Archive for August, 2010

Free Download of The Elements of Investing

August 30, 2010

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The Elements of Investing (read my review here) by Burton Malkiel and Charles Ellis managed to boil down investing to its elements in a short book that could be read in a few hours. You can download it for free here.

The Elements of Investing hacks away at all the overtrading and over thinking so predominant in the hyperactive thought patterns of the average investor. Malkiel and Ellis offer investors a set of simple but powerful thoughts on how to challenge Mr. Market at his own game, and win by not losing. All the need-to-know rules and investment principles can be found here.

* Contains sound investment advice and simple principles of investing from two of the most respected individuals in the investment world
* Burton G. Malkiel is the bestselling author of A Random Walk Down Wall Street and Charles D. Ellis is the bestselling author of Winning the Loser’s Game
* Shows how to deal with an investor’s own worst enemies: fear and greed

A disciplined approach to investing, complemented by conviction, is all you need to succeed. This timely guide will help you develop these skills and make the most of your time in today’s market.

Thanks to The Stingy Investor for posting the link.

Do Advisors Add Investment Value?

August 30, 2010

18 comments

A recent research paper out of Germany provides ammunition to those who question the value of investment advice. The paper titled “Financial Advisors: A Case of Babysitters?” analyzed two sets of data: 32,751 randomly selected internet brokerage accounts over a 66 month period and 10,434 randomly selected clients of a bank covering a 34-month period. A portion of clients both at the internet broker and the bank optionally worked with an advisor. The researchers analyzed the performance records of independent advisors from the first set and that of bank financial advisors from the second set to answer questions like whether advisors tend to be matched with poorer, uninformed investors or with richer, experienced ones and how advised accounts perform relative to non-advised ones.

The researchers found that advisors are more likely to make successful matches with older, more experienced, single, female investors rather than younger, inexperienced investors. They also found that advised clients get lower net returns and lower risk-adjusted net returns than they could have achieved on their own. In other words, on average the cost of financial advice exceeded the benefits that advisors can provide. And consistent with the incentive structure of advisors, the researchers found that advised accounts trade more and have higher turnover.

Since advisors are matched with richer, older and more experienced investors, the researchers liken them to babysitters:

In this respect, advisors are similar to babysitters: babysitters are matched with well-to-do households, they perform a service that parents themselves could do better, they charge for it, but observed child achievement is often better than what people without babysitters obtain, because other contributing factors are favorable.

The research paper is available here. A tip of the hat to Ken Kivenko of CanadianFundWatch.com for pointing to the research.

This and That: Burton Malkiel and more…

August 26, 2010

11 comments

Just a quick reminder that you can read my posts in your favourite reader or delivered by e-mail.

  1. Money Smarts Blog featured a guest post that offered six reasons why Canadians should own oil stocks.
  2. Canadian Financial Stuff shared the best back-to-school advice his dad gave him, which is sure to come in handy for students heading off to University.
  3. Thicken My Wallet isn’t convinced that the debate over the value of financial advice will disappear if advisors move to some other fee model.
  4. Canadian Couch Potato offered a detailed explanation on why he picked both XDV and CDZ as his top dividend ETF.
  5. Larry MacDonald reported out that many credit card holders failed to notice mysterious charges in their statements.
  6. Squawk Fox has an easy-peasy recipe for making gourmet microwave popcorn. Yeah, saving a few bucks is nice but it is nicer avoiding the processed stuff in packaged popcorn.
  7. Many Canadian Money Forum members feel that caution is warranted in Real Estate Income Trusts. I won’t argue that REITs are undervalued but they are not crazily overvalued in this low-interest rate environment either.
  8. Million Dollar Journey featured a guest post that looked at landlord tenant relationship from a tenant’s perspective.
  9. Michael James rips apart popular financial articles that convey an incorrect picture by ignoring the time value of money. Saving is a good habit to cultivate but it is also important to have realistic expectations.
  10. Preet has a special cell phone deal for readers. Of course, he can’t beat my Speakout Wireless plan on which I spend less than $25 per year.
  11. Boomer and Echo offers ten tips to save money on auto insurance.

That’s it for this week. Have a great weekend everyone!