Friday, March 3, 2017

Short Takes: Irrationality Benefits, Trader Feedback, and more

My only post during my last two weeks of vacation was:

The Limits of Retirement Simulators

Here are some short takes and some weekend reading:

Why Facts Don’t Change Our Minds is a fascinating article explaining why acting irrationally in certain ways was a beneficial adaptation.

The Reformed Broker reports on an interesting experiment where a brokerage reported to account holders whether their trading produced any value.

Larry Swedroe reports on some interesting insights into investors’ preference for dividends.

Boomer and Echo explains the main problems with most of Canada’s mutual fund industry: closet indexing and high fees.

Big Cajun Man says the RRSP should really be called the Tax Deferral Savings Plan. He makes a good point that people shouldn’t look at their RRSP balances and think of it as all their money

Million Dollar Journey has a good primer on asset allocation. Near the beginning are two sets of returns illustrating the effect of bonds on long-term returns. The first set is based on returns for the past 30 years and the second is based on the last 90 years. It’s not hard to see that the last 30 years have given us an amazing bull market in bonds. It will be interesting to see if we get a bear market in bonds in the coming decade or so.

My Own Advisor explains the downside of income tax refunds.

2 comments:

  1. I keep telling people that is not all their money, and they keep looking at me like I am a moron. One of us is right, wonder which one? Thanks for the inclusion this week. Vacation? You get vacation?

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  2. re: Why Facts Don’t Change Our Minds -- a good reminder of just how messed up the human mind is (note that 'mind' is different from 'brain'). So few of us will even recognize that fact let alone attempt to correct the ailments. Goes hand-in-hand with how people think and behave as individuals vs member of a group.

    re: Larry Swedroe -- he's stated previously, to which I agree, "There is literally no logical reason for anyone to have a preference for dividends." However, considering our natural repulsion for facts and logic...

    re: Asset allocation -- "...first set is based on returns for the past 30 years and the second is based on the last 90 years." Exactly why it's useless data. The conditions which allowed for the 35-year bond bull no longer exist; it will be much more difficult going forward to achieve those historical level returns. Second, not one of us will ever have a 90-year investment horizon, thus this data is very moot. A good, yet superficial, primer.

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