The Evidence-Based Investor

#SFTW: Most of us are over-exposed to the housing market

Posted by helen.brown on March 2, 2018



It’s time to question our obsession with property

We Brits have a different kind of home bias to investors elsewhere. Of course, we favour our own country’s stocks, just like most people in other parts of the world. The UK accounts for about 4% of global GDP and yet it’s not uncommon for British investors to have 50% of their equity portfolio allocated to UK companies. But that’s not what I’m referring to. No, I literally mean we’re very biased, financially speaking, towards our homes.

Every week the Sunday Times runs an interview with a well-known person about their finances, and every week the interviewee is asked, which is the better investment, property or pensions? Almost invariably the answer is property.

It’s certainly true that house prices have risen sharply in the UK, and in most other developed countries, over the last 25 years. Canada and Australia are other glaring examples. But is residential property a sensible investment in 2018?

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Warren’s Buffett’s latest advice for investors

Warren Buffett’s latest letter to Berkshire Hathaway shareholders has been published and, once again, it is full of useful insights for ordinary investors.

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The morality of suing financial advisers

Financial advisers are the most important link in the asset management value chain. The most effective thing you can do to increase your chances of achieving your financial goals is to find yourself a good one.

Does that mean that all financial advisers give good advice? No, of course it doesn’t. And does it mean that advisers who give good advice today have always given good advice in the past? Again, it doesn’t.

Managing someone’s finances for them is a huge privilege. It’s also a massive responsibility. The potential for an adviser to make a positive difference in a client’s life is vast, but so too are the consequences of bad advice.

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An extraordinarily candid Q&A with a fund industry veteran

This is fascinating. It’s an interview with Charles Payne, a longstanding TEBI reader, who recently left the UK fund industry, having worked in it 35 years. In that time he’s worked for some of the biggest institutions in the City of London — Henderson, Gartmore, UBS Asset Management, Kleinwort Benson, Chase Manhattan Bank — but he’s probably best known for the 14 years he spent at Fidelity International, where, among other things, he served as Investment Director and Head of Equity Product Management.

In the interview I ask Charles Payne about his experiences of the industry, the FCA report on competition in asset management, the arrival of MiFID II, the future of active management and, finally, corporate ethics and culture in the City. Everyone who wants to understand the fund industry should read what he has to say.

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Nobody really knows what caused the recent correction

No matter how many times you gently remind people that markets don’t carry on going up indefinitely, it always seems to comes as a shock when volatility suddenly strikes.

Read the article here


Investing wisdom from Dimensional’s Gerard O’Reilly

One of the best things about this job is getting to meet some of the smartest people in the world of finance, and they don’t come much smarter than Dr Gerard O’Reilly.

After earning a doctorate in Aeronautics and Applied Mathematics from the California Institute of Technology, he joined Dimensional Fund Advisors as a Research Associate in 2004 and became Co-CIO ten years later. Last year he was appointed as Co-CEO, along with Dave Butler.

I recently caught up with Dr O’Reilly at Dimensional’s London offices, where he gave me a rare and wide-ranging interview. The interview is in two parts:

Read Part 1 here

Read Part 2 here


Bogle: Why fee reductions for active funds make no difference

A new, long-form interview with Jack Bogle has just gone online, and, like all Bogle interviews, it’s worth reading.

The interview was conducted by Lawrence Siegel, who is is the Gary P. Brinson director of research at the CFA Institute Research Foundation, a senior adviser to OCP Capital LLC, and an independent consultant, writer, and speaker, specialising in investment management.

Read the full article here


Revealed at last — what UK investors are really paying

It’s been a long time coming. But, after years of campaigning by my colleagues at the Transparency Task Force, by Gina and Alan Miller’s True and Fair Campaign and, of course, by The Evidence-Based Investor, UK consumers are finally being told how much it’s really been costing them to invest.

MiFID II, the European Union directive which came into force earlier this month, requires asset managers to disclose to investors all the fees and charges they pay. Hitherto, the big fund managers have talked about the annual management charge (AMC), or the ongoing charge figure (OCF), as if that were all that investors pay. In fact, as TEBI readers know, those figures tell only part of the story. When you factor in all the other costs involved — particularly transaction costs — investors are paying far more than most of them ever realised.

Analysis by the Edinburgh-based asset management consultancy, The Lang Cat, shows that once transaction costs are included many investors pay almost double the OCF in the UK’s most popular funds. This can go up to four times OCF if you include platform charges and performance fees.

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Also worth reading


Industry ethics

The worst financial companies make it very difficult for customers to escape (Tony Isola)

Regulation, on its own, won’t make the industry ethical (Amanda Newman Smith)

Dishonest advisers are a small minority, but they need to be weeded out (Martin Bamford) 

It’s the big passive fund providers that are putting pressure on America’s gun manufacturers (Lara Crigger)


Portfolio construction

Four elements of constructing a smart-beta portfolio that are often overlooked  (Feifei Li & Shane Shepherd)

Tips for building a portfolio that stands the test of time (Carolyn Gowen)


Investment performance

US college endowments have trailed simple passive portfolios for the last 10 years (James Stewart)

Has the hype around long/short funds lived up to the hope? The evidence says No (Larry Swedroe)

Not even Warren Buffett can beat the stock market any more (Dan Kopf & Corinne Purtill)


Investor behaviour

Overconfidence is one of the biggest problems equity investors face (Nick Maggiulli)

Financial education should focus on changing behaviour rather than gaining knowledge (Tanaya Macheel)

Tulip Mania makes an exciting story. The trouble is, most of it is untrue (Anne Goldgar)


Financial wellbeing

Employers are increasingly offering staff lifetime financial planning (Tim Cooper)

Yet more evidence that having shedloads doesn’t make you happy (Kristen Bahler)


Financial advice

How Plancorp and Prumentum are working to build a bionic advice firm (Chris Robbins)

Clients are often very reserved when talking to advisers, but there is a solution (Brian Hill)


Calling evidence-based advice firms

Every day investors are bombarded with information that hinders, rather than helps, them in achieving their financial goals. Regis Media, which produces TEBI, has a wide range of branded content to help advisers explain how investing really works. You’ll find details and prices on our website and examples of our work on our YouTube channel.


Video: Chas Boinske from Independence Advisors in Pennsylvania explains the benefits of working with Regis Media

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