October Links: Don’t Be Scared It’s October

Posted by John Charles Kernodle on October 01, 2014  /   Posted in Monthly Links

This month’s links are a mix of both investing and personal finance stories. They should give you something more useful to read than all the stories suggesting investors should be “scared” it’s October again.

Nobel winner Fama: Active management ‘never’ good
“If active managers win, it has to be at the expense of other active managers. And when you add them all up, the returns of active managers have to be literally zero, before costs. Then after costs, it’s a big negative sign,” Fama added.

“I Have No Idea”
“Realizing the limits of your intelligence one of the most important skills in finance. P.J.O’Rourke described economics as “an entire scientific discipline of not knowing what you’re talking about,” which is pretty accurate. When you pretend you know something you don’t, your perception of risk becomes warped. You take risks you didn’t think existed. You face events you didn’t think could occur. Understanding what you don’t know, and what you can’t know, is way more important than the stuff you actually know.”

An Inside Look at Why We Love Short-term Habit Change
“It’s great to use a project to jump-start your actions, and to focus your attention, but it’s very important to think about how you’re changing habits for the long-term, not just making some temporary effort.”

More Money, More Problems? The Dangers of Lifestyle Inflation—and How to Avoid It
“Numerous studies support the notion that as incomes rise, so does the tendency to spend, not save. A Federal Reserve report found, for instance, that less than half of Americans earning between $75,000 and $99,999 saved any money whatsoever—and as many as 16% of those within that income bracket actually went into debt.”

The world’s greatest stock picker? Bet you sold Apple and Google a long time ago
“Let’s imagine for the moment that you are the World’s Greatest Stock Picker. … Can you imagine how much wealth you could create? I have some bad news for you, kiddos: Even if you had that superpower, it would be worth surprisingly little to you. The odds are that it would not create much wealth, and it might even cost you money. How could that be possible? The short answer is your brain.”


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