Something for the weekend – Friday 23rd August 2019

While I was on holiday, I had time to read some interesting articles and I thought that it could be a good idea to share some of my favourites here.

Status Anxiety or: How Our Neighbors Make Us Worse Investors [Reading time – 4 minutes]

I remember the phrase “L’enfer, c’est les autres”  (Hell is other people) from reading Huit Clos in high school (I also remember the book being terribly confusing). 

I particularly liked this article because it highlights the danger of comparing ourselves to “les autres”, e.g. neighbours or work colleagues.

Doing so can cause us to take additional investment risks in order to keep up with them. This results in us following someone else’s financial plan, not our own and in a downturn, this extra risk then magnifies our losses.

The Most Important Asset [Reading time – 5 minutes]

“I would be willing to bet that not one of you, if you were offered every dollar of Warren Buffett’s fortune, would trade places with him right now…And I would also bet, by the way, that Buffett would be willing to be 20 years old again if he was broke.”

Would you switch places with Warren Buffett? All his money. But you are now 87 years old.

This article made me think a lot while I was on holiday, especially this paragraph:

“You can work a few extra years before retiring, but you can’t go back and see your children as children again.  You can’t attend that friend’s wedding or mourn a relative with your loved ones twice.  As Epsilon Theory’s Ben Hunt stated, “Always go to the funeral.”  The fact is that money will come and go in your life, many times as a result of good and bad luck, but your time is only here now, so don’t squander it.”

This is What Happens as Societies Become Wealthier [Reading time – 5 minutes]

Last week, it was reported that a Danish bank is offering a mortgage with a negative interest rate (but no, due to admin fees etc the bank WON’T be paying its borrowers). This article is a reminder that low-interest rates are actually a sign of progress.

Master Trader by Laszlo Birinyi 

Finally, in his book Master Trader, Laszlo Birinyi calculated that a buy-and-hold investor who invested one dollar in the Dow Jones Industrial Average in 1900 would have seen it grow to $290 by the start of 2013.

However, had the investor missed only the best five days each year over that time period, his dollar investment would have been worth less than a penny in 2013.

The point is that trying to time when to enter and exit the market risks missing the infrequent large sprints that are the big contributors to overall performance.

If you read anything good over the holidays, feel free to share it.