Nevstar Links 25 October 2024
Welcome back to the Nevstar Links, your guide to some of the best articles on markets and investing available on the internet.
Today is the 25th October which is Saint Crispin's Day, the day of feasting by Christian saints Crispin and Crispinian - twins who were martyred in around 286. Saint Crispin's Day is however perhaps more widely remembered as the day of the climatic monologue in Shakespeare's play Henry V where the eponymous title character gives a rousing speech to the assembled English army before leading his outnumbered force to triumph over France in the Battle of Agincourt.
"We few, we happy few, we band of brothers"
Onto the links for this week including articles on pessimists, predictions, and preserving.
Pessimists Sounds Smarter, But Optimists Are Better Investors
Clever blogpost from The White Coat Investor making the very valid point that a lot of exposure is given to very smart people giving very astute observations about how a specific market is about to fall - only to be spectacularly wrong. Being optimistic is a key trait of successful investors.
"Pessimism is intellectually seductive in a way optimism only wishes it could be. Hearing that the world is going to hell is more interesting than forecasting that things will gradually get better over time, even if the latter is accurate for most people most of the time."
Are We Likely To See 3% Stock Market Returns For The Next Decade?
Speaking of bearish predictions, we have this interesting post from Ben Carlson reviewing a recent Goldman Sachs research piece that posits the S&P 500 could return just 3% annually for the next ten years. Carlson looks at how often this actually happens through history and concurrently how often bonds beat stocks.
"Stocks have beaten bonds over rolling 10 year returns 83% of the time, meaning bonds have beaten stocks 17% of the time. The further you extend the time horizon, the more likely it is that stock beat bonds. So it's improbable but possible."
Preserving Wealth Through Generations Is Hard
Interesting post from Firstlinks looking at the quite astonishing fact that most fortunes end up being dispersed quite quickly over a few generations. Some of the richest people in the world have left very few rich heirs. The article refers to a book called The Missing Billionaires which is an interesting read but this summary of the mistakes made should suffice in helping understand the issues of preserving wealth through time.
"If the Vanderbilt heirs had invested their wealth in a boring but diversified portfolio of US companies, spent 2 per cent of their wealth each year, and paid their taxes, each one living today would still have a fortune of more than US$5 billion."
The Importance of Rebalancing
One of the least appreciated portfolio behaviours is the subtle art of rebalancing a portfolio back to your strategic asset allocation. It is an excellent discipline for a number of reasons and has the ancillary benefit of naturally trimming overperforming asset classes and adding to underperforming ones.
"Left without any rebalancing, a portfolio comprising 60% global equities (growth assets) and 40% short-dated global bonds (defensive assets) would have drifted to nearly 80% in growth assets over the past 10 years. This is a material change in risk exposure and may no longer be in line with the investor's risk profile."
There Is Something About Harry
This is a wonderful post from the Humble Dollar identifying a certain Harry Markopolos as the writer's personal financial hero. Someone that he aspires to be and whose character traits are to be admired and emulated. Who was Harry Markopolos? He was the humble financial market participant who helped uncover the biggest financial fraud in history.
"Being proactive in research and being able to recognize when somebody or something is promising too much are excellent qualities to have in personal finance. From television-celebrity whole-life insurance salespeople to sharky advisors, folks can and will promise almost anything to part you from your money."
Quote of the Week
"Experience is something you don't get until just after you need it."
Steven Wright
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Have a great weekend.
The Nevstar
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