Behaviour
Selling in a fall is the most expensive thing investors do
The gap between fund returns and investor returns is well documented, and it is almost entirely behavioural.
Alastair Nguyen
Editor, The Investment Habit
Alastair edits The Investment Habit and believes most investing content is entertainment sold as advice.
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44 articles
Behaviour
Chasing last year's best fund is a reliable way to lag
Performance tables are backward-looking, and buying the top of one has a poor record.
Risk & Allocation
Time horizon does more work than risk tolerance
How you feel about volatility matters. When you need the money matters more.
Drawing an Income
Sequence risk is the retirement problem nobody plans for
Two portfolios with identical average returns can produce very different outcomes depending on when the bad years arrive.
Drawing an Income
Dividends are not free money
A dividend reduces the value of the holding by roughly the amount paid. Treating it as income separate from capital leads to bad…
Getting Started
Fear of buying at the top, and what the fear costs
Almost everyone starting out worries about investing the day before a crash. The worry is reasonable; acting on it usually is not.
Getting Started
Why more research stops helping surprisingly early
Beyond a modest amount of homework, additional information mostly increases confidence rather than accuracy.
Getting Started
Automating the decision you are worst at making
A monthly contribution that requires a monthly decision is a monthly opportunity to skip it, and skips cluster in exactly the wrong…
Funds & Trackers
The urge to add one more fund
Portfolios grow by accretion, one reasonable-seeming addition at a time, until nobody can explain what the whole thing is for.
Funds & Trackers
Thematic funds sell a story you already believe
The pitch works because it confirms something you had already concluded about the world. That is the mechanism, not the evidence.
Costs
Why nobody gets round to switching provider
The saving is clear, the forms are dull, and the task moves to next month indefinitely. This is a behaviour problem, not a…
Costs
The costs that never appear on a statement
Hesitation, uninvested cash and time spent out of the market are real expenses. None of them are itemised anywhere.
Costs
Expensive signals quality everywhere except here
We learn from everything else we buy that paying more gets you more. In funds the relationship has generally run the other way.
Behaviour
The difference between a plan and an intention
An intention is something you mean to do. A plan specifies what happens, when, and what triggers it. Only one of them survives…
Behaviour
Doing nothing is an active decision and it is hard
Inaction is the correct response to most market events and the hardest to execute, because it feels identical to negligence.
Risk & Allocation
What a risk questionnaire can and cannot measure
A short set of questions produces a single score that bundles together three separate things, only one of which is about your…
Risk & Allocation
Volatility is the feeling; risk is missing the goal
The number that measures how much prices move is not the same as the chance of not having the money when you need it.
Risk & Allocation
Rebalancing is designed to feel wrong
It requires selling what has done well and buying what has done badly, which is exactly what your instincts object to.
Drawing an Income
Spending a portfolio is harder than building one
Decades of practice at saving produce exactly the wrong instincts for the day you are supposed to start spending.
Drawing an Income
Why retirees underspend the money they saved
Research across several countries has generally found retirees drawing down more slowly than expected, and often not at all.
Drawing an Income
The mental line between capital and income
Many retirees will spend interest and dividends freely while treating the capital as untouchable. The distinction is psychological…
Drawing an Income
Write the withdrawal rule before you need it
Deciding how much to take while you are living on it is deciding under exactly the pressure the decision cannot survive.
Drawing an Income
The first bad year tests the plan, not the portfolio
A decline early in drawdown is the scenario every retirement plan is supposedly built for. Very few have a written instruction for…
Drawing an Income
Flexibility only works if the trigger is decided in advance
Every drawdown plan claims to be flexible. Without a stated trigger and a stated adjustment, flexibility means improvising under…
Drawing an Income
When the balance stops being a number and becomes groceries
In drawdown the portfolio funds this month, and that changes how every market movement feels.
Drawing an Income
Who manages this if you cannot?
A portfolio that only one person understands is a problem waiting for a specific and predictable moment.
Drawing an Income
Guaranteed income is bought for how it makes you behave
Income that does not depend on markets is usually compared on rates. Its largest effect is on what you do during a crash.
Getting Started
The scattered accounts you collected without deciding to
Every job change leaves a small account behind. A decade later the pile carries duplicated costs, unknown holdings and nobody…
Funds & Trackers
An index is a set of rules, not a photograph of the market
Somebody decided what qualifies, how it is weighted and when the list changes. A tracker follows those decisions rather than the…
Behaviour
Everybody in the group chat is winning
People report their good decisions and go quiet about the others. The resulting picture of how everyone else is doing is…
Behaviour
Two kinds of regret, and only one gets rehearsed
Regret from acting feels sharper than regret from failing to act. Portfolios quietly get built around avoiding the sharper one.
Behaviour
Ask what you would tell a friend holding this
People give clearer advice to others than to themselves. The gap is wide enough to be worth exploiting on purpose.
Risk & Allocation
Correlations rise in the weeks you need them low
Assets that move independently in normal conditions frequently move together in a crisis. The diversification you measured was…
Risk & Allocation
Home bias is chosen by not choosing
Investors everywhere hold far more of their own market than its share of the world would suggest. The reasons are rarely examined…
Risk & Allocation
Everything you own is in the same portfolio
Property, pensions, cash and your own earnings all respond to the same economy. Looking at the investment account alone measures a…
Risk & Allocation
Cash swaps one risk for a slower one
Cash does not fall in nominal terms, which is exactly why it feels safe. What it loses is purchasing power, quietly and without…
Risk & Allocation
Some risks pay you and some just happen to you
Taking more risk does not reliably produce more return. Only certain kinds of risk have any theoretical reason to be rewarded at…
Risk & Allocation
A glidepath moves the allocation on a calendar, not on a view
Dated funds reduce risk according to a schedule set at launch. That is their whole strength and the source of every objection to…
Drawing an Income
The slow risk that compounds against a retiree
A retirement lasting three decades meets the same compounding that built the portfolio, running steadily in the opposite direction.
Drawing an Income
The years between the last salary and the first pension
Stopping work rarely coincides with every income source starting. The gap years have their own arithmetic and are routinely…
Drawing an Income
Once a year or once a month, and what the choice costs
Withdrawal frequency changes dealing costs, cash drag and how often you make a decision. The last of those matters most.
Drawing an Income
The late-life costs nobody can size in advance
Care needs are unpredictable in whether they arrive, when they arrive and what they cost. Plans usually respond by ignoring them…
Drawing an Income
Two more years of work moves three levers at once
Delaying the start of drawdown adds contributions, removes withdrawal years and shortens the period the portfolio has to cover.
Drawing an Income
One pot, two lifespans
A joint plan has to survive both people and then one of them alone. The second phase is where most plans turn out to be weakest.