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Anyone who has seen the film Crocodile Dundee I know we don’t have mental health problems in Australia. Mick explains: “No. Back there, if you have a problem, you tell Wally. And he tells everyone in town, opens up. No more problems.”
I mention this because my plan in this final skin of the game for 2024 is to answer five common questions I’ve received via email this year. Oddly enough, for an investment column, most of them relate to your mental well-being.
Namely, many readers hate managing their life savings. And even I understand the reason. We are extremely busy and still hope to find a place to generate a high enough return to retire. Meanwhile, the constant fear of loss.
Well, my recommendation is to copy my father. Get someone else to do it and disappear on your motorbike for decades (or until no one does). knocks you out) just look at your portfolio.
This works for reasons I’ve outlined many times. Less churn means less cost. Staying invested ensures you’re in the market during those huge rebound days that follow the sell-off — when everyone else has bailed.
But the father does not pay a fee because he is a primary client and introduces his companions to his advisor. For the rest of us, the next best option is a simple and diversified portfolio of exchange traded funds. Set it up. ignore
Many readers send me a list of their holdings — often hundreds of companies. Even if these exceed an index (doubtful, not chosen by most professionals) the effort alone guarantees misery.
Payment of trading commission or capital gains tax. Loss Offsetting. Administrator of dividends and buybacks. Corporate activities, such as mergers or acquisitions, governance and voting. It forces me to write words. And I used to do it for a living.
Many of the emails also suggest a concern that even potential gains from your portfolio won’t be enough to provide a respectable retirement — let alone a destitute one. How can you maximize returns without insane risk?
Again, I have written often on the long-term performance of various asset classes. You cannot realistically expect a return of more than 6 percent from equities – much less from government bonds. Double digits? you are dreaming
So how do the rich do it? Mostly through complex structures, leverage or tax cuts. The latter is the key. Why bother trying to gain an odd percentage point here, a dozen basis points there? It’s peanuts versus lowering your tax bill.
This is the only reason in my view to spend money on a financial advisor. Forget their macro forecasts or stock views. They have no idea like the rest of us. Find someone who talks tax law in their sleep, and you too can rest easy.
Sure, but are there more thoughtful ways to grow one’s retirement pot faster, dozens of you have asked me this year? There are Low cost! After tax cuts, it’s the second-fastest path to retirement.
It’s rarely talked about – which is crazy. Consider £8 for your two flat whites a day. It is paid from your net income. So basically you need to earn £10 to £14 to fund them depending on your tax bracket.
It approaches five grand of gross income per year, which can be invested in tax-free vehicles like pensions at a nominal return of 5 percent. Two morning coffees over two decades cost you £173,000.
Extend the argument that you buy into other nonsense but don’t really need to. i should know Over a 30-year career my compensation has gone from a little to a lot to a little to a lot to a little to a lot again. My expenses have risen and fallen in tandem. I hardly noticed.
Eating less is also the best way to help the environment. Infinitely more than anything claimed by sustainable money. Even in 2024 readers asked me a lot about this. Does green investing still make sense?
absolutely But it is crucial to vary your approach depending on the asset class. For secondary market securities such as equities – which are simply traded – the greatest impact comes from their ownership, management and voting involvement.
For money to have its own effect, it must be placed in or withdrawn from primary markets—that is, in and from companies. This is where the real investment happens. Where you can write a check if businesses are a force for good or reject it if not.
In other words, the best asset classes when making sustainable investments are private equity, venture capital, direct loans and personal loans. Even corporate bonds are good, because they often have to roll over, so that pressure can be applied.
The last two things I get asked the most about are the same in my view – although many disagree. First, will the dominance of US companies last? Second, UK readers will want to know what the 88 delistings this year mean for their home equity markets.
My answer is simple. Forget liquidity and regulation and the like. The reason British companies jump to US exchanges is because they trade at higher earnings multiples and so their senior executives (and their bankers) will get richer.
When it is reversed (probably after Pop the technology bubble) The Wall Street Journal will soon be flooded with stories about US companies queuing up to be listed on the “outstanding” Footsy 100.
Happy New Year and thanks for all your messages. Keep them coming.
The author is a former portfolio manager. Email: stuart.kirk@ft.com; X: @stewartkirk__
