Julie's Blog Posts

Here you will find interesting quotes, useful information and links to helpful articles on a wide variety of subjects.
Quote of the Week
Life will only change
Quote of the Week
Quote of the Week

My favourite quote on Investment Predictions...

"Even a broken clock is right twice a day".

 

 

Investment Advice from the founder of Vanguard

The way to wealth for those in the business is to persuade their clients, 'Don't just stand there. Do something".  

But the way to wealth for their clients is to follow the opposite maxim:

"DON'T DO SOMETHING.  JUST STAND THERE"

One of my favourite quotes from the recently passed founder of Vanguard , Jack Bogle, the man that helped bring Index Funds to the masses.

RIP Mr Bogle.

Hang in There!
Warren Buffett quote
There Is No Crystal Ball But That's Ok!
A ship is safe in harbor, but that's not what ships are for
The biggest investment lesson for me over the past ten years, is that the fog of uncertainty in 2008 has never lifted and never will. As long as we operate in real time, without a crystal ball, we will never know what the next six months, let alone the next ten years, holds for us. And that’s fine because there is a solution. 
 
When the history books are written, they leave out the bits that didn’t matter and line up in orderly rows what is now seen as significant, even if it was overlooked at the time. With the benefit of hindsight, it’s clear what was and what was not important. In real time, of course, it is far harder to see what is going on.
 
I am enjoying a podcast series at the moment on Watergate, which for obvious reasons is resonant today. What is fascinating about Slow Burn, however, is its attempt to bridge that hindsight gap. It focuses on the things that gripped America at the time but subsequently got left out of the scandal’s defining narrative, which for most of us is All the President’s Men.
 
The first episode tells the story of Martha Mitchell, wife of John Mitchell, the former Attorney General and head of Nixon’s re-election team in 1972. As such, she had both a front row seat as the story unfolded and a reckless desire to share what she knew in late night calls to her friends in the press. She was living dangerously and she paid a heavy price, hounded by the White House and discredited as an unstable drinker. She was right about the President and her husband, but only Watergate geeks remember her today.
 
There is a danger that as this Saturday’s ten-year anniversary of the collapse of Lehman Brothers approaches, we try to tie up this episode, too, into a neat morality tale. Boiled down to its essentials, it actually is a simple story but it didn’t seem so at the time when we didn’t know how it ended. And oversimplifying the financial crisis makes it all the more likely that we will not learn its lessons and will relive it.
 
Here is the short version that will be retold this week. In the years before 2008, banks forgot their basic business of taking deposits and making loans. Instead, they started dealing in the loans themselves, packaging them up into fancy new instruments on a false prospectus that this would make the financial system safer.
 
This snake oil didn’t wash for two reasons. First, because it was now unclear where the risk lay in these opaque and complex securities, now far from their originators. Second, because in order to feed the banking machine’s hunger for the profitable new products, more and more loans of lower and lower quality had to be made. An old-fashioned credit bubble lurked within a shiny new wrapper. When loans to people who should never have had them pressed on them inevitably turned sour, no-one knew where the bad smell was coming from. And a system built on the quicksand of broken promises crumbled.
 
To test the Martha Mitchell view of those times, what we actually thought as we lived through them ten years ago, I dug out my last column in these pages before I moved to Fidelity in March 2008. It was written in the week that Bear Stearns collapsed. Lehman was still a pillar of the financial establishment, far too big and important to fail.
Like Bob Dylan’s Mr Jones, we knew there was something going on but we didn’t know what it was. We only knew it was bad. As I wrote then: ‘for the first time since the economic anarchy of the 1970s, sensible people are seriously considering the possibility that the machine might actually grind to a halt.’
 
That might sound prescient but in the same breath I was clinging onto the wishful thinking that Bear Stearns was the cathartic moment that would mark the bottom. ‘The whiff of capitulation hung over some of the breath-taking share price falls yesterday’, I wrote. I was a year too early.
 
Too early, but not wrong. The market did recover from Lehman, and it did so surprisingly quickly. Even if you had been unlucky enough to invest in a collection of global stocks on the last trading day before the bank collapsed, you would have recovered your money within a year or so. In the ten years since Lehman imploded, the FTSE All Share has more than doubled if dividend income is included in the total return. That’s more than 8pc a year - and if anyone had offered me that as the bankers carried their boxes through Canary Wharf I would have taken it.
 
The biggest investment lesson for me over the past ten years, however, is that the fog of uncertainty in 2008 has never lifted and never will. As long as we operate in real time, without a crystal ball, we will never know what the next six months, let alone the next ten years, holds for us. And that’s fine because there is a solution.
 
Investment diversification is the free lunch that sliced-and-diced collateralised loan obligations pretended to be. In the decade since Lehman there has not been a single year in which the best-performing asset class has been the same as it was in the previous 12 months. There has also never been a year in which each of the main investment assets has fallen at the same time.
 
Putting your eggs in a variety of baskets is a lot less exciting as an investment philosophy than the apparent risk dispersion used to justify the weapons of mass destruction launched by the banks in the years before 2008. The difference is it works. Unlike the historians, we have to compose our investment stories out of the bits that matter and the bits that don’t. In the here and now, we cannot know which is which.
Keeping an Open Mind

One of the qualities I most admire in my own Clients, is their ability to maintain an open mind.  It's a common trait with successful people.  The ability to give every idea and concept a listen - evaluate the information carefully - before arriving at a conclusion that best suits them.

With all the negativity in the media - particularly in the area of finance at the moment - it can be hard for people to maintain that open mind when talking about superannuation, investments or even Financial Advisers!

Our office gets phone calls all the time from members of the public looking for help with their finances.  After all, is there a more important area of your life (outside of health and family) than trying to preserve and grow your capital base (be it your superannuation, rental property, cash reserves etc)?

My best tip for folk that are wanting advice.  Speak to 2 or 3 Advisers and go into each appointment with an open mind.  Let each Adviser share their story, their house view on how to run client's investments and then go away and compare and contrast all that you have heard.  If you walk in with a mind already closed to new ideas, you will gain nothing new.

 

Till next time.... Julie 

The Cost of Holding On
Let’s start with a story from Jon Muth’s book “Zen Shorts:”
 
Two traveling monks reached a town where there was a young woman waiting to step out of her sedan chair. The rains had made deep puddles and she couldn’t step across without spoiling her silken robes. She stood there, looking very cross and impatient. She was scolding her attendants. They had nowhere to place the packages they held for her, so they couldn’t help her across the puddle.
 
The younger monk noticed the woman, said nothing, and walked by. The older monk quickly picked her up and put her on his back, transported her across the water, and put her down on the other side. She didn’t thank the older monk; she just shoved him out of the way and departed.
 
As they continued on their way, the young monk was brooding and preoccupied. After several hours, unable to hold his silence, he spoke out. “That woman back there was very selfish and rude, but you picked her up on your back and carried her! Then, she didn’t even thank you!”
 
“I set the woman down hours ago,” the older monk replied. “Why are you still carrying her?”
 
There is an actual cost to holding onto things we should let go of. It can come in the form of anger, frustration, resentment, or something even worse. The question is, can you really afford to keep paying the bill?
 
The faster we learn to drop our emotional dead weight, the more room we create for something better. I’m talking about everything from stewing about the guy who cut you off in traffic this morning to still refusing to forgive an old friend for an event 20 years ago.
 
We have only so much bandwidth. We have only so much time. We only have so much energy. Do we really want to invest any of our precious resources — financial or otherwise — into something that will return nothing but misery?
 
My question for you is, “What’s one thing you can set down this week?”
 
Go ahead and pick something. A fight with your spouse, something a politician said, your team losing the big game. Pick it, drop it, and then pause. For just a moment, simply pause and savor what it feels like to no longer carry that burden and pay that price.
 
Then, I want you to invest that "extra" into something more productive. If it’s extra time, go for a walk. If it’s extra peace, take five deep breaths. If it’s extra money, because you decided to just pay the stupid traffic ticket instead of letting it sit on your desk accruing late fees, then take that extra money and invest it in something that makes you happy.
 
Play with your kids. Take a nap. Just do something that makes you feel the opposite of how you felt before you let go. I can guarantee you, this is one investment you’ll never regret.
 
 
 
This column, titled The Cost of Holding On, originally appeared in The New York Times on April 25, 2016.  www.behaviourgap.com
 
 
 

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