Time for a spring-clean? 

I do not easily throw things out.  Losing my collection of 'Planned Savings' pension surveys, covering a twenty year period to 2003 was the kind of trauma I took a while to recover from.   So my recent decision to cull our archive of accumulated reference materials did involve a certain level of existential angst.  Still, stiff upper-lip and all that - and, of course, as an exercise this was, in reality, way overdue.

The confession of my paper-hoarding pathology needs to be accompanied by an admission:  I did use to subscribe to a tip-sheet, a very well known one, in fact.  The archive of bi-weekly issues ran from early July 2005 through to June 2011.  I remember that my subscription started off with quite a bit of anticipation, a level of palpable visceral excitement at being on the 'inside track', of being party to a kind of mystical financial knowledge that was not possessed by the masses.  Regular as clockwork (every two weeks), this was relentlessly fed by headlines such as 'There's a looming commodity crisis on the horizon potentially far worse than oil.  Here's how to profit...' and 'How gold could protect you from financial meltdown in the coming bird flu pandemic' and, of course, 'Four 'crisis events' to hit in 2006 and how YOU can survive them'.

It was an interesting, roller-coaster experience, my dalliance with the tip-sheet.  I don't consider myself especially prone to suggestion or manipulation, but I did actually act on quite a few of the tips.  On some of them I made decent profits.  On some, quite the reverse was true.  Overall, I do not think I came out the worse for the exercise, but I would say I was no better off as a result.  Gradually the sparkly shine wore off, and I began to look in more depth at what was going on.  Because I had the relevant trading software, I was able to analyse the volume of trades of the shares being tipped, and noticed a distinct pattern:  a day or two before the arrival of the tip-sheet, there would be a sudden flurry in purchases of the recommended shares, but not big enough to actually drive the price up.  Then the subscribers would pile in and up, up, up would go the price, following which approximately the same number of sell instructions would be placed as had previously occurred with the purchases prior to the publication of the tip-sheet.  Exactly the same pattern seemed to apply to every recommended stock or share.

I think that my somewhat cynical conclusions about what was going on were probably accurate - the pattern held too consistently true to be an aberration in the data.  More importantly, I learned a valuable lesson:  the kind of short-termism implicit within this strategy does nobody any real good, not least the investor.  The best thing I have ever done in relation to my own investment habits, is to move towards a risk-delineated, buy-and-hold strategy, using investment vehicles with a sufficient level of diversification to discourage any kind of short-termist focus.  I feel much more relaxed - so much so that even Brexit with all of its unnecessary and derisory mismanagement has so far failed to ratchet up the anxiety levels - not least because the investment model is globally diversified on a market capitalisation basis.  I certainly do not miss the palpitations and adrenaline surge when moving the mouse to click on the 'Trade' button.

So, as those now-outdated tip-sheets head for the bin, I won't be shedding any tears over them, other than kick myself mentally for the waste of time and money that they represent.  That spring-cleaning of my investment habits also weaned me off Woodford, and those like him, but I am minded that MiFID II, as we have written before, does tend to encourage a reversion to a short-termist mentality amongst our clients, something we all need to guard against as we frame, articulate and manage our annual review services.

As we all know, within the field of financial-planning, the nature of the journey is as important as the destination itself - so a focus on a lower-stress, lower-input, lower-cost approach is to everyone's benefit, including the Adviser.


Kevin Moss, 18/07/2019