Smarter Investing: Simpler Decisions for Better Results by Tim Hale

Part 1

Smarter investing basics
 A foundation course for the rest of the book. Understanding a few basic
 investment ideas and spending a few minutes thinking about them will give
 you the basis on which to move forward and design and implement your
 own portfolio. The chapters in this part of the book include:
 Chapter 1: Simplifying the confusion
 To many investors, the world of investment can seem both confusing and
 complicated; yet it can be reduced down to a simple process. Product
 proliferation, conflicts of interest and market noise are the culprits.
 Identifying and filtering out the industry’s noise is a good place to start.
 Chapter 2: Covering the basics
 What is smarter investing actually about? Your understanding of a few
 simple concepts will allow you to focus on the really important issues. For
 some, this may seem trivial, but take a look anyway because it really is
 important stuff that you cannot afford to misunderstand or ignore.
 Chapter 3: It only takes a minute
 In recognition of the fact that some readers may not be able to find the time
 to read the whole book in one sitting, this chapter provides a summary of
 the rules, tips, hints and guidelines that you should be following. In fact,
 applying these ideas will put you at the forefront of investors, although you
 may well be doing the right things but without necessarily understanding
 why. I strongly urge you to read beyond this chapter.

1

Simplifying the confusion
 It would not surprise me if the world of investing seems a confusing and
 complicated place; the number of investment choices is vast and making
 sense of it all may be daunting. Fortunately, it need not be so.
 1.1 Choices, choices, choices
 The menu of potential investments has the capacity to leave many new to the
 game mesmerised by choice; a little like when you go into a restaurant and
 have to choose what to eat from a menu ten pages long. Dishes on offer
 include bank deposits, corporate bonds, investing in China, UK companies,
 gold, property, commodities, the USA, Japan, stamps, wine and vintage cars
 to name but a few. Your choice is as wide as it is confusing. Do not worry
 though; this book narrows down the menu to a sensible one-pager and gives
 you help on what to choose.
 As already mentioned, in the UK there are around 2,000 funds (unit trusts or
 OEICs) registered for sale that you can choose from, and around another
 30,000 in Europe! That’s a lot of choice. Add in over 1,000 Exchange
 Traded Funds or ETFs (products that are like funds but which are listed on
 stock exchanges and you buy and sell like equities), 900 new structured
 products issues in 2011, and over 700 investment trusts and you can quickly
 see the enormity of the selection decision.
 To make things worse, you face a constant barrage of noise and information
 from the industry, in its widest sense, trying to influence what you should be
 doing with your money. This ‘advice’ comes from a wide range of sources.
 Journalists write articles in the Sunday papers along the lines of ‘Is now the
 right time to be investing in [substitute the flavour of the month]?’ creating a
 convincing spin on what to do with your money. Unfortunately it is usually
 just a return-chasing story encouraging you to jump out of one investment
 that is doing badly into one that is currently doing well – not a good strategy,
 as we saw in the Introduction. Fund managers advertise their spectacular

Smarter Investing: Simpler Decisions for Better Results by Tim Hale