Is a Crash Likely (2015-ish)? Should a New Investor Wait a While to See?

saintalan

Just ask them to hang on a mo, then get on with what you were doing?

jamesd

Damage wrote: »

It's possible I suppose, but if so it's a hell of a coincidence considering it's the first time I've had such a call, and it occurred just after I set up my first ISA.

Try using a different email address for each business you do things with, and ask them for the email address. That'll tell you immediately where they got it.

jimjames

fairleads wrote: »

Damage
Tim Hale had, or still has, connections to the financial services industry and therefore has a vested interest in providing information that is biased.

I don't think anyone has ever claimed that Tim Hale's information is biased.

Can you explain why you are suggesting that and what exactly this bias is?


(Obviously it has a bias to investment rather than just holding cash but I'm assuming that isn't the bias you refer to as it is an accepted part of building a portfolio that you hold different asset classes)

arbster

jimjames wrote: »

I don't think anyone has ever claimed that Tim Hale's information is biased.

I too was bemused by this unprovoked and apparently baseless accusation, together with the veiled assertion that everyone engaged in the financial services industry is somehow trying to mislead us.

bigadaj

arbster wrote: »

I too was bemused by this unprovoked and apparently baseless accusation, together with the veiled assertion that everyone engaged in the financial services industry is somehow trying to mislead us.

It's very useful to start from a premise that anyone in financial services is trying to mislead us though, and seek to find evidence to the contrary.

I don't think hale can be accused of bias in the sense of representing the financial industry, as he is obviously a passive advocate with a focus on low charges, so not helping too many active fund managers, hedge funds etc

I guess he could be accused of hypocrisy though given his career in the industry, and the fact that he will probably have made a lot of money through high charging instruments.

bowlhead99

arbster wrote: »

I too was bemused by this unprovoked and apparently baseless accusation, together with the veiled assertion that everyone engaged in the financial services industry is somehow trying to mislead us.

Everything that anyone writes as a guide to others, is biased towards their preferred way of doing things, even though there are often multiple ways of doing things and achieving favourable outcomes from those things.

The way that Hale likes to do things, he calls "smarter investing". He founded a strategic consulting business on passive investment principles, five years before publishing the first edition of the book. He is an evangelist for passive investing and several times during the book he drops in a few little digs to try to make you feel stupid if you have not yet fully converted to his way of doing things and are still considering using active managers for any significant part of your portfolio.

By using soundbites and research from groups such as Vanguard, who want to grow their passive funds in the UK, he leverages a symbiotic relationship: he gets the quotes and charts from famous names which he hopes will lend credibility to his "this is the smart thing to do" mantra, and help sell more copies; and they hope that his mantra will be adopted by its readers and cause the readers to buy more product.

I'm sure he did not have to pay much for Jack Bogle - founder and ex CEO of Vanguard and creator of the first retail index mutual fund - to call it "a book of investment wisdom and common sense for the ages". That back-cover soundbite from the septuagenarian captain of industry would not have been so freely available if he had poo-poohed the old man's life's work rather than extolling its virtues as he does.

Don't get me wrong, it's not a bad book. It's relatively easy to follow and it will set you on the road to making sensible investments while understanding some of what you're doing. But it is good that Damage says he will read other things afterwards.

Analogy: when an American college kid is trying to work out what the US political system is, what issues matter to some people, and how to physically cast their first vote for president, they can watch a bit of Fox News during the forthcoming election campaign. They will probably learn some useful life skills, like how to talk about boring grown-up stuff with the guys in the bar instead of just sports and cartoons, and the all important info about how to cast a vote for a president.

However, if they never get around to watching any other news channels, it's unlikely that their vote will be for a Democrat.

If you asked Fox News or Tim Hale if they were "biased" they might feel insulted. Surely, they just believe that what they think is more right than most of the other options out there, and they just want to make some money off selling an opinion... you find a way how to think, they get some income, everyone's a winner!

Is it wrong to have opinions, bias and prejudices? On the contrary, capitalism pretty much requires it. But once you get the basics down, you should go and find more opinions. And be aware that by the time you are hearing your fiftieth opinion, you will be applying a healthy dose of scepticism to each opinion you hear. This means those later opinions will carry less weight with you because your well-honed cynical streak will help you quickly evaluate and dismiss new ideas, in favour of what you "know". It's natural.

So to level the playing field you should make sure you go back and apply that same well honed and healthy sense of scepticism to opinion number one, your first introduction to the genre. Otherwise there is a danger you end up a bit blinkered by the first enlightening thing you read. The Tim Hale strategy will work. It is much "smarter" than investing haphazardly across funds run by expensive managers chosen at random and using stupid asset allocations to drive the process. However, "smarter" does not mean "smartest". There are MANY ways to be smarter than the average idiot.

Rollinghome

bowlhead99 wrote: »

Is it wrong to have opinions, bias and prejudices?

To simply have an opinion of course is somewhat different to being biased or prejudiced, both of which imply unfairness or lack of reason and therefore usually considered wrong. Most of us would like to think our opinions are free of both bias and prejudice, even when they're not.

bowlhead99 wrote: »

If you asked Fox News or Tim Hale if they were "biased" they might feel insulted.

I should be surprised if anyone at Fox News were overly insulted at being called biased. They're employed to be biased: that's their job. (Or am I just prejudiced?)

DominicH

I got half way through the Tim Hale book before throwing it across the room. Not because I disagreed with it, exactly, but because I found it repetitive and, frankly, badly written. The good bits are kind of obvious and have already been said by many others. And like most self-help books, the essence of it could be boiled down to about three pages. But that wouldn't make a book, so it is repeated over and over again until the obligatory 300+ pages are reached. And in fact he slightly overreaches, by making all sorts of arbitrary claims about appropriate asset allocations, which he calls "tilts" and appears to have pulled out of his hat.

I prefer the similar book by Lars Kroijer. Also hundreds of pages of badly-written padding, but at least he has the excuse that English isn't his first language, and his approach, which is basically the Efficient Market hypothesis, or "what makes you think you know better than the market?", seems more consistent and coherent.

bowlhead99

Rollinghome wrote: »

To simply have an opinion of course is somewhat different to being biased or prejudiced, both of which imply unfairness or lack of reason and therefore usually considered wrong. Most of us would like to think our opinions are free of both bias and prejudice, even when they're not.

If you approached Tim Hale with a portfolio proposition based on active management, he would likely tell you it is wrong, as soon as he sees the idea that money is being paid for active management, because his philosophy is that you should not pay for active management. He has pre-judged your proposal before he's finished every word. That is prejudice. Prejudice does not always imply lack of reason, just lack of open-mindedness. If you have spent enough of your career in one path you may have a strong enough opinion that you don't constantly reassess it.

It is the same sense of prejudice that tells you, once you have seen enough gangs of hoodies, that you will probably enjoy the journey more by sitting downstairs on the bus instead of upstairs near the back where the gang of hoodies are sitting. That particular gang of hoodies might simply be a really nice bunch of kids all dressed up appropriately for the inclement weather. But your experience, bias and prejudice tells you it is not worth finding out, when you can avoid altogether and still get to your destination using the reliable way you know, of staying downstairs. Even though that method will be draughtier when the doors open at each stop, and you might have to give up your seat for someone more infirm, etc.

It is an efficient way of going through life because it stops you fully evaluating everything from end to end, thus saving you time. The innate ability to cut through the first x% of any decisionmaking by having your pre-judgment sitting in the wings to be rolled out after a very cursory review of the facts at hand, is useful to you. It is not considered a useful trait by the defendant who has you amongst his jury.

Hale formed his views on 'active vs passive' investment strategies more than a decade and a half ago, ahead of setting up a strategic investment consultancy for wealth advisors; his USP was that they used passive investment techniques.

So, Hale gives some ideas on what to do. He thinks he's given a good explanation of why they are the right ideas for you to be given. There are plenty of other ideas you could follow instead but his come from the particular school of thought that he believed and trained himself in, and he will periodically remind you that the other ways are wrong, naive, misguided. The book would be less likely to deliver results for people if he wavered and kept stopping to say, "and of course don't forget you could also do it this way [insert 1000 words], or that way [instert new chapter], or another way [insert five pages], which might be beneficial although I don't personally believe in those ways".

The goal of an instruction manual is to instruct you how to do something, to outline a method. It is not to show you the second and third and hundredth other ways of doing that thing or the first way of doing a slightly different thing. Until you obtain and read the instructions and methods from all authors on the subject, you won't know which one you prefer and you might not have heard the best one.

So, people don't need to be offended or bemused that their favourite author is facing 'baseless accusations' and 'veiled assertions'. Everything that anyone says, when you are considering parting with money for any reason, should be met with scepticism. Hale is sceptical of the claims of many active fund managers. Scepticism is healthy. Why is the church implying that people who put a pound in the collection tin to repair the leaky roof may be the kind of people who are more likely to go to heaven? Couldn't the Church of England sell some of its investments in private equity or hedge funds or real estate and buy a few new tiles for St Mary's and still let me into heaven without taking all my money?

Damage

Thank you; there is some really helpful discussion here. I usually read as widely as I can when I'm trying to learn something new, so I suppose the next question is to ask if anyone can recommend any books (books of a similar style) that will help provide a balanced view of the available approaches to investing.

I have a couple of other books lined up, which may or may not be of help, but they look interesting:

'A Random Walk Down Wall Street', by Burton G Malkiel.
'The Power of Gold: The History of an Obsession', by Peter L Bernstein.

As a complete novice I must admit that it's tempting to just be lazy and stop after reading 'Smarter Investing', but there is a lot at stake, so I won't!

Incidentally, whoever did Tim Hale's proof-reading needs shooting because the book contains a lot of mistakes (typing errors etc), which I found quite a surprise.