Heads I Win, Tails I Win: Why Smart Investors Fail and How to Tilt the Odds in Your Favor - Hardcover

Jakab, Spencer

 
9780399563201: Heads I Win, Tails I Win: Why Smart Investors Fail and How to Tilt the Odds in Your Favor
Hardcover
ISBN 10: 0399563202 ISBN 13: 9780399563201
Verlag: Portfolio, 2016

Inhaltsangabe

INVESTING IS ONE OF THE FEW AREAS IN LIFE WHERE EVEN VERY SMART PEOPLE LET HOPE TRIUMPH OVER EXPERIENCE
 
According to Wall Street Journal investing colum­nist Spencer Jakab, most of us have no idea how much money we’re leaving on the table—or that the average saver doesn’t come anywhere close to earning the “average” returns touted in those glossy brochures. We’re handicapped not only by psychological biases and a fear of missing out, but by an industry with multimillion-dollar marketing budgets and an eye on its own bottom line, not yours.
 
Unless you’re very handy, you probably don’t know how to fix your own car or give a family member a decent haircut. But most Americans are expected to be part-time fund managers. With a steady, livable pension check becoming a rarity, we’ve been entrusted with our own finances and, for the most part, failed miserably.
 
Since leaving his job as a top-rated stock ana­lyst to become an investing columnist, Jakab has watched his readers—and his family, friends, and colleagues—make the same mistakes again and again. He set out to evaluate the typical advice people get, from the clearly risky to the seemingly safe, to figure out where it all goes wrong and how they could do much better.
Blending entertaining stories with some sur­prising research, Jakab explains
 
·How a typical saver could have a retirement nest egg twice as large by being cheap and lazy.
·Why investors who put their savings with a high-performing mutual fund manager end up worse off than if they’d picked one who has struggled.
·The best way to cash in on your hunch that a recession is looming.
·How people who check their brokerage accounts frequently end up falling behind the market.
·Who isn’t nearly as good at investing as the media would have you think.
 
He also explains why you should never trust a World Cup–predicting octopus, why you shouldn’t invest in companies with an X or a Z in their names, and what to do if a time traveler offers you eco­nomic news from the future.
 
Whatever your level of expertise, Heads I Win, Tails I Win can help you vastly improve your odds of investment success.

Die Inhaltsangabe kann sich auf eine andere Ausgabe dieses Titels beziehen.

Über die Autorin bzw. den Autor

SPENCER JAKAB writes for and edits the “Heard on the Street” col­umn for The Wall Street Journal and previously wrote its daily investing column, “Ahead of the Tape.” He has also written about investing for the Financial Times, Barron’s, and Dow Jones News­wires. Prior to becoming a journalist, he was a top-rated stock analyst covering emerging markets at Credit Suisse. This is his first book.

Auszug. © Genehmigter Nachdruck. Alle Rechte vorbehalten.

Chapter One

Lake Moneybegone

If I can tell you where you got your shoes at, can I give you a shoeshine?"

It was near the peak of the technology boom and business had never been better for the investment bank where I was working. Naturally, the director of our research department did what many executives in highly cyclical industries do when their companies are minting money: He decided to spend it like a drunken sailor. The company flew more than a hundred analysts from various countries in Europe and the Middle East by business class all the way to New Orleans for a long weekend full of speeches and "team-building" exercises.

A lot of what happened that weekend is unprintable, and some of it is a little hard to remember. Still, despite acting like drunken sailors ourselves, we learned a few things. One of my inebriated colleagues, for example, discovered that in America, unlike England, police cars and taxis look really similar. We bailed him out the next morning, but weren't around to lend a helping hand to another Brit who took the toothless, elderly African American man up on his offer to identify where he bought his shoes. He certainly wasn't going to guess Marks & Spencer, was he?

"You got your shoes right here on Bourbon Street!"

A good sport and not about to be a pedant about the Queen's English or a dangling preposition, he chuckled and sat down for his shoeshine while the rest of the group kept walking toward the bar. When he was done, the man, not having mentioned the price ahead of time, asked for $25. Whether today or sixteen years ago, that's a lot of money for a bit of spit and polish. But as my colleague began to object, five very large men suddenly materialized and made sure he paid in full.

I love making bets, and I especially love winning them, though I've never relied on linguistic ambiguity, much less the threat of violence, to do so. One way to avoid being the patsy in a wager is to consider how much information the other person has compared to you, and another is to recognize when one of you is being overconfident. Here's a case when those two would cancel each other out. Say I were to bet every person reading this who said they were above average at investing (studies show most of you would claim to be) to benchmark your returns in the same way that people do for their looks or driving ability. The latter two are pretty hard to quantify, but portfolio performance isn't. Many of you wouldn't take me up on it, so it might seem like I'd be setting myself up for a fall by betting against a self-selected group-only the crème de la crème, as it were.

Except I wouldn't be. Studies, among them one by German finance professors Markus Glaser and Martin Weber, show that there's absolutely no connection between how well an investor actually has done and how well they think they have done. None, nada, zip. Or, as the Herren Professors put it in more scientific language (ideally recited in a thick Teutonic accent), "The correlation coefficient between return estimates and realized returns is not distinguishable from zero."

That's pretty amazing. But if I wanted to do better than just break even-much better, in fact-I'd bet you instead on whether or not you keep up with the market return. In Glaser and Weber's study the investors surveyed estimated that on average they had made nearly 15 percent on an annualized basis over the four years in question. Their average performance actually was just 3.7 percent, and only about two out of ten managed to keep pace with the overall market.

Another much longer-term study of U.S. investors is even starker. In April 2015, Dalbar, a firm that evaluates fund managers, released results on how American investors in mutual funds did over the past thirty years compared to the markets that those funds were supposed to track. As I said in the preface, people unfamiliar with these numbers often scoff in disbelief. A handful of other researchers have attempted to calculate this "performance gap" and come up with numbers in the same ballpark. So read them and weep:

The "composite fund investor" earned an annualized 2.5 percent during those 30 years. That is just awful. It's less than inflation during that time. In other words, if a typical saver had a nice nest egg at the end of 30 years it was only because he or she salted away lots of his or her paychecks, not as the result of any real investment gains. And of course this is all before taxes.

Over the same time frame, the main U.S. stock index, the Standard & Poor's 500, earned just over 11 percent a year, and the broadest bond index, the Barclays Aggregate, managed 7.4 percent. Trailing the market in a single year or even for a few years is nothing to panic about, but three decades is an entirely different matter. That great boon to your nest egg, compound interest, works insidiously in reverse too. Fear, greed, naïveté, bad advice, and even the cost of sound advice combine to whittle away the pot of money we should earn after a lifetime of saving relative to what we could have amassed.

Add up the effect of all this behavior and you wind up somewhere I call Lake Moneybegone. Like Garrison Keillor's fictional town of Lake Wobegon where all the children are above average, nearly all investors are below average, and not by a little. But while that sounds bad, a gap expressed in percentage points is just too abstract to resonate with a typical saver.

"You really have to tell them that they should be shocked," says Dalbar's founder, Lou Harvey. "They really need to translate that into 'can you put your kids through college, can you fund your retirement?'"

The sums left on the table really are shocking. To consider a simplified example, let's say your great-uncle leaves you a $100,000 inheritance at age thirty-five but doesn't entirely trust your judgment. He forbids you to touch the principal or change how it's invested until you retire at age sixty-five. Being a frugal and conservative sort, he picks low-cost index funds comprised of 60 percent stocks and 40 percent bonds and they rebalance back to those percentages at the start of each year. Now, let's say your best friend receives a similar gift but is free to invest it as she sees fit, though also without withdrawing any principal. Your friend is a typical investor.

Fast-forward to the day thirty years later when you both qualify for Medicare and your great-uncle's gift would be worth over $1.5 million before taxes-seven times the $215,000 your friend has accumulated. That seems like it should be mathematically impossible. How can an average investor be so far below the passive return of the market? Where does all the money she didn't earn wind up?

Like I said before, not money heaven. That foregone income is earned by someone else. While the children in Keillor's fictional town can't really all be above average, there's no reason why the vast majority of investors can't be below it. That's because "average" and "market average" aren't the same thing. Subtract the costs of investing from all the wealth that stocks, bonds, and other investments churn out and you have what investors earned on average, but not what an average investor earned.

The gap of several percentage points between that typical investor's return and...

„Über diesen Titel“ kann sich auf eine andere Ausgabe dieses Titels beziehen.

Verlag
Portfolio
Erscheinungsdatum
2016
Sprache
Englisch
ISBN 10 
0399563202
ISBN 13 
9780399563201
Einband
Gebundene Ausgabe
Anzahl der Seiten
288
Kontakt zum Hersteller
Portfolio
https://www.wetones.co.uk/

105 Golborne Rd
London
W10 5NL
Vereinigtes Königreich
Verantwortliche Person
M.E.G Cards & Gifts
443000000000
paula@megcards.com

48 Cloyfin Road
Unit 4, 48 Cloyfin Road
Coleraine
Londonderry
BT52 2NY
Irland