The Idle Investor

How to Invest 5 Minutes a Week and Beat the Professionals

Edmund Shing

• Publisher: Harriman House
• Year: 2015
• ISBN:
  9780857194817
• Edition: 1
• Topic: Business
• Subtopic: Investments & Securities
• Index: Business

3 simple strategies to earn high returns and beat the professionals Would you like to use a simple, low-risk investing system that beats market indexes and fund manager performance over the long term, but requires only a few minutes of your time each month? Does it sound like a lot of hard work? It's not - even the laziest investor can achieve it. The Idle Investor includes three straightforward DIY strategies for long-term investing. All you have to do is follow the simple rules. Each method requires only a limited amount of your time and they all make use of easily accessible, low-cost funds. The reasons why the strategies work and everything else you need to know to put them into practice is explained clearly, with numerous worked examples.The three strategies are: 1. The Bone Idle Strategy: Part of your portfolio is allocated to shares and part is allocated to bonds, with adjustments only required twice a year. The rest of the time you do nothing. 2. The Summer Hibernation Strategy: For part of the year your portfolio is allocated to shares and for part of the year it is allocated to bonds. Once again, adjustments to the portfolio are only required twice per year. The rest of the time you do nothing. 3. Multi-Asset Trending Strategy: A simple trend-following method determines whether to hold your portfolio in shares or bonds. For this strategy you will need to check your investments and make adjustments once a month.Even on the very few occasions each year when action is required - twice a year for strategies 1 and 2, and once a month for strategy 3 - you'll only spend a few minutes checking your portfolio and making simple changes. The activity levels range from yearly rebalancing, for the laziest investor, through to monthly reallocation, for those who are more active. How much you do depends on how lazy you are feeling.Testing the three Idle Investor strategies for the period 1990 to 2012 resulted in average annual returns of up to 28%. Compare this to a buy-and-hold approach of investing in UK shares, which would have delivered 8.5% per year over the same period, and you can see that being idle doesn't mean being unsuccessful!If you are looking for a straightforward investing method that lets you get on with your life while your money grows in the background, then become an Idle Investor.

Contents

About the author

Acknowledgements

Preface

Chapter 1. The Long Path To These Investing Systems

Chapter 2. How Is It Possible To Be An Idle Investor? Quite Easily…

Chapter 3. Why You Should Not Give Your Money To A Fund Manager

Chapter 4. Our Investment Building Blocks: Shares, Bonds And Cash

Chapter 5. Beat The Share Market Without Breaking Sweat

Chapter 6. The Foundations Of The Three Idle Investor Strategies

Chapter 7. Investing Strategy 1: The Bone Idle Strategy

Chapter 8. Investing Strategy 2: The Summer Hibernation Strategy

Chapter 9. What Mechanical Investing System Works Best?

Chapter 10. Investing Strategy 3: Multi-Asset Trending Strategy

Chapter 11. Six Key Investment Trends For the Future

Chapter 12. Idle Investor Maxims

Appendix. Useful sources of financial information

Chapter 1.
The Long Path To These Investing Systems

The journey that I have taken to arrive at these three investing systems has been relatively long and involved. I have worked in the financial markets, both in London and Paris, for 20 years, in a number of different roles. This came after I had gained a doctorate in Artificial Intelligence (a subject which, while fascinating to me at the time, had precious little to do with finance of any sort).

I wanted to pursue a career in financial research, but applied research rather than the academic research that I had been engaged in for over three years leading up to that point. So I applied to a large number of research departments, primarily at investment banks based in the venerable City of London.

My first steps in the City

I was finally offered a role to kick-start my post-academic finance career in late 1994 at the pre-eminent US bulge bracket investment bank Goldman Sachs, located in Fleet Street next to the old home of the Daily Express newspaper. I started out on day one knowing virtually nothing at all about finance, and was immediately assigned to the equity strategy team, which involved trying to predict the direction of share markets (including trying to forecast year-end levels for indices such as the FTSE 100), and coming up with interesting investment themes that professional investment managers, key clients of the bank, could reflect in their own share portfolios of UK and European companies.

This was a great experience for a newbie to the world of finance, as it involved a lot of on-the-job training and learning fast, usually doing long hours as a junior investment analyst. However, I quickly became quite cynical about the claims of so-called City experts to be able to predict or forecast the direction of the economy or financial markets (e.g. share or foreign exchange markets) given the complexity of the problem. Frankly, it is just too difficult, particularly when you consider the potential impact of exogenous events like the Gulf War or the bankruptcy of Lehman Brothers.

The first key lesson that I took away from my full-time job in the City

Don’t waste your time trying to forecast future levels of share market indices like the FTSE 100! There are so many macro-economic, geopolitical and share-specific factors at work that you have little chance of being right on a consistent basis.

A very British change of culture

Upon leaving Goldman Sachs together with my then-boss after a couple of years, I embarked on a similar equity strategy role at another City ...

Table of contents

• About the author
• Acknowledgements
• Preface
• Contents