January's Great Reads

The New Year is always a really exciting, invigorating time for me. I’m that annoying chippy chipmunk who runs her annual spending summary on December 31st and who starts work on January 2nd with a really long list of the organizing she got done over the holidays.

One of the things I spent time thinking about was why I do what I do with this reading list every month. Some of my close friends know that I broke up with Facebook this year, and that I’ve been consciously reducing or restraining my media consumption habits...which sounds strange coming from someone who reads 30+ articles a day, curates them on Twitter, and puts out the best handful in a monthly newsletter, I grant you.

In reading Morgan Housel’s How to Read Financial News last month, I had one of those moments of clarity that usually only come when I’m far away from any means of recording it: I do what I do with this monthly feature because not everyone has the time (or, frankly, the desire) to read at the volume I do. I might not always hit the marks you’re specifically interested in, and sometimes I’m playing a totally different game than you are (that’s for all you other planners out there), but my goal with Great Reads each and every month is to filter through the noise (as I see it) and find you some signal (again, according to yours truly). I hope my work is of value to you, at least once in a while.In fact, I’d love your feedback on this feature.

Click here to take an incredibly short survey, and my sincere thanks to everyone who has already done so.

Signal on the list this month is Morgan Housel (yes, he’s on here more than once, I know) on walking the knife edge that is patiently doing nothing and solving hard problems with simple solutions, Ken Kivenko on the glaring lack of investor representation in the regulatory consultation and rule-making process, an article about keeping up with the Joneses that manages to avoid calling the Joneses stupid (for once), and a killer critique of retirement income strategies that invest to earn higher returns before buying guaranteed income (if your definition of “killer” involves actuarial math and liability matching. Mine does, surprise!)

2017 in Review

From James Osborne

We’ve collectively invested one of the calmest, most profitable years for market returns in a long, long time (turns out money these days doesn’t care who’s in power), and the big question roiling away in the back of many minds is “should I let it ride?”Here’s my friend James Osborne with a clear year in review aimed at US investors, and a spectacular paragraph on what to do next aimed at everyone:

“Or, you could be happy, satisfied, pleased with a better-than-average year, and know that when years like this come, we take them. We don’t take it for granted, but we take it. And the consequences are pretty straightforward. If a great year like this one leaves your portfolio out of balance, you rebalance. After a year like this, you do what you said you were going to do after a year like this. Instead of fretting, instead of trying to guess if the rally will continue or when the inevitable correction will come, do what you said you were going to do. That’s the only way this works. Not changing your mind, not going with your gut instinct or making a move based on what you think the President will tweet next. Having a plan is the beginning. Having the discipline to stick to that plan is the other 95%.”

Read the full article here.

Time for a Big Shift

From Meir Statman

The behavioural science behind how we deal with the enormous change from earning an income to living off of our savings:

“An elderly couple moving to an assisted living apartment call their son in another state for help in moving their belongings. A widow in her 90s finds it difficult to clean her home, yet refuses to hire help. These people are not wealthy, but neither are they poor. Each has more than enough to pay a moving company or cleaning crew, without risk of running out of money before running out of life. Yet they resist, insisting that they cannot afford these services. Why do people behave this way?”

Read the full article here.

You’re on Your Own Now

From Josh Brown

Another piece written mainly for a US audience, since Josh is specifically referring to the GOP dilution of the Department of Labour’s Fiduciary Standard, but his commentary can easily be applied to the advice community in Canada, some of whom have dug in and are desperately fighting against banning embedded commissions and enacting a fiduciary standard here with the same arguments that Josh refers to here: that such regulations will reduce freedom of choice and access to advice for smaller investors.

“When industry lobbying groups put phrases into bought-and-paid-for politicians’ mouths like “freedom of choice”, what’s actually happening is that consumers are being given the “freedom” to choose solutions that are marketed inappropriately and designed to transfer their wealth into the pockets of others. They’re being “empowered” to inadvertently act against their own self-interest with the help of unscrupulous salespeople and deceptive advertising practices.”

Read the full article here.

You can read this month's entire list below:

Solving Hard Problems with Simple Ideas | Morgan Housel

Just make sure you're working with the right simple ideas!

"When you’re dealing with uncertainty and complexity, simple ideas are not dumbed-down ideas. They are often complex solutions gift wrapped for you in a way that makes their application practical and sustainable."

This is Why it Seems Everyone Else Has More Money than You | Liz Weston

These kinds of articles circulate periodically, and usually the question posed in the title is answered with some version of a smug eye roll and “because everyone else is a dummy”. Not this one.

How To Read Financial News | Morgan Housel

“[G]ood, relevant content is extremely rare. You should have no tolerance for the lower half of categories in this chart, and asking yourself where something fits before reading it is vital. Giving yourself permission to move on quickly provides more time to find something relevant.”

The Return You Need | Dirk Cotton

“It's a little like saying, "I really need to buy some very dependable income with this money but I think I'll bet it at the racetrack first because if I win I'll be able to buy even more safe income!" You need to consider other possibly less attractive outcomes.”

Retail Investors and the regulatory "consultation" process | Ken Kivenko

“The problem isn’t only that industry is powerful and has lots of money and that its lobby groups, funded think tanks, law firms etc. can participate in the public consultation process. While this is true, the fundamental problem is that the rule-making process is deliberately designed to exclude investors; they are given no meaningful opportunity to make their views known at any point in policy and rule making.”