Federal Election Results22/05/2019
The Importance of culture for investors13/06/2019
The cast and crew of the record-breaking show must be feeling many multiples of my melancholy, not least as a result of the abundant criticism of the final series by fans and critics alike.
Amongst the many complaints, is shock at the seeming lapses in attention to detail, with modern day coffee cups and water bottles inadvertently included in scenes, jarring with the elaborate fantasy world.
Here are some areas that we commonly lose the wood for the trees:
Lowest interest rate obscures excess borrowing
What you end up paying in absolute interest over the life of a loan has much more to do with how much you borrow than the initial interest rate.
Consider saving a bigger deposit or compromising on the home you buy, as interest rates will fluctuate, but once borrowed a loan will always need to be repaid.
Losing money to save tax
Sometimes very intelligent people become ensnared in hugely complex structures to reduce their tax burden, only to have any meaningful benefit consumed by additional accounting and administration costs.
Even worse, when we let the tax tail wag the investment dog, as was the case for many poorly performing agricultural managed investment schemes, we run the risk of losing capital far beyond any planned tax deduction.
Prudently paying our fair share of tax and making donations to worthy charities, while may seem boring, can actually be a much better bet than elaborate tax schemes.
Many active fund managers do an excellent job of both enhancing returns and reducing risk by leveraging their research and insights.
However, in the desire to outperform the market to achieve alpha, investors often trade frequently, skipping from one investment to the next based solely on recent past performance.
The associated increase in transaction costs and lack of effective diversification almost guarantees under performance relative to a given benchmark.
Having a flutter on higher risk opportunities with a small proportion of your portfolio can be a healthy way to maintain interest, but embracing a low turnover, well diversified portfolio is the simple way to secure long term objectives.
Repeatedly doing the simple things well creates a lasting legacy of success and avoids the potential gaffes made when distracted by trying to be too clever.
Article by Catherine Robson. Published by The Sydney Morning Herald, May 29, 2019. The original article can be found on The Sydney Morning Herald here.