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Anyone seen the movie Crocodile Dundee He knows we don't have mental health issues in Australia. As Mick explains: “No. There, if you have a problem, tell Wally. He tells everyone in the city, and the matter comes out into the open. No more problems.”
I mention this because my plan for this final skin of the 2024 game is to answer the five most common questions I've received via email this year. Oddly enough, for an investing column, most of it is about your emotional well-being.
That is, many readers hate managing their savings. Even I understand the reasons. We are very busy and yet we are expected to find room to generate returns high enough for retirement. At the same time, the fear of losses is constantly gnawing.
Well, my advice is to imitate my father. Have someone else do it and disappear on your motorcycle while you tour the country for a few decades (or until someone else does). He knocks you out). You barely look at your wallet.
This works for the reasons I've mentioned several times. Less churn means lower costs. Staying invested ensures you'll be in the market on the massive bounce days that follow sell-offs – when everyone bails out.
But my father pays no fees because he was one of the first clients and continues to introduce colleagues to his advisor. For the rest of us, the next best option is a simple, diversified portfolio of exchange-traded funds. Set it up. He ignores.
Many readers send me a list of their holdings – often hundreds of companies. Even if these indicators outperform the index (which is doubtful, most carefully selected by specialists do not), the effort alone guarantees misery.
Pay trading commissions or capital gains tax. Compensation for losses. Supervisor of dividends and repurchases. Company activity, such as mergers or acquisitions, governance, and voting. It stresses me out about writing words. And I was doing it for a living.
Many of the emails also cite the concern that even the potential gains from your investment portfolio won't be enough to provide for a decent — let alone a spoiled — retirement. How can you maximize returns without taking crazy risks?
Again, I've written a lot about the long-term performance of different asset classes. You can't realistically expect a real return of more than 6 percent from stocks – let alone government bonds. Double numbers? You are dreaming.
So how do the rich do it? Often through complex structures, or to benefit or reduce taxes. The latter is key. Why worry about trying to gain another odd percentage point here, and a dozen basis points there? It's peanuts in exchange for lowering your tax bill.
This is the only reason in my opinion to spend money on a financial advisor. Forget their macro forecasts or stock views. They have no idea like the rest of us. However, find someone muttering the tax code in their sleep, and you too can rest easy.
Sure, but is there a more mindful approach to growing your retirement balance quickly, as dozens of you have also asked me this year? there. Spend less! After minimizing taxes, this is the second fastest path to retirement.
Neither is rarely talked about – which is crazy. Consider £8 for two flat eggs each day. This is paid from your net income. So, in reality, you'd have to earn £10-£14 to fund it, depending on your tax bracket.
This is close to five grand in gross income per year, which could have been invested in a tax-free car like a pension at a nominal return of 5 per cent. Over two decades, my morning coffee has cost me £173,000.
Extend this logic to other things you buy but don't really need. I should know. Over the course of 30 years of work, my compensation has changed from a little to a lot to a little to a lot to a little to a lot to a little again. My spending rose and fell in parallel. I hardly noticed.
Consuming less is also the best way to help the environment. Infinitely more than anything sustainable finance demands. Readers often ask me about this too in 2024. Does green investing still make sense?
definitely. But it is necessary to change your approach depending on the asset class. For secondary market securities such as stocks – which are simply traded – the greatest influence comes from owning them, dealing with management and voting.
For the money itself to have an impact, it must be deployed or withdrawn in primary markets – that is, to and from the companies themselves. This is where the real investing happens. You can write a check if companies are a force for good or reject them if they are not.
In other words, the best asset classes when investing sustainably are private equity, venture capital, direct lending, and private credit. Even corporate bonds are good because they need to be renewed often, which allows for pressure.
The last two topics I was questioned on are the same thing in my view – although many disagree. First, will US corporate dominance continue? Secondly, UK readers want to know what the delisting of 88 companies this year means for the local stock market.
My answer is simple. Forget liquidity and regulation And so on. The reason British companies are flocking to US stock exchanges is that they trade at higher earnings multiples, so their senior executives (and bankers) will be richer.
When this reverses (most likely after The technology bubble has burstThe Wall Street Journal will soon be filled with stories about US companies lining up to be included in the “exceptional” FTSE 100 list.
Happy New Year and thank you for all your messages. Keep them coming.
The author is a former portfolio manager. Email: stuart.kirk@ft.com; tenth: @stuartkirk__
