Skip to content

Weekend Reading: Heads I Win, Tails I Win Edition

Do you think you’re an above-average investor? Most of us do, and that’s the premise of Heads I Win, Tails I Win, a new book by Spencer Jakab, the former stock analyst who now writes the Heard on the Street column for The Wall Street Journal.

In the book, Jakab refers to Lake Moneybegone, a place where nearly all investors are below average due to a combination of greed, fear, naïveté, bad advice, and even the cost of sound advice. This, of course, is a play on the Lake Wobegone effect, a natural human tendency to overestimate one’s capabilities, that stems from the fictional town where “all the women are strong, all the men are good looking, and all the children are above average.”

Heads I Win, Tails I Win presents a compelling case for passive investing using statistics and anecdotes to show just how badly the deck is stacked against active management and individual stock picking.

Without spoiling a terrific read, here are some key takeaways from the book:

  1. Know yourself – The typical investor earns returns that are way below average and the first step to improving is understanding that performance gap and how your personality might be contributing to it.
  2. Stop zigging when you should zag – Leave yourself with as few decisions to make as possible and remove the temptation to do so in the future.
  3. Learn to be cheap and lazy – Your results are inversely proportional to your effort. Low-cost, passive funds that require as little input from you as possible are your best bet.
  4. Don’t confuse luck and skill – Your odds of identifying star fund managers in advance are very poor. Save your money and avoid disappointment.
  5. Turn lemons into lemonade – Bad times are inevitable. Embrace risk by refusing to panic, and rebalance your portfolio on schedule. You’ll capture extra returns on autopilot.
  6. History doesn’t repeat, but it does rhyme – There’s a lot of uncertainty, and savers need to understand what levers they can control: time, savings, and portfolio construction. Treating the market like a predictable money machine is an almost certain path to disappointment.
  7. Don’t be afraid to ask for help, but only as much as you need – A human advisor is more expensive than a robot (or going it alone) but may save you money in the long run by acting as a sanity check.

Time for a giveaway!

The author was kind enough to send us an extra copy of Heads I Win, Tails I Win to give away to one lucky Boomer & Echo reader. Just leave a comment below and tell us your worst investing trait.

Do you check your investments too often, or not often enough? Chase performance of hot stocks or funds? Succumb to fear and panic when markets tank?

Leave a comment before Friday August 5th at 5:00 p.m. EST. We’ll select a random winner and reveal the name in next week’s edition of Weekend Reading. Good luck!

This Week’s Recap:

Our mortgage is up for renewal next month and I’ve already received multiple calls from TD wanting to “set-up a meeting” to discuss new terms. I’m looking at the 2-year fixed rate or 5-year variable rate options. This article (and subsequent comments) at comparison site RateSpy argued something similar: Go short, or variable.

On Monday I wrote about my TFSA dilemma and came up with a solution to ramp up my contributions.

On Wednesday Marie continued her financial planning for couples series with a look at buying a home together.

And on Friday Marie explained how to create retirement income with a fixed payment strategy using monthly income funds.

Over on the Rewards Cards Canada blog I recapped the entire Air Miles fiasco.

Weekend Reading:

The one thing that’s certain in retirement is uncertainty, says fee-only planner Sandi Martin, so pick your poison.

Traditional advice about needing to replace 70% of your working income in retirement is wrong, according to Money Boss J.D. Roth. Here’s how much you actually need to save for retirement.

But don’t be so quick to dismiss this money rule, says Michael Kitces as he defends the 70% replacement ratio in retirement.

How B.C. just violated NAFTA with its foreign property tax.

Money After Graduation shows the income you need to purchase a home in Canada’s 25 largest cities.

If you spend the money you have in savings, it’s not in your savings anymore. Des Odjick shares three ways to keep your savings in your account.

Rob Carrick says the only fail-proof way to reach your financial goals is to save more.

I’m moving in with my girlfriend. She makes way more than I do. How do we share expenses?

How to complain to customer service without being ignored. Learn the Spock Treatment, and six other tricks of successful complainers.

Marie Kondo got everyone to tidy-up, but here’s an interesting look at the class politics of decluttering:

“But minimalism is a virtue only when it’s a choice, and it’s telling that its fan base is clustered in the well-off middle class. For people who are not so well off, the idea of opting to have even less is not really an option.”

It seems like there’s a Go Fund Me set up for everything, from sick pets to funding vacations. Chris Taylor says this not-so-noble crowdfunding is causing backlash.

Apple has now sold 1 billion iPhones, the iconic smart-phone that first launched in 2007. That’s one iPhone for every three people on the planet with access to the internet.

Big Cajun Man Alan Whitton shared the huge list of fees charged at Queen’s University, where his daughter attends. Unlike tuition, these fees are not legislated and are subject to all kinds of creative additions and increases.

Frugal Trader lists the dividend kings – companies with annual dividend increases for over 50 years.

Our Big Fat Wallet blogger Dan Wesley reveals some changes to his dividend investing approach, namely avoiding chasing yield, reinvesting dividends, and limiting his trading activity.

It is inevitable that stocks will suffer a gut-wrenching drop sometimes. Michael James says to get used to this idea or reconsider your asset allocation.

Daniel Kahneman, the Nobel prize-winning psychologist, shares his thoughts on his pessimistic mother, the delusion of investment bankers and the need for irony:

“Investment bankers believe in what they do. They don’t want to hear that their decisions are no better than chance. The rest of us pay for their delusions.”

Dan Hallett argues that by fighting investor-friendly reforms, the mutual fund industry has brought on the commission-ban it so badly feared.

Finally, in honour of Gail Vaz-Oxlade’s recent retirement announcement, MoneySense shared some of the debt-diva’s wisest nuggets of personal finance wisdom.

Have a great long-weekend, everyone!

Print Friendly, PDF & Email

40 Comments

  1. JA on July 30, 2016 at 5:51 pm

    My worst investing habit is that I’m a procrastinator.

  2. Potato on July 30, 2016 at 6:23 pm

    Ooh, free book! Sounds interesting, always looking for other ways to explain why passive investing is a good way to go.

    My worst investing trait would be that I can’t see into the future. Man, if I could, I would be so much better as an investor. Aside from that, probably analysis paralysis (or its close cousin, reading prospectuses for investments I never intend to buy just to rant about them at parties).

  3. Des Odjick on July 30, 2016 at 7:37 pm

    Ahhh, I’ve been wanting to read that!

    Confession time: I check my totally passive, robo-advisor-invested, entirely hands off portfolio every single day. Literally every day. I figure it’s not the worst habit I could have, because I watched it go more and more negative after investing at this time last year and did nothing, so I figure I’ve just entirely desensitized myself to market downturns. There are worse things I could have done, like sell, but I *know* it’s a totally bad habit!

    As always thanks for the link love!

  4. Garth on July 30, 2016 at 8:25 pm

    Would love to read Jakab’s book. My worst investing trait is checking ETF prices sometimes several times a day and then updating my portfolio balances…totally meaningless and potentially dangerous in bear markets, but I find myself doing it anyway. Hoping my awareness of the bad habit is enough to minimize any harm.

  5. Steve on July 30, 2016 at 8:43 pm

    My worst investment trait is attributing my ‘wins’ as intelligence, and my ‘losses’ as bad luck. Really it’s the opposite, my ‘wins’ were luck, and my ‘losses’ were all me.

  6. TW on July 30, 2016 at 9:54 pm

    Not paying myself first!

    Without a set income I always leave my investing to the end of my pay period when I completely understand the benefits of investing the funds when receiving my pay.

  7. Paul on July 31, 2016 at 5:06 am

    My worst mistake has been trying to time the market. Have bought high a few times and got caught with a bum like Nortel. Now I just use dollar cost averaging and keep my fingers crossed.

  8. Big Cajun Man (AW) on July 31, 2016 at 5:16 am

    Thanks for the inclusion this week, those fees are quite diabolical at times, I don’t mind some of them, but opt’ing out of them is never easy either.

  9. Beth on July 31, 2016 at 5:28 am

    As always, a great list of articles to read!

    My worst investing habit is not making it a priority. I want to get out of mutual funds and into lower fee options. However, I’ve been putting most of my time and energy into my career.

  10. Carmen on July 31, 2016 at 5:36 am

    primarily an index investor in RRSP and TFSA, some can dividend stocks in non regd account. Find it challenging to rebalance .

  11. AndrewGr on July 31, 2016 at 6:10 am

    I’m totally an index ETF investor. My biggest win is a “pay myself first” policy with a 35% savings rate from our income (may end being 40% in the end). That rate will change next year when daycare kicks in.

    My worst habit is over-complicating my asset class mix, both asset class selection, selecting which investment accounts to hold which asset classes and their overall weighting in my whole portfolio. Shuffling this around has caused me to incur more transactions and possibly missing opportunities from either just leaving it alone or just making it simpler with fewer asset classes.

    In the end, set it up with a descent strategy and forget it. Then just add money and rebalance as needed. This is my target state.

  12. Carol A. on July 31, 2016 at 6:17 am

    Worst investing habit is becoming personally attached to the stocks I buy. I always do plenty of research into stocks I buy but than I hold onto them to long. I have to become more aggressive about buying & selling.

  13. Jeff on July 31, 2016 at 6:31 am

    My worst investment habit may be a lack of awareness of my worst investment habit but… I also think it may be investing in companies that I like, that I want to do well. I still require them to have decent fundamentals but, if I find a green technology company, or one that is combating a major health issue, say, that I think is under-valued, I’ll ignore the lack of a growth scenario and ‘hope’ the share price will go up. FHCO is probably the best example, produces a female condom to reduce the spread of AIDS, unwanted pregnancies, etc and the company had no debt. It actually went up after I bought it but I hung on and watched it plummet to 20% of my purchase price.

  14. Kim on July 31, 2016 at 6:47 am

    My worst investing trait – stressing over the downs in the market. I know I check my balances way too often and I get stressed when the numbers are down.

  15. Denis on July 31, 2016 at 7:03 am

    My worse mistake, I continually repeat. Buy on the way up until the bottom drops out and end up with too many capital losses.

  16. Peter Dewaal on July 31, 2016 at 7:19 am

    My worst trait is holding on to a stock that is going down in hopes that it will reverse it’s slide. Then I hold on to that stock because to sell it now would incur to much loss. In the end I end up with a kennel full of dogs!

  17. Shawna on July 31, 2016 at 7:19 am

    My worst investment trait is being risk averse.

  18. Duane on July 31, 2016 at 7:23 am

    I have changed my worst trait. I moved away from mutual funds several years ago, but when I did I did not calculate the cost of back end fees when making the move. I know making the change was smart but never did calculate whether how I made the change was. I now work at making more informed decisions without getting analysis paralysis. This is a lot easier when using a passive ETF investment style with scheduled rebalancing.

  19. james quinn on July 31, 2016 at 7:38 am

    I am completely convinced that passive investing is the rational way to invest and that market returns are reached by a minority of investors, and yet I still find myself resisting re-balancing, tweaking here and there, trying to time things and allocate things so as to beat the market. What folly!!

  20. Irene on July 31, 2016 at 7:53 am

    My worst habit is analysis paralysis. I do my research to arrive at a reasonable and suitable option for my situation . Once I get there, the doubts raise their ugly head. Then, I go and search out more information to re-validate. And my money just sits there. I need to get comfortable with stopping at good enough.

  21. Rich on July 31, 2016 at 8:12 am

    I have no bad investment habits because I am so above average as an investor. Does this mean I can’t win the book?
    Love the weekend reading posts.

  22. Ana on July 31, 2016 at 9:45 am

    My worst habit is to check my stocks every day. I get a warm feeling when they go up and get a sense that I’m in control because I know the prices and know what’s going on. I’m a buy and hold investor but I need to be constantly monitoring.

  23. Nicole on July 31, 2016 at 9:55 am

    Worst investing habit – I quite literally have no clue where my automated contributions go. Maybe money market, maybe a lousy DISA, or a GIC. I should follow it better, but I procrastinate and then forget about it again.

  24. Chris on July 31, 2016 at 10:36 am

    Good recap. Worst trait? Not prioritizing decisions with time sensitive matters.

  25. Gary on July 31, 2016 at 11:18 am

    My worst investment trait is procrastination

  26. Matt on July 31, 2016 at 12:09 pm

    My worst investing trait? Perhaps the desire to check my account multiple times a day to ensure I don’t miss a trade (I have my investments professionally managed) or a dividend distribution. I love it though but I tend to not look on bad market days 🙂

  27. Michael on July 31, 2016 at 12:25 pm

    Check investments every single day.. Even weekends! Makes no sense, is a bad habit, but still…

  28. ELH on July 31, 2016 at 12:38 pm

    My fears of a stock market crash are so great that I don’t do anything at all. I’m sitting in cash and have done so for the last 5 years. Ugh!

  29. Deb on July 31, 2016 at 2:43 pm

    Holding on to stocks that have decreased in value too long, but I am a long-term investor and wait too patiently for them to go back up

  30. John on July 31, 2016 at 4:07 pm

    My worst investment trait? Buying stock on co-workers and friends suggestions and then not selling them when they ineffably go south, so you see nothing but red results in your portfolio reports.
    Last few years though I have taken some advice from Boomer and Moneysense and have invested in ETF’s. Things are looking up but I have still to make up a ways to cover these red results that are still there because; “to sell now don’t make sense, I lost most of it anyway, so I may as well wait until they come back up?????”

  31. S.Hartley on July 31, 2016 at 5:21 pm

    Thank you for thye free offer!
    worst mistake – cutting and saving articles that have anything vaguely to do with investing and then being overwhelmed with all the information. Cannot make it simple no mater what I do!

  32. Jill on July 31, 2016 at 6:02 pm

    The book sounds interesting.
    My worst investing habit is giving good advice to others and failing to follow through with the same advice in my own financial world.

  33. Tracey H on August 1, 2016 at 6:49 am

    My worst investment trait is inaction. When the stock market is down, I think, “This would be a good time to invest that cash in my bank account,” but I don’t follow through and do it.

  34. Jane on August 2, 2016 at 6:08 am

    My worst investing habit is to jump too quickly with either a purchase or sale. I try (now) to have only passive investments or stocks that I want to hold forever, so that the temptation to be more active is less. Know thyself!

  35. Don on August 2, 2016 at 10:14 am

    My worst trait? Rrelying on professional money managers exclusively.

  36. Barb M on August 2, 2016 at 3:33 pm

    My 60th b/day today and I still cannot resist checking on my investment balances Weekly!!

  37. wsiemens on August 2, 2016 at 10:18 pm

    My worst habit lately is reading too much on financial/personal finance. Sometimes, I just need to take a break and read some fiction. In saying that, I’d still love to win this book… I can read fiction once it’s done 😉

  38. Denis on August 3, 2016 at 9:31 am

    I am patient but sometimes not a good thing, like keeping a loser that won’t recover anytime soon (like Twitter as an example) expecting it to return to my buy price.

  39. Nicole Jubleew on August 4, 2016 at 4:04 pm

    My worst investing trait is not drawing a line and accepting that I lost money in a fund that is doing poorly and moving on.

  40. Jason St-Hilaire on August 5, 2016 at 5:13 am

    My worst investing traits are both loss aversion and analysis paralysis. I tend to look into stuff way too much and even when I finally find that it’s a good move, I can’t pull the trigger. A good example: hanging to losing stocks.

Leave a Comment