It is all about the return

Until we delisted from the find an advisor website, we were annoyed with phone calls from asset managers nearly every week. Excluding the Namibian funds, an investor have close to 700 funds to choose from, according to Morningstar.

The list is available on the Amedco website.

Each fund on the Morningstar list have their year-to-date, 1 month, 3 months, 6 months, 12 months, two year, three years, five years, seven years and ten years respective return published.

Who will be in Majorca?

This week I received two warnings. The first from Chubb Security Services, advising me not to flash at vehicles with no headlights. It might be a gang who will turn around and kill me. The other (if I can recall) from homeland security, advising me not to open Michael Jackson e-mail as it may be a computer virus.

These e-mails are well intended, sent by concerned friends. The odds of occurrence? Relatively low.

Today, I am issuing a warning. One that I hope you will forward to your friends, as this may probably be the longest running scam in South Africa. It is called Term Policies.

Dear Mr. Jacob Zuma

Did you notice that The President of the United States happens to be a black guy?

That is right. I am playing the race card in the first sentence of this open letter to you and now that it's out of the way, I can get right to the crux of the matter, hopefully, without being labelled a racist.

Spaar: 'n Riemtelegraaf

As dit nie vir Allan Gray was nie, het ek ook nie geweet dat Julie Spaar-maand in Suid-Afrika is nie. Blykbaar, is daar ook iets soos die Suid Afrikaanse Spaar Instituut. Dit is egter te verstane dat die Oktoberfest meer betekenis het as Bewahrenzeit as jy na die syfers kyk.

Suid-Afrika Spaar Nie

In 'n onlangse uitgawe van GrayIssue, skryf Rob Formby van Allan Gray Bate Bestuurders dat die spaarkoers van die land op 'n all-time low is.

Hoe meer verdien word, hoe minder gespaar word.

The Greater Depression

What new research is showing us

This week I received an interesting e-mail from Chris Botha of Stanlib Asset Managers. It was an astonishing chart that compare the World Industrial Output between the Great Depression of 1929 and our current state of affairs that started in April 2008.

I simply could not believe the similarities and set out to search for the source.

The authors of this chart turns out to be Barry Eichengreen, Professor of Economics and Political Science at the University of California (also a senior policy adviser at the IMF) and Kevin H. O'Rourke, Professor of Economics at the Trinity College in Dublin.

The Hot Hand Fallacy

And how asset managers may mislead you.

Can you predict on which side the coin will fall looking at the following sequence: Heads (H) or Tails (T)

HHH TTT HHH TT?

or

HTH TTH THH TH?

Most people may erroneously believe that the coin in the first sequence will land on tails. This is a very wrong assumption. The fact is that it appears as a sequence, but is actually just as random as the second sequence. Even more important is to realise that most people will perceive casual regularity of this sort as ‘n sequence of events.

Less (hindsight) is more (profit)

This is the third article in our series on Investor Psychology. It is loosely based on research done by Daniel Kahneman (Ph.D) who published "Aspects on Investor Psychology" in 1998 as well as other interesting finds on the subject.

It is well documented that people can rarely reconstruct what they thought was going to happen just before the event occurred. Most people exaggerate their earlier estimate of the probability that an event may occur. This manifestation is called hindsight biases.

It's all in the mind - part II

Optimism

In the previous post I wrote about overconfidence. Another aspect that influences investor behavior, and closely related to overconfidence, is optimism.

How good driver are you compared to others on the road?

The research by Kahneman (Aspects of Investor Psychology by Daniel Kahneman, PhD) and other articles I found on the Internet, suggests an overwhelmingly percentage (80%) of people believe that their driving skills are above average. Although I could not find any statistics on driver abilities (I conclude that it must be very difficult to measure), you have to agree that this is a typical illustration of optimism.