By Amanda Morrall
1) Tomorrow is a blank canvas
Aussie stockbroker Marcus Padley, writing for the Sydney Morning Herald, offers 10 tips for investors buying shares. I think some would take issue with No.3 about never buying a stock falling in price. Depending on the company, its managers, goals and product, many would argue that buying stock at a discounted price is not a bad thing in the long-run.My favourites are No.5 and No.7.
Five: Humans are not natural investors. We need mechanisms outside the ramblings of the brain to protect equity investments - unemotional triggers and systems - because our natural triggers of fear and greed are useless.
Seven: There are no crystal balls. When it comes to tomorrow, financial theory tells you to look at history and project it forward. That's rubbish. Tomorrow is not a reflection of the past but a blank canvas.
HT to SR.
2) Luck or skill
The Harvard Business Review revisits the issue of active versus passive fund management styles and how to judge whether your manager has skill or just got lucky. Track record is a key indicator in this matter. It is early days still in KiwiSaver but long enough that some patterns are emerging. You can study the year-to-year performance of your fund by looking at our data here. Interest.co.nz senior analyst Craig Simpson has also written some excellent reports on individual KiwiSaver provider performance over the past few weeks. You can find them by searching our site with the key words Simpson and your fund provider.
3) Is risk free really risk free?
Motley Fool investment analyst Scott Phillips, writing for the Age newspaper, breaks out the charts and calculator and shows why staying invested in low risk cash investments, can be risky to your long-term wealth. That's because despite the downturn, shares have "thumped" returns on cash over the past three decades. Phillips shows what would have happened to A$10,000 invested back in 1982 under three scenarios; in short a $150K to $180K gap.
- 30 percent higher for those with a bachelor’s degree compared with those with a diploma.
- 16 percent higher for those with a diploma compared with those with a level 1 to 3 certificate.
- 16 percent higher for those with a master’s degree compared with those with a bachelor’s.
- 46 percent higher for those with a doctorate compared with those with a bachelor’s.
- Young students who completed their degree earned 29 percent more than those young students who left without completing their degree.