Physical Address
304 North Cardinal St.
Dorchester Center, MA 02124
Open the editor’s digest for free
FT editor Rula Khalaf picks her favorite stories in this weekly newsletter.
Anyone who has seen the movie Crocodile Dandy He knows we don’t have mental health issues in Australia. As Mick explained: “No. Back there, you tell Wally if you have a problem. And he tells everyone in the city, he brings it in public. No more problems.”
I mentioned that my plan for this final skin of the 2024 game is to answer the five most common questions I’ve received by email this year. Interestingly, for the investment column, most of them are related to your emotional well-being.
That is, many readers hate managing their life savings. And I even understand the reasons. We are very busy and yet expect to find room to generate sufficient returns for retirement. Meanwhile, the fear of bankruptcy gnaws constantly.
Well, my advice is to imitate my father. Get someone else to do it and get lost on your motorcycle touring the country for a few decades (or up to one). He knocks). Barely look at your portfolio.
This works for reasons I’ve explained many times. Less means lower costs. Investing ensures that you’ll be in the market during those massive recovery days – after the sell-off – when everyone bails out.
But Dad doesn’t pay anything because he was a previous client and continues to refer his friends to the consultant. For the rest of us, the next best option is a simple and diversified exchange-traded portfolio. Set it up. Ignore it
Many readers send me lists of their holdings – often hundreds of companies. Even if these are more than an index (doubtful, they are not chosen by the majority of experts) the effort alone will justify the suffering.
Paying trading commissions or capital gains tax. Compensation for losses. Profit and Purchase Manager. Corporate activity, such as mergers or acquisitions, governance and voting. It forces me to write the words. And I was working for a living.
A flurry of emails also suggests that even potential gains from your portfolio may not be enough to provide a dignified retirement — let alone a ruined one. How can you increase responses without the risk of insanity?
Again, I have written several times on the long-term performance of various asset classes. In reality, you can’t expect a real return of more than 6 percent—much less than a government bond. Double digits? You are dreaming.
So how do the rich do it? Mostly through complex structures, using or reducing taxes. The latter is the key. Why bother trying to find another odd percentage point here, there’s a dozen points out there? It’s peanuts compared to lowering your tax bill.
In my view, this is the only reason to spend money on a financial advisor. Forget their macro forecasts or stock outlooks. They have no idea like the rest of us. Find someone who complains about tax laws in their sleep, but you can rest easy too.
Sure, but is there a more prudent approach to growing one’s pension pot faster, as dozens of you have asked me this year? he said. Less cost! After tax deductions, this is the second fastest way to retire.
Neither is talked about much – which is crazy. Think £8 every day for your two flat whites. This is paid out of your net income. So depending on your tax bracket you need to earn between £10 and £14 to support them.
That’s approaching five grand a year in gross income, which can be repaid in the name of 5 per cent as an annuity on a tax-free vehicle. Over two decades the two morning coffees lost £173,000.
Extend that logic to anything else you buy but don’t really need. I need to know. Over 30 years in my career, my compensation has gone from less to more to less to more to less to more to less again. My expenses rose and fell in tandem. I didn’t notice much.
And less consumption is the best way to help the environment. It is far more than anything else that is being asked for in sustainable finance. Readers asked me a lot about this in 2024. Does green investing still make sense?
Absolutely. But it is very important to change your approach depending on the property class. For secondary market securities like stocks—the ones that are easily traded—the greatest impact comes from owning them, engaging with management, and voting.
In order for the money itself to have an impact, it must flow through the primary markets – that is, into and out of companies. This is where the real investment is made. Where businesses can write a check if they are a force for good or not.
In other words, the best asset classes when investing in sustainability are private equity, venture capital, direct loans, and personal loans. Even corporate bonds are good, because they often need to be rolled over and allow for pressure.
The last two topics I get asked about the most are similar in my view – although many disagree. First, will the dominance of American companies last? Second, UK readers will want to know what the 88 specifications mean for their country’s equity markets.
My answer is simple. Forget liquidity and regulation And so on. British companies flock to US exchanges because they trade at higher earnings multiples and their top executives (and bankers) get richer.
When this is reversed (most likely from A technology bubble will pop) The Wall Street Journal is buzzing with rumors that US companies will soon be lining up to be listed on the “exclusive” Footsy 100.
Happy New Year and thanks for all your messages. Keep them coming.
The author is a former portfolio manager. Email: stuart.kirk@ft.com; X: @stuartkirk__
