Weekend reading: Five years on, and a barrel of dead fish

Good reads from around the Web.

Some readers have asked why I’m not sharing many active investing ideas at the moment.

One reader even wrote on his blog about it!

It’s true I’ve given passive investing mantra the run of the pitch recently. I even joined in with a post about Warren Buffett’s tracker-philia.

Yet away from Monevator I’m as much in thrall to the dark forces of active investing as ever.

What gives?

Actively resisting

First, I’m ever more convinced that most people are genetically terrible investors who should automate their savings and asset allocation and then stand well back.

I don’t want to dilute that passive message at present. (I’m capricious and this is a personal blog, not Pravda, so it won’t stop me forever.)

Secondly, the ongoing platform price war is The Big News of the moment – our equivalent of Prince Harry getting married on an aircraft carrier to a pregnant girlfriend en route to the Falkland Islands.

The Accumulator was even on Radio 4!

Thirdly, while I probably still have more in equities than I should – and a mongrel lot at that – my exposure is no longer dialed to Spinal Tap’s 11. As I’ve mentioned previously, I’ve been selling down, on and off, for months.

Fourthly, and related, there aren’t the blatantly great opportunities to invest cheap in mainstream markets like there were.

It’s now five years since I (accidentally!) urged buying on the day of the bottom of the bear market. Prices are well up. It’s a long time since strange anomalies suggested the market was seemingly breaking down, since equity income trusts traded at double-digit discounts, or since commercial property and the housebuilders were priced at levels implying either bubonic plague or that future generations were going to live like nomads in tents.

I’m a cheapskate value investor, and I like to buy bargains. So there’s less to buy.

Finally, I have have written once or twice when (for what it’s worth) I’ve seen value. I wrote last summer about the potential in gold miners, for example, and also in emerging markets.

Both ideas were too early and the first was really just a punt for fun money (which I’ve put on via the iShares gold mining ETF with the ticker SPGP).

Emerging markets do look like a proper grown-up opportunity, however.

Everyone is a genius in a bull market

I’m not saying UK equities are clearly too expensive or anything like that.

True, there’s lots of froth in the smaller caps, but the FTSE 100 looks alright. Europe seems okay to me, too. The US does look downright dear, but it usually does in bull markets.

I digress. The bottom line is I saw many cheap things over the past five years, but you didn’t have to be George Soros to do that – the wind was at our backs.

The FTSE 250 is up 170% over the past five years, and that’s not including dividends. Picking winning ideas has been like shooting fish in a barrel – that’s the humble truth.

It hasn’t stopped legions of overpaid hedge fund managers shooting themselves in the foot and doing much worse, of course!

Anyway, newcomers to the blog who waded through my preference shares post this week with bemusement should know there’s a side to this blog that’s sleeping…

If it truly awakes again it may be in a members-only area, to keep the site’s main focus on index tracking.

Passive investing is almost certainly best for you. But if you’ve got the active bug like I have, then there’ll always be a place somewhere for you on Monevator, too.

From the blogs

Making good use of the things that we find…

Passive investing

• Total market investors are not dumb – Rick Ferri
• How pension funds think about bonds – Canadian Couch Potato

Active investing

• Is it time to sell your Morrisons shares? – UK Value Investor
• Why dividend investing works – Clear Eyes Investing
• A Bitcoin Q&A – Musings on Markets
• Be careful when bargain hunting in the PIIGS – Value Perspective
• Why day traders lose money and die stressed – Investing Caffeine
• Should you bet on the BRICs recovering? – Under the Money Tree

Other articles

• Asset classes for early retirement – Can I Retire Yet?
• Three big questions to ask a financial adviser – Rick Ferri

Product of the week: Newly resurrected TSB has a new current account paying 5% interest, reports The Telegraph. As usual there’s a snag – you only get 5% on the first £2,000.

Mainstream media money

Some links are Google search results – in PC/desktop view these enable you to click through to read the piece without being a paid subscriber of that site. ¹

Passive investing

• Even successful active managers are dying out – Economist
• Asset allocation: Value versus growth… – MarketWatch
• …but beware the Smart Beta trap – ETF.com

Active investing

• Are you too optimistic about future returns? – Wall Street Journal
• How to invest in strong dividend growth – Institutional Investor
• Larry Swedroe: Unpacking Warren Buffett’s alpha – ETF.com
• John Lee reveals how he made his ISA fortune – Guardian
• Bubble watch: Growth is good – FT Alphaville

Other stuff worth reading

• Morgan Housel: We’re awful at assessing risk – Motley Fool
• Should you worry about your ISA provider going bust? – Telegraph
• Merryn S-W: If you’re already rich, take a look at forestry [Search result] – FT

Book of the week: As US treasury secretary, Tim Geitner was at the nerve centre of the financial crisis. Warren Buffett has read the proofs of his upcoming book Stress Test and says it reveals we were much closer to Doomsday than he thought. (He also says it’s a fabulous read!)

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1. Reader Ken notes that: “FT 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”.”[↩]