The world of the inactive investor

armchair

The Plowman is an armchair investor

 

Of all my amateur enthusiasms, my interest in how to invest my money is perhaps the silliest. The economist’s hat sits ill upon my head, my capacity to second guess market trends is zero.

So I’m always pleased to discover from an expert like the FT’s senior commentator John Authers, that my current world view is in line with others.

 How do we reconcile a calmly rallying market with so much turmoil? The most likely explanation, I believe, is monetary policy. With bonds still so expensive, investors are still buying stocks, relatively indiscriminately, but not enthusiastically. And they are very worried about what happens to the most indebted companies when interest rates rise. It is an unpalatable picture, but it seems to be an accurate one.

It is very comforting to know I am not alone!

In truth, the Plowman’s world view is no more than “keep calm and keep invested”. I have moved my personal savings out of a multi-asset fund and into a global equity fund on the basis that I couldn’t be doing with investing in debt (the multi-asset) and I was prepared to buy stocks indiscriminately through LGIM.

When I say “indiscriminately”, I mean I am comfortable with the simplicity of the passive approach, though I expect the managers of my pension fund to be exerting pressure on the stocks they invest in to do environmental and social good through the exercise of good governance.


The world of the inactive investor

The investment of my retirement savings is something I am willing to entrust to a trusted third party. It is extremely important I trust Legal and General Investment Management. I trust them because I feel they are competent , fair and have a value set similar to mine (e.g. it is possible to invest for social good without prejudicing your return).

For me, the investment of my time in shaping a private portfolio of stocks is out of the question, I have neither time, nor competence nor interest. Similarly, trusting in active managers and the “factors” that drive their investment decision making seems a decision too far. I want to find the fund that allows me to do as little as possible to have absolute peace of mind.

This approach appears to be mirrored by other investors, who according to John Authers, are unenthusiastically, indiscriminately investing in global equities.

I am sure that I ought to be more passionate, I got passionate this time last year, when i met with HSBC’s Mark Thompson who explained the philosophy of the Future World he had created in junction with FTSE and LGIM


 Future World

All year I have been waiting for L&G to offer me the opportunity to invest in their Future World fund (the one HSBC use as its default) , (I might switch to something called their Global Equity Ethical Fund as an alternative- if I could understand what it does). I am a little disappointed that despite claims earlier in the year that the Future World fund was an investable option, this has not materialised.

I had hoped , during the course of the year, more about CEO Nigel Wilson’s vision for engaging people like me in how our money was invested and what good it was doing. I have every hope that I can help build houses in Leeds, or hospitals in Southampton or help revitalise Salford.

However , the reluctant investor that I am, is still waiting! Perhaps i should have a word with the IGC and find out what is going on.


Engage me please!

I have chosen to give my money to LGIM and I’d like to have the chance to find out what is going on. Inactive as I am, I have the capacity to turn on my web browser, I can even get across to LGIM HQ and meet with either the people who do the investment or the independent governance committee who look after my interests.

I am unusual in that I have the capacity to share the information I get (rather than hoarding it). So if LGIM has messages for inactive investors like me, it would make sense not just to kill this bird , but the other birds that read this blog.

Our fund managers are our fiduciaries, they are the people we trust and – in LGIM’s case- I know them to be worthy of trust. I may be inactive, but – passively as they manage my money – I’d like to see a little more activity from them in getting my attention!

As our DC balances grow, I am sure I am not the only one!

 

About henry tapper

Founder of the Pension PlayPen, Director of First Actuarial, partner of Stella, father of Olly . I am the Pension Plowman
This entry was posted in pensions and tagged , , , , , , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s