Probably my favorite thing about the current state of the web is the opportunity for reasonable, rational people, from advisors and financial professionals to bloggers and formal journalists to have a platform and voice. Some great work was done this year, and I want to highlight a few pieces that you should not have missed.
(In no particular order).
Confessions of an Institutional Investor – The Reformed Broker. This anonymous guest post on Josh’s site pulls back the veil of overly complex investment strategies that get sold to institutional investors, and why these are a farce.
“Most institutional investors assume, “My job is to outperform the markets or my benchmark and earn a performance bonus.” This is the wrong way to look at a portfolio.”
The Biggest Little Secret in Money Management – Capital Spectator. JP’s piece picks apart most back-tested and highly-touted investment strategies to remind us the market exposure drives returns, not fancy strategies.
“Some clever managers (and their marketing departments) repackage rebalancing and the associated factor tilts as their own home-grown strategies. The rebranding goes by any number of labels, and there’s usually a higher fee and perhaps bold claims of offering something previously unavailable.”
Establishing Your Top 10 Investment Default Settings – Above the Market. Bob’s top ten list should be required reading for any investor getting started with a portfolio. Many, many people will do worse than someone simply following these steps.
“It is axiomatic that all other things being equal, lower fees are better for investors than higher fees. Indeed, ranking investment funds according to fees (with lower fees being more highly rated) provides the best indicator we have of future performance. “
The Intelligent Investor: Saving Investors From Themselves – The Intelligent Investor. Jason Zweig’s seminal post on his career as a financial journalist is tremendous.
“My job is to write the exact same thing between 50 and 100 times a year in such a way that neither my editors nor my readers will ever think I am repeating myself. That’s because good advice rarely changes, while markets change constantly. The temptation to pander is almost irresistible. And while people need good advice, what they want is advice that sounds good.”
Bubbles: No One Has Any Idea What’s Going On – Morgan Housel (Fool.com). Let’s face it. Morgan Housel has been writing some of the best stuff on the web this year, and was nominated for a 2013 Gerald Loeb award. His piece on bubbles tells the truth:we can’t predict the future, we can’t identify a “bubble” in advance and we are quite frankly overly obsessed with the idea of bubbles. And if we do spot a bubble, what do we do with it? Also make sure to watch Morgan’s recent interview with Behavior Gap‘s Carl Richards.
But those who are sure something is (or isn’t) a bubble tend to have the opposite. They make up their mind, dig in their heels, and treat arguments against their original diagnosis as a my-side-versus-yours battle. As Andy Rooney put it, “People will generally accept facts as truth only if the facts agree with what they already believe.”
Bason Asset Management 