Monday, September 30, 2013

Jim Parker's Coffee Break links...

by Jim Parker, Vice President, DFA Australia Limited 

“All I want you to tell me is when will the market go up and when will it go down.” How often do we hear that cry? Perhaps the better question to ask is whether it is really in our best interests to trust predictions about something, like the financial markets, that is inherently unpredictable. This article from Carl Richards in the New York Times provides a useful perspective on the dangers of market timing.

Have you ever noticed the similarity between commercials for lottery tickets and those by investment managers promising market-beating returns? Just as you rarely see images of a mug punter tearing up is lottery ticket, you rarely will see ads with pictures of dejected investors realising ‘the sure thing’ was anything but. The good news is you don’t need to treat investment as a gamble.

Spending more than you earn, failing to have a cash emergency fund on hand and neglecting insurance. Those are three of the big 10 money mistakes cited by The Sydney Morning Herald as most common among Australian consumers. But perhaps the most dangerous one is the “hot tip”, the get-rich-quick idea based on a speculative gamble on a single security or scheme. As always, getting sound and independent advice is a good starting point

Monday, September 09, 2013

Coffee Break (from Jim Parker, DFA Australia)

Useful Articles from the Web

The biggest communications challenge for financial professionals these days is rarely lack of information. The challenge often is accessing the right information quickly and in a form that suits the market you are seeking to service.

This new regular item points to potentially useful links in communicating the principles of sound investment. How you use them is up to you – whether in a newsletter, blog, client meeting or just to spark your own ideas.

We don’t necessarily endorse everything in these links, but we’re sure there’s something you can use. And if you see something worth reading, let us know here.

In the popular 1990s US sitcom Seinfeld, the hapless George Costanza ponders that his fortunes might change if he stops giving way to his first impulse on everything and instead does the opposite. It’s a lesson we might heed in investment as the media pushes us toward “popular” stocks. Larry Swedroe of CBS News explores the Seinfeld connection.

We see them on the TV news every night. They are always making sage and convincing sounding forecasts about the outlook for growth, interest rates, currencies and shares. But economists actually have very little to teach us as investors, as blogger Barry Ritholtz explains.

The pubs of the world are full of people big noting about how they beat the market by getting in or out at just the right time. But the truth is even a well-orchestrated entry and exit will not guarantee you beating a diversified portfolio that is rebalanced periodically.

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