Articles and Insights

The Economics of Time and Money: Understanding the Value Exchange

The Economics of Time and Money: Understanding the Value Exchange Think of all the things that you spend your money on – objects and experiences. Do you ever stop to consider if it is worth it? Sometimes it is and sometimes it’s not. If you are not limited by money, you will be limited by…

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For Financial Health, Consider an Information Diet

For Financial Health, Consider an Information Diet In today’s digital age, investors are drowning in unproductive information. Market commentary and news flow often thrive at the extremes, drawing the attention of investors during periods of market exuberance or decline. When investors zoom in on this noise flow, they tend to make less rational and unprofitable…

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If You Want a Good Life Then Improve Your Healthspan

If You Want a Good Life Then Improve Your Healthspan There is a direct correlation between your health and your quality of life. As your health suffers in later years your quality of life diminishes. It is not how many years you have lived but rather how many of them were good. Poor health significantly…

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Rising Geopolitical Risks and Overcoming the “Focusing Illusion”

Rising Geopolitical Risks and Overcoming the “Focusing Illusion” The escalating geopolitical tensions significantly influences our perceptions, often leading us to draw connections between complex global events and anticipated financial market shifts. In the process, we tend to lose sight of our long-term objectives, treating current events as pivotal moments without fully acknowledging their historical insignificance…

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Money Troubles vs Money Worries

Money Troubles vs Money Worries If you want more control over your finances, you might be surprised to find that focussing your attention on your money worries can actually lead to more negativity, which often results in feeling even less in control. The first step is to distinguish between money troubles and money worries. Financial…

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It is Better to Optimise for Behaviour than for Return

A Controversial Take – It is Better to Optimise for Behaviour than for Return Most investors know they cannot successfully time the markets with any consistency. It is widely accepted that to increase the odds of investment success you need stick to a well-defined plan and strategy over time allowing compounding to work its magic.…

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Experience vs. Expertise

Experience vs. Expertise We often confuse experience with expertise. Ben Carlson emphasised this point, stating that “Experience is not the same as expertise. Just because you’ve been doing something for a long time doesn’t mean you’re an expert.”Top of Form In various fields, there’s a common misconception that experience automatically translates into expertise. While experience undoubtedly…

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Shifting From Outcome to Process

Shifting From Outcome to Process A goal is a specific, measurable objective that you want to accomplish. It comprises several key components: What do I want to achieve? Why does it matter to me? How will I achieve this outcome? Setting goals helps clarify what we want to achieve and the behaviours needed to reach…

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How to Beat the Average

How to Beat the Average Every investor has a deep desire to beat the market. It is ingrained in human nature. In a 1988 speech, Charlie Ellis* explained: “There are three ways in which you might try to achieve superior results: one is physically difficult, one is intellectually difficult, and one is emotionally difficult.” He…

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The Illusion of Control

The Illusion of Control The world is complex and feels out of control. Being human, we have a deep desire to be in control. We have a greater sense of wellbeing when we convince ourselves that we have control over events and outcomes even when this is not true. There are many aspects in our…

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Goals, Resolutions and the Lack of Follow Through

Goals, Resolutions and the Lack of Follow Through Every year we start with good intentions and New Year’s resolutions. However, research suggests that fewer than 25% of us follow through on these intentions. Weight loss is a common example – we intuitively know what to do but don’t do it. The path to successful weight…

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Relationships Play and Essential Role in Well-being

Relationships Play and Essential Role in Well-being Time spent alone steadily increases throughout your life. Numerous studies confirm that loneliness affects your physical health and emotional welfare. Former Surgeon General of the United States, Dr. Vivek Murthy, aptly highlighted the severity of the issue by drawing a comparison between loneliness and smoking, stating that loneliness…

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The Levers That Money Can’t Pull

The Levers That Money Can’t Pull Money holds no inherent moral value; its significance is heavily influenced by our individual perceptions and associations with it. Many people mistakenly tie their self-worth to their net worth, yet the lack of money can significantly hinder one’s capacity to progress toward your desired self. Without financial resources, time…

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Diversification is Not a Free Lunch

Diversification is Not a Free Lunch Nobel laureate Harry Markowitz reportedly said that “diversification is the only free lunch in investing”. However, this seemingly cost-free strategy comes with its own set of challenges and trade-offs. The premise of diversification is rooted in the acceptance of an unknowable future. For those who believe they can foresee…

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Staying Resolute Amidst Market Cycles

The Secret to Long-Term Investing: Staying Resolute Amidst Market Cycles In the complex world of financial markets, one fundamental truth prevails: everything moves in cycles. These cycles are often the result of emotional decisions that cause markets to swing like a pendulum. At times, these market cycles can reach the extreme ends of human emotions:…

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Embracing Uncertainty in Investing

What Real Life Financial Planning Looks Like Investors often grapple with the challenge of achieving their long-term financial goals while avoiding the anxiety-inducing rollercoaster of market volatility. They naturally prefer to participate in the market when it’s on an upward trajectory, but this desire for one-sided certainty can lead to misguided actions and decisions. Investors…

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What Real Life Financial Planning Looks Like

What Real Life Financial Planning Looks Like There is a lot of confusion around what a financial planner does. The best financial planners don’t just do one thing. They help you manage your entire financial life. This picture above from Max Pashman does a really good job of showing everything that a GREAT financial planner…

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Decisions and The Conscious Illusion of Control

We are often not as in control of our choices as we think We love to consider ourselves as conscious agents that are in control of all our actions. Research suggests that we are often not as in control of our choices as we might think. Every day, we make countless decisions, from what to…

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We are often not as in control of our choices as we think

We are often not as in control of our choices as we think Every day, we make decisions that shape our future. When we make decisions there is an interplay between cognitive and emotional biases, which can profoundly impact the quality of our choices. Our minds have two parts: one that thinks about things and…

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One Year Returns Don’t Matter

One Year Returns Don’t Matter Ben Carlson has put together a chart displaying how long-term market returns vary slightly, but we observe a wide dispersion in short-term returns. Returns in any given year are all over the show but 30-year returns don’t change all that much over time. Long-term minded investors with discipline harvested decent…

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Compounding, Time, and Becoming a Lifetime Investor

Compounding, Time, and Becoming a Lifetime Investor The power of time and compounding can significantly enhance the odds of success for long-term investors. Unfortunately, many investors fail to build their investment plans on these strong foundations, leading to a disconnect between the potential of compounding and the behaviour of the average investor. Understanding the Magic…

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Health, Wealth, and a Fulfilled Life

Health, Wealth, and a Fulfilled Life In today’s fast-paced world, our focus often tilts heavily towards building wealth, leading us to overlook the vital importance of looking after our health. In the relentless pursuit of financial success, we tend to neglect both our physical and mental wellbeing. This skewed allocation of time and effort towards…

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The Familiar Tale of Investment Folly

The Familiar Tale of Investment Folly We find ourselves trapped in an all-too-familiar plot, witnessing a recurring phenomenon where investors fall prey to chasing outsize returns, only to be left disappointed and burnt. The ARK Innovation ETF, once the largest actively traded ETF, serves as our protagonist in this narrative. Its meteoric rise during the…

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The Surprises From the First Half of 2023

The Surprises From the First Half of 2023 In a recent blog the insightful Charlie Bilello highlighted some of the surprises for the first half of 2023. A tough 2022 wore investors down and consensus sentiment turned very bullish. The recession that never came In December 2022, there was widespread agreement that the U.S. economy…

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The Dunning-Kruger Effect – When Little knowledge is Dangerous

The Dunning-Kruger Effect – When Little knowledge is Dangerous Humans exhibit a cognitive bias known as the Dunning-Kruger effect, which leads individuals lacking skills or knowledge in a specific domain to draw erroneous conclusions while remaining oblivious to their own inadequacies. Novices often overestimate their ability and competence, while experienced and skilled individuals tend to…

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Investing vs. Trading: Understanding the Distinction for Financial Success

Investing vs. Trading: Understanding the Distinction for Financial Success Are you an investor or a trader? These two approaches represent fundamentally different mindsets and strategies. Failing to understand the difference can lead to disastrous short-term decisions made by long-term investors. Historical data shows that when markets fluctuate, long-term investors often regress to trading behaviour with…

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The Rand’s Perfect Storm

The Rand’s Perfect Storm It is not perchance that we have maintained a significant overweight exposure to offshore assets during the first half of 2023.  As much as it pains us to admit, there are moments in time when one concurs with Magnus’s views and this has been one of those periods.  From around R17,00…

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Understanding the Concept of Risk for Long-Term Investors

Understanding the Concept of Risk for Long-Term Investors If you don’t have a proper understanding of what risk means as a long-term investor you will struggle to have the composure required for long-term success. What Risk is Not Contrary to common belief, equity market exposure is not the primary risk for investors. Without exposure to…

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Persistence Score Card: Fund Performance vs. Investor Behaviour

Persistence Score Card: Fund Performance vs. Investor Behaviour Even when we are warned, we still don’t act rationally and in our own best interest. The phrase “past performance is no guarantee of future results” is communicated to investment clients as financial advisors are compelled to disclose this from a regulatory perspective. Our collective behaviour evidences…

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“Worrying” hijacks your self-care agenda!

“Worrying” hijacks your self-care agenda! How you relate to doubt in your inner world can cause chaos in your external world. How many times have you worried about events that never occurred? Very little of what we fear and worry about actually ever happens and hardly ever in the fashion we expected. We worry about…

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How will AI impact the future of Financial Advice?

How will AI impact the future of Financial Advice? The hype is real! Machines with human level intelligence seems to be with us. Artificial Intelligence (AI) solves problems that require the kind of reasoning that we associate with human intelligence. AI learns from past processes and goes beyond normal algorithms which are formulas for processing…

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Back to the Future – the benefits of the Pre-Mortem approach

Back to the Future – the benefits of the Pre-Mortem approach You start off with a clear future goal and a plan that will help you to achieve this goal. But the future is uncertain, and we need to have a good understanding of the risks that could cause us to fail at our objectives.…

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All the Things We Do Not Know About SVB

All the Things We Do Not Know About SVB Barry Ritholz made a couple of sage comments in his article “All the Things We Do Not Know About SVB” that is worth considering: “Armchair quarterbacking the decisions of the Federal Reserve long ago became a blood sport. With the benefit of hindsight, we all are…

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How well are you doing in terms of Life Experience Points?

How well are you doing in terms of Life Experience Points? Money is important and I don’t intend to knock its significance. The lack of money prohibits access to many experiences. Although that rings true, a lot of the things we want to do early-on in life require health and time, not money. When you…

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Money Etiquette and the Big “Taboo”

Money Etiquette and the Big “Taboo” Money is a significant source of stress. More than half of Americans feel embarrassed talking to others about their finances, according to new research done by Questis. But not talking about it doesn’t mean the problem isn’t there. A survey of 2,000 adults examined their relationship with money and…

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Short-term Sentiment, Confusion and Misguided Convictions

Short-term Sentiment, Confusion and Misguided Convictions How much time do you spend agonising over short-term economic data? Daily news flow is overwhelming and at times conflicting. As a long-term investor, to what extent does this inform or alter your long-term decisions? Markets are always looking ahead and pricing in future expectations. If the consensus expectation…

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Align your Actions with your Timeframe

Align your Actions with your Timeframe In May 1999 Barron’s published a cover story on Amazon shortly before the tech bubble burst. In the article Jeff Bezos was rubbished as just another middleman and that the idea of him pioneering a new business paradigm was silly. We all know what has transpired over the following…

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The Science of Less

The Science of Less We confuse activity with achievement. Leidy Klotz in his book “Subtract, The Untapped Science of Less” focuses on this fascinating question: “In designing our worlds, why do we always seem to add, but not subtract?” He writes that we often start with “What should I do more off?” A better approach…

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Rube Goldberg and Winning the Loser’s Game

Rube Goldberg and Winning the Loser’s Game Charles D. Ellis in his best-selling book Winning the Loser’s Game suggests that individual investors will be better off by working with the markets instead of against them. Based on historical facts he argues that investors need to avoid short-term traps to concentrate on their long-term strategies. The magic ingredients…

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Personal Financial Planning – Shifting from IQ to EQ

Personal Financial Planning – Shifting from IQ to EQ Consumers weigh the perceived value of products and services against the asking price. Two components affect consumer decisions regarding products and services: What am I paying? – Price What am I getting? –  Value When you lower prices your profitability goes down. It’s simple. Discounting everybody…

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Real-world decisions are almost always made under uncertainty

Real-world decisions are almost always made under uncertainty Life is uncertain. We cannot control many of the things that have an impact on our lives. Some of the most important numbers that you would like to know are unknowable in advance. We don’t have control over these numbers. How long will I live? How much…

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The Paradox of Common Sense – It’s not That Common

The Paradox of Common Sense – It’s not That Common The world is complex, but the human mind seems to prefer simplicity, even at the expense of accuracy. 2021 did not feel so uncertain. Who was able to predict in 2021 that we were about to experience the worst opening 6-months for 40 years in…

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The Trap of Being Interesting

The Trap of Being Interesting We all want to build an independent brand, identity, our unique value. A “why I am smarter than…” story. I have been intrigued by various conversations with well-qualified advisors over the past couple of years whose requirement for their client portfolios is that it should look different and be interesting.…

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Do-It-Yourselfer or Delegator?

Do-It-Yourselfer or Delegator? To answer this question, you need to be aware and consider the true cost of DIY. The financial planning industry has, by enlarge, not done itself any favours in the way it framed their value and what they are being paid for by clients. The planning and advice are free, but you…

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A Terrible, Horrible, Very Bad Day

A Terrible, Horrible, No Good, Very Bad Day Inflation is at levels we have not experienced for decades. The daily volatility of markets is unnerving. Interest rates are rising. The messaging from the media is running rampant providing no comfort. We are scared and would prefer to wait it out on the side-lines. It reminds…

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The Price of Solving for Comfort

Finding Certainty During Turbulent Times The decisions and trade-offs that you make will shape your financial future. Most of us cannot have it all. Wanting more of one thing usually means settling for less of something else. If you are not willing to accept the volatility of markets, you probably need to reassess your needs…

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Your happiness and your neighbour

Your happiness and your neighbour In a recent article I discussed the transient nature of Enough. Enough seems to be…. “Just a little bit more”. Our expectations increase along with our possessions resulting in no permanent gain in happiness. Happiness gains from merely “having more” are short lived. What is truly important to you? We…

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The Ulysses Pact

The Ulysses Pact – keeping investors committed You only benefit from a long-term plan if you stick to it. Fund flows and behavioural research confirms that we don’t. We are hardwired to feel that we should act when we experience stress. Market volatility causes us to make decisions that hurt us in the long-term. It…

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What if you could time recessions?

What if you could time recessions? From 1871 the US market has provided an annualised real return of 6,9% despite the 30 recessions you had to endure. That is the return if you stayed invested through all the ups and downs: buy-and-hold. But we don’t like the downs. Let’s assume you could time recessions We…

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Revisiting the Advisors Alpha

Revisiting the Advisors Alpha Many articles have been written about the advisor’s value for investors. Although a generalisation, evidence suggests that clients are better of engaging with an advisor when making investment decisions. The question that needs to be considered is the source of this “alpha”. In a recent article referencing the work of David…

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Markets, Instincts and Bad Decisions

Markets, Instincts and Bad Decisions A big market decline is an unnerving and painful experience. It triggers emotions that pulls our attention and perspective into a very narrow space. In times like these it always feels like the world is coming to an end. But it never does. Declines have always been temporary. This time…

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Deathbed wisdom and happiness

Deathbed wisdom and happiness What memories will race through your mind as you approach the end of your life? We confuse wealth with more money. How we spend our time directly impacts our well-being. People often spend more time at work to earn more money for their families. Sadly, often the family would prefer more…

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The Transient Nature of Enough

The Transient Nature of Enough You can’t have a goal if you don’t know what you need. The goal is only personal if it is the result of an internally guided process rather than from external inputs. When you conduct an honest audit, what are the needs and expectations that must be satisfied? Planning for…

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The End of History Illusion

The End of History Illusion Your values and priorities change over time. When we reflect on our younger selves, we identify how much we have grown and changed over time. When we look ahead, we expect to stay the same. The extent to which we underestimate how much we will change in future has been…

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Don’t expect the average

Don’t expect the average How often do you expect to experience your target return in any given year? You probably heard that the stock market generates about 10% annual returns on average. Sounds pretty good, doesn’t it. From 1926 to 2020, the average return for the U.S. stock market was basically 10% per year. That’s…

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Chasing the heat gets you burned

Chasing the heat gets you burned Fund flows are explained by short-term recent performance. There is a near perfect correlation between a fund’s recent performance and the flow of assets. A fund with strong recent performance, typically experiences strong inflows. Conversely, when performance was poor it suffers outflows. This is evident in a vast body…

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Avoid the Thrill of the Chase

Smart Investors Avoid the Thrill of the Chase We like to think of ourselves as rational decisionmakers making decisions that will serve in our own best interest. Your future will be the result of your actions not your intentions. Why do we persist with behaviours that dilutes our future opportunities? The body of evidence is…

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The Great Resignation

The Deeper Meaning and Implications of “The Great Resignation” By November 2021 nearly 5 million Americans had left their jobs. Clearly a broad-based global shift in mindset is underway which has affected how we think about life and what we value. People are questioning fundamental assumptions and they are re-evaluating what truly matters most to…

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