Amanda's Take Five for Wednesday

Personal Finance

Top 10 End of the World products; Beating the index; 3 tips to invest better; Fish fingers and financial pies; Betting on India

19th Sep 12, 8:12am by Amanda Morrall

By Amanda Morrall

1) Saving for the apocalypse

All good things must come to an end and so too shall the human race, one day. I for one don't expect this event to happen in my lifetime but there's no shortage of Mad Maxs and Chicken Littles out there warning about the imminent apocalypse. Just for kicks, here's a list of the top 10 products and services to prepare for it. They include affordable bunkers for the middle class, zombie strength weapons and a Doomsday dating service. God Bless America. This link's for you Bernard.

2) The case for index trackers

It's an age old debate and one that makes the rounds in our office quite often: whether it is better to be with an active fund manager than a passive one. On the balance, research suggests you'll be better off going passive, with a manager who tracks the index. That's because there are not many fund managers that can beat the index. Vanguard Investments in its latest newsletter reinforces the point with some gut kicking statistics. Here's one of them: "Over the 12 months to the end of June this year, 72% of active managers were outperformed by the index.''

But wait, it gets worse:

"Over three and five years, the percentage of funds beaten by the index were 72 per cent and 81% respectively.''

Does that mean you should rule out active fund managers altogether? Of course not. It just means the good ones are few and far between and increasingly hard to find.

Vanguard said the polarising issue also overlooks the "question of what is the right balance between the core asset allocation to index style of investing to capture the market return, and to active satellites where investors or their advisers have higher levels of confidence they can get higher returns."

3) Three tips from Peter Lynch

The Motley Fool, in anticipation of "Worldwide invest better day" Sept.25, talks to Peter Lynch from Fidelity Investment's Magellan Fund about his top three tips for minimising risk and capturing returns.

Why should you care what he has to say? Because according to the Fool, an "ordinary investor who put $1,000 in the fund on the day Lynch took over would have had roughly $28,000 by the time Lynch stepped down 13 years later."

4) Fish fingers and many financial pies

British TV chef Phil Vickery, the subject of the Telegraph's latest fame and fortune profile, shares his recipe for frugality, happiness and resilience. How's this for a kick in the pants? Vickery was made redundant on the eve of his marriage, and was saddled in unemployment with big fat mortgage with a painful 15% interest rate. He endured 10 years of negative equity on the house and the marriage, wracked with financial strife, ended in divorce. His story does have a happy ending as well as a link to some healthy and economical recipes for time pressed parents.

5) Betting on India

India appeals for a number of reasons to me. Bloomberg.com in this video explains why betting on India, as an investor, could be a long-term good idea.

To read other Take Fives by Amanda Morrall click here. You can also follow Amanda on Twitter @amandamorrall

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11 Comments

by steven | 19th Sep 12, 8:58am 1348001931

You missed the product to celebrate the event in Amanda,

http://www.trademe.co.nz/Browse/Listing.aspx?id=515049688

I wonder if he made it himself or just signned it...

regards

by StanGoodvibes | 19th Sep 12, 10:22am 1348006928

#1 I plan on living a good 50 years or so more, which will take me through to the 2060's - 30 years after WHO estimate that we'll need to two planets worth of resources. So, call me me Mad Max or Mad Stan or whatever, but I think the odds that our species will join the growing list of other species we are killing off at a rate not seen since, well, the last great extinction, in those 50 years are actually quite good. Say, 50/50.

Facts on my side:

1. humans are notorious for thinking that change happens gradually, but in fact it happens in fits and starts, usually because a black swan event comes along and changes everything. So we look at the future thinking it's going to be much of the same, but we don't factor in sudden and irrevocable change events. That's why those predictions from the 50's about life in the year 2000 are so hopelessly wrong - they don't factor in swans like the internet, mobile phones, solar energy etc because they can't imagine it. Life in 50 years time will be nothing like what you imagine it will be.

2. Like any organism on our planet, when conditions are ripe for a population explosion, the population explodes, and then crashes. Dramatically. Witness the Mayans, or more recently, what happened to everyone on Easter Island when they finally chopped the last tree down. A generation later a flourishing society of 7000 people who built those fantastic statues were living in holes in the ground and eating each other, and then they were all gone. We are repeating that experience on a global scale. Some unforseeable black swam in our near future will cause our ridiculously overpopulated planet (9 billion? yeah right) to drop down to a few hundred million. It won't go well for the several billion who don't make it.

3. Much as I love post-apocayptic books and movies - Mad Max, Book of Eli, The Road etc, there is one giant flaw in the fantasy that what's left of the human race will rebuilt from the ashes; there will be by the end of 2012 about 500 nuclear power stations that all require continuing power, water and skilled people to stop from going Chenobyl. If you are one of the furtunate few left standing on a nearly deserted planet, you have about 3 months before you and everything else dies from radiation poisoning.

Basically, if you came up with a plan for engineering the extinction of all life on the planet, you'd be hard pressed to beat the one we are currently on. And forget about global warming, that's the least of your problems right now.

But on a lighter note: my favorite End Of The World money making prize goes to the brilliant person who came up with the idea of creating a business to look after the pets of Christians in America after they go up to meet Jesus in the rapture. Apparently the insurance premiums are quite a substantial little earner. Genius.

by powerdownkiwi | 19th Sep 12, 2:43pm 1348022629

SGV - right on.

I've argued long and hard here, that CC would not be first cab off the rank - but that it will pull out.....

http://www.cosmosmagazine.com/features/print/2736/survival-species

http://www.oilcrash.com/articles/murray02.htm

I wrote that 4 years ago.......

by StanGoodvibes | 20th Sep 12, 12:58pm 1348102682

From your article...

The world is in the sway of a dangerous illusion. Most leaders, officials and institutions behave as if the human enterprise is somehow remote from the environment; as if human expansion can go on forever; as if the Earth's resources and energy were limitless. And yet, we know this is not the case. We know many complex civilisations, successful and advanced, have nevertheless collapsed. Ours could too.

Spot on. Although I'd replace "Ours could too" with "Ours will too".

by StanGoodvibes | 19th Sep 12, 6:28pm 1348036082

The history I read of Easter Island was that it was a verdant forested island when the original settlers arrived. After a while when they split into factions they started carving the ridiculous statues down by the waters edge (where some half-finished statues remain today) and lacking any packhorses they cut down the trees to make rollers to roll the statues into place.

Eventually through denuding the forest to the point where it was no longer sustainable something happened to the last few trees and the islanders then lacked the ability to repair their boats or fix their nets, and thus sprung the internal conflict which left them trashing each others statues, using all the buildings for firewood and living in caves, hoarding and fighting over the last few resources, before finally resorting to cannibalism (evidence still exists) because there was no food left and they could neither fish nor leave by boat.

A better parable for our current society would hard to find.

by powerdownkiwi | 19th Sep 12, 6:58pm 1348037906

The problem with survivalism is that it's no answer.

Back in the '50's/'60's, a lot of folk across the USA build fallout shelters. It was the wrong approach. You don't survive long-term, even if you weathered the initial attack, plus which it's not exactly 'life as you knew it' when you emerge.

The valid way was the anti-nuke political way. Stop the thing happening. Whether you are successful or not, it's the only valid approach,.

Same with peak oil, finite resources and the limits to growth. Setting yourself up to survive isn't good enough (although it's an idiot who thinks the future will always be better on the basis that it has thus far - you're still better moving to a resilient lifestyle) you have to do the political/societal ghange thing too, or it's Mad Max and not worth having gotten resilient.

by StanGoodvibes | 20th Sep 12, 1:02pm 1348102956

Seems to me the problem with survivalism is that you have to share the planet with other survivalists. You emerge from your shelter and find yourself with only redneck-bogans left to communicate with. Every article I ever read about survivalists (even by survivalists) makes me think these aren't people I'd want to be spending time with.

I think I'd prefer it if cockroaches inherited the earth.

by steven | 20th Sep 12, 1:10pm 1348103414

LOL

regards

by StanGoodvibes | 20th Sep 12, 1:17pm 1348103846

Nice bit if history - cheers.

I think the awareness that we could be approaching the end is becoming part of the human psyche - even unconsicously. You just have to look at the plethora of post-apocalyptic books and movies that have been produced in recent years.

Clearly it's gone from the unthinkable realm of science fiction to being potential fiction.

by Bernard Hickey | 19th Sep 12, 11:59am 1348012750

Great fun Amanda.

My favourite is the apolocalypse marketing link with the 'Survivalist Singles' website.

"Find love for less than the cost of a box of bullets..."

Those crazy Americans...

Good thing you're Canadian...

cheers

Bernard

by Curious | 19th Sep 12, 5:33pm 1348032824

Re 2

This follows on from my comments yesterday about the average investor's returns being less than the fund they invest in due to timing the entry and exit. To me the debate around active vs passive should not be about return but about risk adjusted return. It matters little if an index funds beats 70% or 80% of the active funds if investors have bailed after any significant market correction. If investors use the services of a good active manager who is able to mitigate some of the downside and therefore stay the course their returns are likely to be better than riding an index fund for a time then panicking and going to cash.

The difficulty as you state is of course finding the right fund. Making a decision on performance alone is likely to be problematical.