When I was teenager and living outside of New York I used to listen to a radio station called WFAN. For 24 hours a day the station was dedicated to sport. Most of the programming involved a host arguing with callers about some esoteric sporting topic – player A was better than player B, etc.
This was one of my less harmful teenage vices but it is hard not to look back on it as a giant waste of time. The programing was repetitive and largely consisted of callers citing different stats to make their case. In a sport like baseball where a season lasts 162 games there was a large sample size of statistical measures of performance to draw from.
Investing can sometimes feel a little like my teenage obsession with WFAN.
There was a lively debate in the comments section of Emma Davidson’s article on the relative merits of LICs last week. These types of debates are interesting and - depending upon your proclivities - may even be fun.
Yet these debates can also be harmful to some investors. I’m not worried about the Firstlinks’ audience who are thoughtful and informed. Investors in this mold can determine the relevance of a particular point to their personal situation.
Yet I’m also mindful that similar debates occur across social media with a decidedly uninformed audience. Many of these investors are crowd sourcing opinions or asking AI for answers without providing enough input to make an informed recommendation.
An investor without the knowledge required for self-reflection can start to seize on certain rationale for buying an investment which isn’t applicable to their personal circumstances.
I can use myself as an example – when I hear risk adjusted returns, I stop listening. That doesn’t mean risk adjusted returns are useless. They just happen to be useless to me given my time horizon, cash safety net and goals.
Adjusting a return using volatility as a proxy for risk means nothing to me as volatility isn’t a risk I face. I’ve set myself up with the foundation needed to be a long-term investor. Consequently, I’m just worried about not earning a high enough return over the long-term to meet my goal and trying to avoid catastrophic losses.
To understand what matters for you, and what doesn’t, requires some foundational knowledge to know what a term like “risk adjusted returns” means. But it also requires a good deal of reflection which is difficult when you are constantly bombarded by news and opinions.
I’m writing this in Japan. One of the core components of Japanese culture is the concept of honne and tatemae. Honne is your true feelings while tatemae is the public façade you maintain to keep social cohesion.
Many investors have reversed this concept. In public debates about the ‘best’ investments they come across as confident and, in some cases, arrogant. In private their doubts manifest themselves in a constant churning of their portfolio as they rashly chase each compelling sounding opportunity. The results are the low returns many individuals generate.
The truth is there isn’t a perfect investment. Each structure and specific opportunity has flaws. All each of us can hope to do is find investments where the trade-offs make sense given the problem we are trying to solve.
If you started to doubt your own choices after the 102 comments on the relative merits of ETFs and LICs I wouldn’t worry too much about it. If you learned more about how LICs worked the article served its purpose. Start with what you are trying to accomplish and your own unique circumstances – that is the secret to figuring out what is right for you.
Mark LaMonica
Also in this week's edition...
Roger Montgomery is back, taking a look at the historic impact of war on the equity markets and doubles down on his call that 2026 is the year where diversification will pay off for investors.
As we get closer to the budget the debate continues about intergenerational equity. Tony Dillon takes a look at the origins of the CGT ‘discount’ and what he considers a mis-framing of the debate.
While much of the focus of Div 296 is on the immediate impacts of the new tax, Rachael Rofe looks at what happens after death and the considerations for estate planning.
The indiscriminate sell-off of software shares is overshadowing the more nuanced impact of AI on different companies. Damon Callaghan takes a look at opportunities for investors.
The rift between Trump and the EU continues and is driving an unappreciated transformation according to Matt Reynolds.
Are AI data centres going to space? According to Evelyn Chow and Paul Martinez this might just be the answer to the resource burden of AI.
Katjia Hanewald looks at a way that retirees can tap into their housing wealth using a little known and misperceived government program.
This week's white paper is VanEck's latest Viewpoint quarterly, focusing on global instability and where patient investors can position themselves.
Curated by Mark LaMonica and Leisa Bell
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