Good reads from around the Web.
Are you a prudent saver who regularly runs the numbers on your potential post-retirement income?
Or are you a Scrooge McDuck who has fallen in love with money for its own sake?
The title of a John Authors’ article in the FT this week – Is Greed Good? No, It’s Seriously Bad For Your Health [Search result] – implies that this isn’t an academic question.
Authors even cites research suggesting it’s not just your physical health that could suffer from an excessive love of money, but also your financial health.
Psychologists now have a clear definition for love of money. It is not about any instrumental need for money to fulfill our other goals, which all of us have, but rather about a love or need of money for its own sake.
Using the Money Ethic Scale developed by Thomas Li-Ping Tang in 1992, State Street developed an Investor Love of Money Scale (ILOMS).
Researchers asked interviewees in 20 countries a series of questions designed to find out how important money was to their self-esteem.
They also tested how they would respond in a series of financial situations.
For example, they would ask if money was a symbol of success, if they talked about it a lot, or if they wanted to be rich.
The results were clear. The more someone had an emotional attachment to money, the more likely they were to make mistakes with money.
A series of behavioural biases that lead investors into predictable mistakes have been diagnosed over the years. Avarice exacerbates all those biases.
The article goes on to list investing vices, from over-trading to buying high and selling low.
Being in love with money could be counter-productive, in other words, even for intentional money-grabbers.
Money, money, money
It’s a nice morality tale and life is more complicated, but I do agree that concentrating on wealth can at least change you as a person.
I’ve seen a bit of that in myself.
When you first start saving and investing, the idea that you’re in love with money feels fanciful.
Unless you inherited the family pile – literally – you start with nothing (or these days likely less than nothing, after student loans).
You’re just trying to be sensible, at a time when money is scarce, too.
However as the years go by, your wealth grows and snowballs. At some point it becomes so much that when you’re adding the sums up you’re looking at quite a wodge.
And you wonder.
Of course, you probably rationalize this wodge away – as I believe you should. It’s for financial freedom or to keep the lights on in retirement. Your friends might not nurture their nest eggs to the same degree, but they face the same challenges and have likely stashed some of their cash, too.
Being conscious of these challenges and actively trying to confront them doesn’t seem like the same thing as being in love with money to me. The FT quote I highlighted above agrees.
Then again, I know that in my 20s I seriously didn’t care much about money.
I saved it because I am by nature a saver.
But I earned a relative pittance compared to my university peers and I rarely thought about it.
I considered gambling away ALL my life savings in a business venture in my-mid-20s – and I did put about half of them into one in my early 30s.
I can’t imagine taken such proportionate risks with my wealth barely a decade later. Have I fallen in love with money?
I don’t think so. Rather, I know I’ve gotten older and I believe there’s less time left to make good.
That said, unlike most Monevator readers I have probably fallen in love with active investing and with keeping score.
But what about you? Is money for you a means to an end, a fling, a passion – or the only thing left that can really still do it for you?
From the blogs
Making good use of the things that we find…
- How to survive a market melt-up – A Wealth of Common Sense
- Asset management fees are a stealth tax – The Evidence-based Investor
- Forget home bias, what about region bias? [Image] – JP Morgan
- Why consumer staples are the new dotcoms – The Value Perspective
- Investors perilously wait for Goldilocks market – Investing Caffeine
- IG Group still looks cheap – UK Value Investor
- Late summer, late cycle – MFS
- The causes and consequences of cash burn – Musings on Markets
The great de-retirement debate: A follow-up
- Where can we live but days? – SexHealthMoneyDeath
- Burnout, baby, burnout – Simple Living in Suffolk
- FIRE is… – The FIREStarter
- Selecting your DIY pension platform – DIY Investor (UK)
- Be more selfish – The Escape Artist
- What is a safe pension withdrawal rate? – Schroders
- Naive, a victim, or just plain irresponsible? – Retirement Investing Today
- Can today’s electric vehicles make a dent in climate change? – MIT
- Retire early with kids? You’re kidding, right? – Simple Living in Suffolk
- Introverts get “hangovers” from too much socializing – Kottke
- What’s wrong with America? [Tweetstorm] – Chris Arnade
Product of the week: Nothing good lasts forever, as I often told my exes. And that’s triply true of bank accounts, as demonstrated most recently by Santander slashing the 3% cash geyser on its 123 account down to a puny 1.5%, as reported by ThisIsMoney. Seriously, never put your happiness in the hands of anything or anyone. Except, possibly, puppies and kittens. And remember that higher-interest paying P2P alternatives like Zopa and RateSetter also come with extra risks.
Mainstream media money
Some links are Google search results – in PC/desktop view these enable you to click through to read the piece without being a paid subscriber of that site.1
- Interview with Charles Ellis on the case for index funds [Video] – WealthTrack
- This anonymous index fund manager oversees $800bn – Bloomberg
- Fund charges fall across Europe as investors demand better value [Search result] – FT
- Investment: Rise of the DIY algo traders [Search result] – FT
- The price of oil is back from the dead – Telegraph
- Swedroe: Who trades on momentum? – Mutual Funds
- Is it too late to invest in gold? – ThisIsMoney
- Some US stocks the”ultimate stock pickers” picked – Morningstar
A word from a broker
- The economic verdict on Brexit so far – Guardian/Hargreaves Lansdown
- A quick look at high yield bonds – TD Direct Investing
Other stuff worth reading
- Like me, comedian David Mitchell is all for inheritance tax – Guardian
- Poor little rich kid! Readers respond to inheriting wealth [Search result] – FT
- Is AirBnB income really worth the hassle? [Reader debate] – Guardian
- You can’t withdraw 4% from your pension and expect it to last – Telegraph
- Big banks already getting ready to bail on Brexit Britain… – Bloomberg
- …but High Street sales figures defy the Brexit doom – ThisIsMoney
- …while regional housing market health depends how it voted – ThisIsMoney
- How one couple saved $1m in four years to retire at 43 – CNBC
- Why can’t we see we’re living in a golden age? – The Spectator
- The State pension top-up nobody seems to want – Guardian
- London finds Brexit hard to stomach – Reuters
- In defence of the adult nap – NY Mag
Book of the week: Have you been enjoying Billions? (I’m thinking of the TV drama on Sky, not your net wealth). Do you have the ‘Edge’ that eludes so many? Do you want to start a hedge fund? Then why not read How To Start a Hedge Fund? It is well-endorsed and has decent reviews, but beware it is focused on the US – the UK path is unfortunately more complex.
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- Note some articles can only be accessed through the search results if you’re using PC/desktop view (from mobile/tablet view they bring up the firewall/subscription page). To circumvent, switch your mobile browser to use the desktop view. On Chrome for Android: press the menu button followed by “Request Desktop Site”.