My post last week was about how people in general are frightened to invest in the stock market while I, daring rebel that I am, have been shelving all my spare cash into equities for years. At the weekend, however, I read through this post by Jim Collins where he talks about the Wealth Accumulation stage of your life versus the Wealth Preservation stage. There’s no doubt that I am in the latter camp but, it struck me, I’m still acting as if I was in the former, because I’m still about 95% invested in equities.

I read what Jim has to say on Wealth Preservation – that basically I should now have about 25% in bonds – and think that he’s right (providing that you keep reallocating to this ratio as the market moves.) The trouble is, equities have been so good to me over the years (I think) that my own personal strategy of “do nothing” always kicks in when I think about making any changes to where I put my money. Leave it be. It ain’t broke, so don’t fix it.

Funnily enough, Jim also backhandedly supports this strategy when he mentions that Fidelity recently did a survey of their most successful investors:

Word is, Fidelity reportedly conducted an internal performance review of accounts held between 2003 and 2013 to find which did the best. The results:

  • First: Dead people
  • Second: People who forgot they had the account

I’m not sure if those dead people were 100% in equities or not, and reading that survey leads me to think, “You know, life’s too short. Why not go and spend some of your damn money while you still can!”, which immediately sees me following The Rhino’s advice to go and take a cold shower and calm down. Spend it? We can’t have that.

Anyway, my other balance against switching equities into bonds is my Defined Benefit pension scheme. God Knows how that’s all invested and, for all I know, He might care about it too. I don’t. I just want it to pay out, solidly, securely and forever, as it said it would. For me, that’s the really passive, conservative part of my investment portfolio that I’m never going to tinker with.

And then there’s the not to be sniffed at State Pension too, which I often forget about. Providing that me and my Darling Other Half both get to draw upon that, it will provide around fourteen grand’s worth of household income every year. That’s actually quite a bit of cash. With those two “bankers” to come (plus my wife’s NHS and Council DB pension schemes too) surely I can afford to “gamble” whatever else I have on the markets?

The State Pension, when I do think about it, does lead to me ask what I think I’m going to be doing with my money at sixty seven years old? For me, that’s about fourteen years away and those fourteen years are going to be, probably, the best I’ll have in terms of health in both body and mind. Shouldn’t I sprinkle some of the sugar of wealth on top of that while I still can? Because I can already see signs that my world is beginning to shrink. I used to happily take two long haul holidays a year. These days I can hardly be arsed taking one. I just can’t be bothered with the hassle of flying ten hours somewhere to be confronted by a McDonalds or KFC, the same traffic jam I just left, adverts for HSBC or Barclays and another bleeding slew of shops selling the same tat that I can buy in Aldi, Lidl, Debenhams etc etc.. As for heading somewhere unsullied and uncommercialised, well, the Scottish Highlands offer that in spades. Am I rushing there every spare weekend? No, so why would Peru or Nepal be better? Seen one mountain, you’ve seen ‘em all. I mean, if that’s how I’m thinking now, how likely is it that when I’m sixty seven I’ll suddenly be jumping on a flight to Auckland just to hear the pilot announce “Welcome to New Zealand. Please adjust your watches back twenty years” which allegedly happened when one of my mates holidayed out there. And, when I asked him how he found it, he replied, “It’s a bit like the Scottish Highlands”.

Given that, maybe I’ll just continue to try and enjoy my life and investing on pretty much the same trajectory as I’m on now. It’s served me well so far and, when you think about it, choosing to “do nothing” is still “doing something”, isn’t it?

Smash the System

As ever, I perused through the Money sections of the magazines over the weekend where they tend to throw out facts and information that, as a FIRE advocate, you feel should be on the front page of the main newspaper. Fascinating fact this week: over 80% of ISA’s held in the UK are held in cash accounts.

Isn’t that just gobsmacking? I mean, given current inflation, a lot of those “Savings” are effectively losing money. Why is it this way, when most of us who are piling our cash into stocks and shares saw our investments grow in mainstream index trackers  by fifteen percent plus (probably) last year?

Is it fear? Are people frightened of losing money if they invest in stocks and shares? I’d like to think that this was the case – this would be an indication that people had at least thought about their savings choices, although they might not have looked into the detail. I’d like to bet if you ask most people about the stock market, however, the main thoughts they’ll have about it are the Great Crash of 1929, the Dot Com boom and bust, or whatever it was that happened in 2008 when Northern Rock almost collapsed, or something. And yes, those were scary stories which, we are told, we’re pretty much guaranteed to see the likes of again in our lifetime. “The value of stocks and shares can go up as well as down”, is a mantra that almost everybody can quote, the equivalent of “Here be dragons” on one of those old maps you see in the movies.

The Movies. They’ve probably got a bit to answer for too. “It’s a Wonderful Life”, “Trading Places”, “Wall Street”, just to name three that spring immediately to my mind that don’t paint a very flattering picture of the stock market. All of those, and probably several more like them, warn that the market isn’t really for people like us. Unless you know what you’re doing in Orange Juice or Pork Belly Futures, steer clear.

The same people who shun the markets because they don’t understand them are often the very same people who’ll happily tell you that investing in the housing market is a safer bet than investing into a pension. At least that’s what the regular “Minor Celebrity Answers 20 Questions on Money Matters” interview attests to in the Sunday Times. Week after week I read someone answering the question of whether to invest in “Property or Pension” by stating definitively “Property”. About one week in ten someone answers “Both” and anyone answering “Pension” is an even rarer occurrence than that.

There’s another factor in the UK that might be keeping people away from the markets, and that’s a subject particular to Britain that I’ve mentioned here before: Class. I was educated in a Scottish mainstream comprehensive and I can honestly say that the thought of entering a career in finance, aside from accountancy, never crossed my tiny mind. Stockbroking, Merchant Banking and Fund Management? I’d never heard of those careers and, if I had, I would have classified them in the same career choice option as I’d have put “Astronaut”. At least I could have named an astronaut. I knew nobody who knew anybody who worked in the City. I wouldn’t even have known that term. If I had, I might have been interested, but the whole subject was so far from our little world that it was never discussed. Or, if it was, it would have been in an Economics class, and who listened in those anyway? Stocks and shares just weren’t for “people like us”, it was as simple as that.

These days we’re supposed to be more of a meritocracy, and lads from a working class background can make a big deal in finance. Blokes like Nick Leeson and Fred Goodwin, for example, where we all learned about their humble origins immediately after they almost wrecked the system. I do wonder what the background to the high earners in the banks look like? How many simply have the right network and connections? How I snorted with derision when I read how the (excellent) author Michael Lewis (Liar’s Poker, The Big Short etc..) broke into a career in the City. He happened to attend a dinner in London where he spent the evening sitting next to the wife of a partner in Goldman Sachs (as you do). She wangled him an interview, no doubt charmed and convinced he was the “right sort”.

To continue on this theme, I recently read an interview with a City investment guru who recounted that old chestnut about knowing when to sell “when my plumber and taxi driver start giving me share tips”. If this happened in New York, you’d shrug and move on, but in London the story smacks of class division – oh yes, when the ignorant masses start dabbling in the markets, it really is time to sell up and head for Saint Kitts.

Fortunately when I hit my thirties I came across The Motley Fool UK Investment Guide which, for me, deconstructed and poked fun at a lot of this “It’s not for the likes of you” rubbish, and I never looked back. These days I hope that the growing popularity of some of the web based bloggers and investment platforms allows that opportunity for millions more.


Retirement Society

In my last post, I talked about the importance of knowing where your money goes and, in the way of these things, I chuckled when I heard a guru of “expenses tracking” – Vicki Robbin, co-author of the classic Your Money or Your Life – being interviewed by the Mad Fientist on his most recent podcast. I almost gave up on listening right through to the end of this interview however because, to be honest, this woman is a verbal Duracell Bunny on amphetamines. She just won’t shut up! The Fientist was lucky to get two dozen words in edgeways as the ideas, stories, recollections and events of Vicki’s life just poured forth like a torrent. It didn’t help that when the Fientist did actually lever a question in, she’d answer, “You know, that’s such a GREAT question”, an American cliche in interviews that’s becoming so common (like beginning sentences with the word “So”) that it’s almost an insult.

So I stuck with it, and in the end was glad I did, because as the podcast came to a close, Vicki began to talk about some subjects that I’d like to tackle myself in my blog, about some aspects related to retirement finance that you don’t necessarily think about. Or don’t want to think about. Top of the list was a comment she threw out from the welter of information she’s gathered over the years. “Loneliness is expensive”, she stated, and went on to talk about how vital it is to have a developed network of friends and community around you as you grow older. This was in the context of quite a lot of other material about community living and how to develop and look after yourself in retirement once you have the finances covered.

When I had my year out sampling early retirement, this was something that struck me personally quite hard – just how much my community, my network and several of my close friends, were actually all connected to my workplace. When that vanished, well, they didn’t exactly vanish too, they just receded rapidly over the horizon! People I’d spoken to every working day for several years were suddenly out of reach. Clearly I couldn’t call them on a daily basis just to chew the fat, but I made the effort to keep in touch maybe once a fortnight. Which then dropped to maybe once a month. Meanwhile the casual acquaintances at work, whose company I often enjoyed even if in small doses, well, they did vanish, only to be glimpsed occasionally on Linkedin as a reminder of the community I once had.

Okay, this seems obvious now, and I was cognisant of it when I was at work too – my workplace pretty much was my community. But leaving it was something I hadn’t really prepared for, nor was it something I was ready to pragmatically replace. I’m not, and never have been, a great fan of clubs or societies. I never liked the Scouts or the Boys Brigade as a lad, so thoughts of joining a “club” like the Round Table, or the University of the Third Age, or the local Historical Society, really didn’t appeal to me. Even clubs I was a member of, like my local golf club, I’d no interest in getting more involved with. In fact, the guys I do golf with, we all take an almost perverse pride in how little we join in with any of the club’s activities, slagging off our perceived notions of just how small-minded and parochial, if not downright snooty, that culture seems to be.

What other community interests and ventures could I take part in? I tried some voluntary work when I was retired but, ye Gods, after coming from the world of “real work” the way these organisations seemed to do things quickly drove me scatty. They were like how I thought the worst of the public sector might work. Meetings that would drag on and on with nothing really decided, or done. Hours spent discussing the organisation of a coffee morning or a checkout collection at the local village Tesco, while I’d be sitting there thinking “There are seven Tescos in our town, why don’t we do all of them, every day, for a week! Now that would raise some real cash!” When I voiced this opinion, the (elderly) members just looked at me as if I’d gone insane. Soon we’d be back focusing on the more important things, like who was going to organise the tea and coffee for the next meeting? And which biscuits should be bought, given the budget situation.

My wife’s managed to develop a wide circle of friends through her attendance of classes at the gym where I’m a regular member too. But, I don’t know, I find gyms really quite unfriendly and distant places, at least for men. Are blokes slightly embarrassed to be there? Or are the type of men interested in developing their fitness quite insular and introverted? Are we too competitive and proud to be friendly? I really don’t know, but in my experience gym’s are just not overtly sociable places. Perhaps this is the old “How did you find the people in the last village?”* adage, but I don’t think so. There’s more to it than that.

As I write this, I think, “Maybe I’m just becoming a crotchety old git?”, Victor Meldrew over the back. But surely he was such a strong and popular character because he ciphered some hard home truths to people about how they might become if they’re not careful? Victor Meldrew is seriously no role model for retirement but not because he’s ridiculous. It’s because we see in him traits that we can see in ourselves but find difficult to face up to. As you grow older, your tolerance bandwidth shrinks unless you work to enlarge it.

To return to the podcast, Vicki talked about how we’ve put work and money on a pedestal while sacrificing just about everything else before it. We’ve no time, or energy, or inclination to nurture much outside of family – if we actually get to see the family much itself, after the commute and long day at work.  There’s some statistic that about 50% of us don’t even know our neighbours names these days. Arguably that’s a good thing but, if I take out the facetiousness, it clearly isn’t a good thing at all. Especially not for older people.

There’s now some interesting data being punted around about how the biggest division in society is between people who leave their home town and those who don’t. People who value community ties before the career path. Guess where the Brexiteers and Remainers sit? Well, forget the cliched politics of the stereotyping that this debate has grown out of, I find it a relief just to read of a way of looking at our society that’s not fixated on class, money, status and the individual. If Brexit sparks a debate about the importance of culture and community outside of the economic factors then that’s a good thing, is it not? As we grow older we need a social and community support network almost more than we need cash. Given that the generation coming up isn’t going to have much of the latter, we need to think an awful lot more about how to nurture the former.

*The Parable of the Two Villages
A man who was traveling came upon a farmer working in his field and asked him what the people in the next village were like. The farmer asked “What were the people like in the last village you visited?” The man responded “They were kind, friendly, generous, great people.” “You’ll find the people in the next village are the same,” said the farmer.

Another man who was traveling to the same village came up to the same farmer somewhat later and asked him what the people in the next village were like. Again the farmer asked “What were the people like in the last village you visited?” The second man responded, “They were rude, unfriendly, dishonest people.” “You’ll find the people in the next village are the same,” said the farmer.

Tales of the Unexpected


I read an interesting article recently where a journalist was saying that she’d noticed a growing division amongst her friends, between those who were heading toward their sixties financially comfortable and those who weren’t. It wasn’t that the latter group were heading toward poverty, or anywhere near it (she’d have to head North to have friends like those!) they were just realising they wouldn’t be able to keep up with their very nice middle class lifestyles once they stopped earning. From the skiing week  in Courchevel before the big long haul holiday in the summer, to the odd bottle of half decent red most evenings and the spontaneous weekends away, such middle class dreams often require a salaried funding. When it stops, or radically reduces, these people sometimes find they have been living well beyond their future means in quite a big way.

Those friends of the journalist who were facing a financially restrained future had often had unforeseen events happen to them that subsequently hobbled their plans.  A messy divorce, an illness that didn’t want to wait on NHS for treatment,  a hoped for inheritance being rapidly burnt up in care home expenses or a sudden and unexpected end to employment. Well, such calamities happen, but having a level of spending that they just hadn’t realised they were burning through on a week to week basis is less excusable. No, strike that, it’s just NOT excusable, and most readers of this blog will probably nod in agreement. How can you NOT know what your spending levels are, or where the money goes on a month to month, if not day to day, basis? The people who are going to be caught out are financially in the “Unknown unknowns” zone, and they only have themselves to look at when this realisation dawns. How many are in this situation? Well, when I was talking to a headhunter friend recently he was telling me  how depressing it was to meet with fifty something executives, desperately pleading with him to help find them a job paying “Just fifty or sixty thousand a year, that’s about all I need”. They’ve no idea how difficult it is to find those roles once you’re a certain age. “And Jim”, he went on, “these guys are living literally from pay cheque to pay cheque, you’ve no idea how many of them I see. I tell you, the desperation sets in pretty quick”.

(Believe me, I could write, and will write some day, about the job market for the over fifties. It’s horrible in so many ways that I’m afraid if I start, I might finish myself off!)

I often hear my friends jibing each other about employment in the private sector versus the public one, and there’s an increasing edge to it as we approach pensionable age. This is because the public sector workers often have the iron clad, defined benefit pension pots that will simply never run out until their dying day. The guys who are in private employment generally now have defined contribution schemes (the self-employed blokes, I’m afraid to ask). With a DC plan, it’s beginning to dawn on them, from Day One of  their retirement that pot starts to run out. How to ensure it doesn’t? Buy an annuity? Seriously? Those who have done the calculation often feel their jaws drop at the paucity of the returns. Surely they must get more than that?

I’m lucky, I have an experience of both with a DC and a DB pot. But I still fret about the future. What if my DB company scheme gets into severe difficulty? It’s already carrying a substantial deficit that I’m frankly too scared to look into. What if my self invested DC plan implodes in a market meltdown? Having lived through the internet bubble and the 2008 crisis I’ve seen the latter happen, but in those dismal days I was earning and buying the cheap market month after month, pound cost averaging and keeping my fingers crossed. Once retired, that avenue of earning won’t be open to me, or potentially not in any easy or financially significant way.

With both types of pension to hand, I can be a bit sanguine about the potential financial impact of unexpected events. Other consequences of them, who knows, and I find I really don’t want to dwell on subjects like divorce, bad health, ageing parents and the rest. Old age is not an unexpected event all the same, and at least I did plan a bit for when it arrives, although the older I get that harder it is to define when Old Age is actually going to happen to me. It’s always about twenty years away, isn’t it? So that gives me plenty of time to plan…..