The Monday Morning Quote #228

“Be master of your petty annoyances and conserve your energies for the big, worthwhile things.

It isn’t the mountain ahead that wears you out—it’s the grain of sand in your shoe.”

Robert Service


Investing – The Key Topics For Your Success & an offer from RW Ltd

The four weekly ezine from financial planners Ray Prince and Graham Urwin is a good read and full of sense. Here’s a section from the latest one and an offer to obtain The Investment Answer.

Investing – The Key Topics For Your Success

When we look back over the seven and a half years that we’ve been writing articles on the do’s and don’ts of investing, certain subjects are bound to repeat themselves.

So we thought we’d take a look back and highlight some of the most important topics:


  • Why are you investing?
  • What timescales do you have for your various goals?
  • Only invest in what you can understand and keep it simple
  • Don’t listen to the noise of picking hot stocks
  • Buy & hold
  • Rebalance your portfolio regularly
  • Have an Investment Philosophy, not a collection of policies

Risk & Return Are Related

  • What risks are you willing or not willing to take?
  • What risk do you need to take to achieve your goals?
  • When markets are volatile how do you react?
  • What are the likely potential gains and losses on your portfolio?


  • Academic research conclusively shows that active funds do not, after costs and over time, beat index funds
  • Past performance is not a guide to future performance
  • Beware of following the herd
  • Emotions, such as fear and greed, can get in the way of a successful outcome

On these last two points, in a previous article we quoted Erik Davidson, Managing Director of investments for Wells Fargo Private Bank who said:

“In all other areas of life, we want to buy more if prices go down. With investments, people buy when prices go up.”

Trying To Time the Market

Again, in a previous post we used figures from Dimensional Fund Advisers who showed that in being out of the market, the risk is that the investor will miss the big rises that really boost performance.

As an example of how important this is, if you take the years January 1986 to December 2010, here are the annualised rates of return based on missing certain periods:

Totally invested – 10.18%

Missed best 5 days – 8.54%

Missed best 15 days – 6.46%

Missed best 25 days – 4.75%


Whereas we haven’t a clue as to future performance, what we do know is the costs of the portfolio, which act as a drag on performance.


  • Buy funds at the wholesale (institutional) price, not retail
  • What about legal and administration costs?
  • What about trading costs when the manager buys and sells?
  • What does my adviser charge me up front and ongoing?
  • Annual management charges?


  • What are the implications with HMRC?


  • How easy is it to get at your money if you need to?

Then we come to a subject which confuses some investors…


Spreading an investment portfolio across the different asset classes is paramount when creating a truly meaningful balanced portfolio.

The basic asset classes are:

  • Cash
  • Fixed interest
  • Equities
  • Property

No one can accurately and certainly not consistently predict which of these asset classes will perform best in a given year.

So this being the case, and each asset class having their own risk & return characteristics, creating a portfolio is all about the proportion of one asset class to the other. This ‘meld’ is then your asset class portfolio, and off you go.

However, sometimes when we discuss this with a new client, they will say that yes they definitely have diversification as their adviser has put them in lots of Managed Funds!

This is understandable, however it’s a major mistake.

Quite simply what this achieves is not diversification between the asset classes, but a concentration of the same type of equities!

Most Managed Funds are mostly invested in equities, and do not have a significant holding of the other asset classes.

For example, U.S. stock-market researcher Larry Swedroe found that investors mistakenly believe that it’s the number of different mutual funds they own that defines how diversified their investments are.

On the contrary, he shows that owning 10 actively managed funds that all (for example) focus on U.S. large-cap stocks, will commonly give you the same stock market exposure as a single low-cost index fund – all while incurring much higher costs!

These mistakes can really cost an investor, and it brings home the importance of investors educating themselves.

Fancy Marketing

It’s really important that all investors see beyond what we would call ‘fancy marketing’. That is, companies who may sell their offering on styleather than substance.

Yes, whilst it’s important to know that the company (whether the company is a fund management company or an adviser firm) you are dealing with is professional, make sure you take the time to dig beneath the surface so that you can do your due diligence.

Action Point

One of the most recommended courses of action for all investors is to get educated as much as possible as this should enable you to make better decisions.

The book ‘The Investment Answer’ can really help here and we’d like to offer you a pdf copy free of charge.

It covers:

Chapter 1 – The Do-It-Yourself Decision
Chapter 2 – The Asset Allocation Decision
Chapter 3 – The Diversification Decision
Chapter 4 – The Active versus Passive Decision
Chapter 5 – The Rebalancing Decision
Chapter 6 – Compared to What?
Chapter 7 – What About Alternatives?
Chapter 8 – Everyone Can Succeed

It’s an easy read and you should be able to get through the book in 90 minutes or so.

If you’d like a copy, please go to the web version of this.

The Weekend Read – Antifragile by Nassim Nicholas Taleb

Probably not the ideal book for the beach or poolside but well worth the time it will take to read and digest – I’m half way through reading it for the second time so that I can assimilate and enjoy the message.

In his first book Fooled by Randomness Taleb explored the randomness of success and how we need to understand luck and our perception of luck. He followed that with The Black Swan which showed that highly improbable and unpredictable events underlie almost everything about our world. In this book he says that uncertainty is the necessary and even desirable. The antifragile is beyond the robust or the resilient. The resilient resists shock and stays the same the antifragile gets better and better.

Do a google search for far more eloquent reviews than mine – I make no claim to be a book reviewer – then read the book.

Available from our Amazon store


Dr Andrew Lawson: ‘If I’d relied solely on the NHS to treat me, I might well be dead’

I wrote in February this year “As Nigel Lawson said in his memoirs, the NHS is the closest thing that the English have to a religion and to criticise any part of it from altar boy to archbishop is tantamount to sacrilege. The Olympic opening hype didn’t help. I grew up  having fear but little respect for the Roman Catholic clergy – many years later I was shown to be right to have had suspicions of the organisational denial of the church.”

The choice of people who should know better to ignore what is happening is yet another example of “wilful blindness”.

A letter from today’s Daily Telegraph tells the story from within better than I.

Dr Andrew Lawson: ‘If I’d relied solely on the NHS to treat me, I might well be dead’

Our outdated and inflexible system was not able to manage my cancer properly.

One year on from London 2012 and there is justifiable pride in our achievements at the Olympics and Paralympics, and enormous pleasure in looking back at triumphs both on and off the field. For me, however, one element continues to rankle. Indeed, I know of no doctor who found the celebration of the NHS during the opening ceremony anything other than crass, politicising nonsense.

Nurturing belief in the NHS is important, for as Nigel Lawson once said, the NHS is the closest thing we have to a national religion. It is not just a religion, though. It is a social construct, the glue that makes us all feel better, hence its inclusion in Danny Boyle’s extravaganza. It is a key part of being British.

But just like the lovely starched white aprons worn by the dancing nurses, that aspect of the NHS went west years ago, along with a lot of what is now called caring. Since the Olympics, we’ve been challenged by a series of stories that do not fit the accepted narrative of the greatness of the NHS: the A&E crisis; the 111 phone line fiasco; the hundreds of needless deaths at Mid Staffs; and the abuse of the Liverpool Care Pathway designed to improve end-of-life care (having seen the latter at work in my brother’s case, it should perhaps be more aptly termed the Liverpool Lack of Care Pathway).

An undercurrent goes with these stories, a suggestion that those who criticise the NHS are attacking a sacred institution. Take the case of Julie Bailey. It was she who started the process that exposed the disgrace of Mid Staffs Hospital. As a result, she received death threats.
Why? Because she highlighted just how bad the good old NHS can be.

I know something about this – as a former NHS consultant, and more recently as a patient. In 2007, at the age of 48, I was diagnosed with a malignant pleural mesothelioma, a form of lung cancer caused by exposure to asbestos. It seems that, while at medical school, I was exposed to asbestos fibres in some part of the hospital (four other doctors and dentists from my era developed the disease; I am the only one surviving). As a result, I have experienced care in the NHS and in the private sector as well as taking part in a trial in the US.

I’m still alive six years on, the average time before death being 12-14 months, but there is nothing I received that couldn’t be offered to any NHS patient if only the system were more flexible. Unfortunately, it isn’t. It does not routinely move patients from unit to unit, it does not routinely tell cancer patients of trials taking place here and overseas, and it discourages accessing other opinions.

I was fortunate because I had insured myself years ago, long before my diagnosis, after being told that private patients had access to some anti-cancer drugs that NHS patients did not. So I was able to use my insurance to be operated on by a surgeon I chose. It was also my decision to go to the US to take part in a trial, but access to the trial was available to anyone if only they had been told about it. The $20,000 trial drugs were free. This, of course, was easy for me – I knew where to look and who to ask. It was clear to me that most NHS patients were simply not told about such trials.

I was also given a drug, at my request because I’d researched it, which may well have delayed my tumour’s growth. Bisphosphonate is used extensively for other reasons, is readily available and not expensive, yet I know of patients who have asked for it on the NHS to treat their mesothelioma, but been refused on the grounds of lack of evidence. Others have been given it when they asked. There is early evidence that it can be effective, and everyone who works in the field knows about this, but it’s not yet officially approved by the National Institute for Health and Care Excellence (Nice).

How has what I’ve seen impacted on my wider concerns? The NHS is not a philosophical concept or an instrument of social cohesion. It may produce the latter but this is not its primary purpose. The NHS is just a health delivery system, one of many around the world. I have had great treatment from the doctors and nurses who were employed by the NHS, but the NHS did not treat me. Those same doctors and nurses might give me the same care if employed by any other organisation.

However, a national mindset that puts this type of religious belief in the NHS above all else enables people to ignore such hard facts. Somehow, because we have universal free access to health care – and are therefore “better” than the Americans with whom we always compare ourselves – we have convinced ourselves that the bad bits of the NHS are OK.

This belief system surrounding the NHS also blinds ministers and MPs (who, of course, will never experience anything but the best NHS care because they get special treatment if they are ever in hospital) to fundamental problems. And, politically, it’s always preferable to focus on the good narrative, and never admit that we are not doing as well as we might and that things might need to change.

Yet this wealthy advanced economy of ours has cancer survival rates almost at the bottom of the Organisation for Economic Cooperation and Development (OECD) league tables. When this fact was published a few years ago, it was deemed less newsworthy than a telephone survey in seven advanced countries (the Commonwealth Fund Report of 2010), which showed that the NHS was the most efficient health system in the world. No matter that the report did not look at outcome data, expenditure, distribution of health care resources and a wealth of other factors. It told us what we wanted to hear and was therefore given prominence.

More recent cancer survival data still shows us lagging behind the OECD average. To tackle that, radical change is required, a fact self-evident to those who work in the NHS. Yet attempting real reform runs up against the brick wall of politics. Encouraged by the politicians who don’t dare to think and certainly not say otherwise, the public’s belief in the NHS continues to be fostered and is complemented by a conviction that any change will always be for the worse.

We know that postcode lotteries exist when it comes to care. The existence of “bad” hospitals and poor areas for health care has been common knowledge for decades. Say, for example, you have cancer of the ovary and a secondary in your liver. In two or three hospitals in England you might be offered a resection of the liver tumour and chemotherapy, which might buy you many more years. In others, you will only be offered palliative chemotherapy, which means you will die sooner. In all probability, you will not be told of the other treatments. How is this fair or equitable? How is this a truly national health service?

To begin to improve matters, the existence of such inequality has to be acknowledged, and addressed openly. That includes being clear that everything cannot be provided everywhere. Real centres of excellence need to concentrate resources and draw their patients from a much wider catchment area, even if that means some people will have to travel further.

Blindly continuing with an NHS formula laid down in 1948, which envisaged falling health costs, did not consider the problems generated by a rapidly increasing, ageing population and did not define what the state should and would provide, is no longer an option. If we have a health service, shouldn’t we have some specific idea of what it is there for?

Clinging to a model of health care that has its roots in the 19th century is ridiculous. This physician-led and disease-focused approach no longer works now that the demography of health has changed.
We continue to make all health-related problems the responsibility of the NHS and ensure that no one is individually responsible. This is simply unsustainable. An ever-expanding commitment by the NHS to all health-related issues was never what was intended, nor is it economically viable.

Instead of just handing the chequebook over to someone else, government should be seeking to restructure health-care provision in keeping with the new demography of health. Much can be done outside hospital: hospital stays can be reduced following surgery, and much can be done in chronic and primary-care provision by nurses, which has the potential to reduce costs. This will inevitably involve closing hospitals, refashioning emergency services and depoliticising the system.

But it won’t come about until politicians confront the population and ask them what they are prepared to do about their own health. We must aggressively challenge lifestyle choices that entail serious health consequences and accept that the state/NHS has limitations. To take just one example: in the past 10 years, the level of obesity-related admissions to hospital has risen 11-fold. The Olympics opening ceremony might have been more accurate if it had featured morbidly obese people jumping up and down on their NHS beds, and breaking them.

It’s not a political change that is needed; it’s an ethical one, in which politicians must start to take the lead. And if we, the public, want our wishes and autonomy respected, then we must to start taking more responsibility for our health.

The Monday Morning Quote #227

“If you see a fraud and do not say fraud, you are a fraud.”

Nassim Nicolas Taleb’s First Ethical Rule in Antifragile


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