals revealed as rates continue to rise – Which
Nationwide revives 5% rate on [limited] current account balance, plus cash bribe – ThisIsMoney
Open an account with InvestEngine via our affiliate link and get £25 when you invest at least £100 (new customers only, T&Cs apply) – InvestEngine
100 98 days left to use your £20 and £50 banknotes – Bank of England
Ten-year fixed-rate mortgages now ‘incredible value’ – Guardian
Beware the new ATM scam where crooks can steal your card details in minutes – ThisIsMoney
Topsy-turvy homes for sale, in pictures – Guardian
Comment and opinion
Where does the wealth go when asset prices drop? – Noahpinion
Volatility in your pension isn’t the risk you should worry about – Financial Bodyguard
10 years of fake retirement later – Financial Samurai
Former Tory minister calls 10% rise in state pension ‘ludicrous’ – Guardian
So bad it’s good: three reasons to be bullish… – LPL Research
…and six more things that might go right – Validea
Rising interest rates are ending an era where the rich got much, much richer – The Atlantic
12 paradoxes of investing – Humble Dollar
How exposed is the UK as inflation spirals the cost of government borrowing? – Proactive Investors
Reverse-engineering the path to making $1 million a year – Banker on FIRE
10 years of leisure wrested from The Man – Simple Living in Somerset
Think outside the portfolio – Of Dollars and Data
Rental houses versus stock market investments – Mr Money Mustache
The billionaire investors bickering show is back [Podcast] – All-In
Larry Swedroe: how to use and not abuse the Shiller CAPE ratio – TEBI
Bear markets are a test of investor emotions – Behavioural Investment
The eye of the storm – Young Money
Bond bust mini-special
When bonds do not hedge stocks [US but relevant] – Morningstar
Has the bond crash done enough to make them attractive again? – Institutional Investor
Are TIPS broken? [US but relevant] – Eversight Wealth
Crypt o’ crypto
Bitcoin whale Michael Saylor urges governments to regulate crypto’s “parade of horribles” – Yahoo
First short Bitcoin ETF listed on the NYSE – Coindesk
Naughty corner: Active antics
Managing a SIPP in drawdown: 10-year update – DIY Investor UK
A summary of High Returns for Low Risk by Pim Van Vliet – Novel Investor
Should you buy Rio Tinto for its 17% dividend yield? – UK Dividend Investor
An interview with thoughtful active investor Guy Spier [Podcast] – I.C. via Youtube
And with Mohnish Pabrai, with lots on Charlie Munger [Podcast, forgot to link last week] – TIP
Covid rates continue to rise; one in 35 had it last week – BBC
Polio virus detected in London sewage samples – BBC
How the monkeypox epidemic is likely to play out, in four graphs – The Conversation
Vaccine Damage Payment Scheme: the battle for compensation – BBC
Kindle book bargains
Find Your Voice: The Secret to Talking with Confidence by Caroline Goyder – £0.99 on Kindle
Ultralearning by Scott Young – £0.99 on Kindle
The Dealmaker: Lesson’s From a Life in Private Equity by Guy Hands – £0.99 on Kindle
Think Like A Rocket Scientist by Ozan Varol – £0.99 on Kindle
A floating city in the Maldives begins to take shape – CNN
Wet Wipe island has “changed the course of the Thames” – via Twitter
UK chemicals plant ready to start carbon capture rollout – Guardian
Controversy grows over whether Mars samples endanger Earth – Scientific American
French and Belgians eating wild frogs to extinction – Guardian
Off our beat
Inside the secret, often bizarre world that decides what porn you see [Search result] – FT
A brief history of the shipping container – Hakai Magazine
Experience: I lost my eyesight overnight – Guardian
Amazon readies Alexa to mimic a deceased loved one’s voice – Gizmodo
The summer of a thousand goodbyes – Finding Joy
‘Mid-century millennial’: the ubiquitous look of a generation’s homes – Guardian
Over half of Africa’s young adults want to emigrate – Quartz Africa
“The more we tie our happiness to things that we cannot control, the more we subject ourselves to the negative volatility of the outside world. Therefore, we need to be mindful in setting our goals.”
– Vitaliy Katsenelson, Soul in the Game
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