I rarely talk numbers on this blog. This might be surprising, since it’s mainly a blog about money.
If you know me, it might also surprise you. I LOVE spreadsheets and playing around with numbers.
I love macros and VBA and my mouse with 11 buttons which is awesome in Excel, and my 4k monitor which has lots of screen real estate for detailed spreadsheets (more pixels = more cells, baby!).
No joke: when I worked at a bank, my Secret Santa gift one year was a photo frame, with a spreadsheet inside of the frame.
Despite this, I don’t talk numbers. There are lots of reasons why.
I could spend hours doing detailed comparisons of various financial products. I’d publish that information, and it would be a snapshot in time.
I could be like the Barefoot Investor and recommend specific transactional accounts with specific banks.
But before you know it, a product will change. And then another product will change. And another. Interest rates will change. The relative merits of one product will change compared to its alternatives.
If investment returns are involved, new returns would be published. Fees might change. To keep the content up-to-date, I’d have to spend a lot of time on it.
One of the reasons I don’t go into specifics like this is laziness. I’ve published over 500 articles on this blog. I don’t have the time and inclination to go back to update old articles, when I have hundreds of things I still want to write.
(And frankly, there are lots of places for detailed comparisons. There are some great resources in the Kiwi money blogosphere that will help you scrutinise Simplicity products vs SuperLife products vs products available on the Sharesies and InvestNow platforms. I’m grateful for the hard work they do. I don’t think New Zealand needs another comparator.)
If I’m being more charitable to myself, I try to write content on this blog that is evergreen. By that, a lot of my articles will be as relevant today as they will be in 12 months’ time, or even in 5 or 10 years’ time. Too many numbers, and it’s not evergreen.
Past performance ain’t future performance
When it comes to investing, a lot of the numbers you read about are backward-facing.
I’ve said it before, and I’ll say it again: past performance is no indicator of future performance.
Even with something as basic as a transactional bank account, just because its fees or product features have traditionally been great compared to its peers, doesn’t mean it will continue to be great.
In fact, being too precise with numbers can make it seem like the future is more certain than it really is. Sometimes precision is counterproductive and it’s better to take the philosophy of “near enough is good enough”.
The magic’s not in the numbers
From my perspective, the actual investments you should make are the very last piece of a bigger puzzle.
Before you even think about investing in, say, a managed fund, and therefore assessing the merits of the products available to you, there are a lot of things you should consider. First, you need to consider whether there are more appropriate ways of applying funds available or excess income: for instance, repaying debt, buying property, or investing in education. If financial assets are appropriate, you need to look at asset allocation, and this is based on many personal, idiosyncratic factors, including your personal relationship with risk and your cash flow needs for the foreseeable future. It’s only after these things that you start to look at what funds might be suitable.
Once you get the big picture things right, these smaller decisions become less important.
The way I see it, is that there are loads of shades of right.
No one can say ahead of time what the best investment approach will be. All you can say is whether it’s suitable for you at this moment in time.
Sure, lots of investments aren’t great. But lots of them are good.
I’m all for saving money on fees, but it’s only for very large balances where a 0.1% or 0.2% difference in fees will move the needle much.
There are also nuances about products that are hard to capture in a table. For instance, consider Simplicity’s conservative/balanced/funds versus SuperLife’s equivalent funds. Simplicity’s funds have a target asset allocation of cash to bonds to shares, but its actual allocations change within a specified range, and where it lands depends is based the average of its peers. SuperLife’s funds, however, stay a lot closer to their target allocation. Does that matter to you? For most people, it doesn’t. But for some people it matters a lot.
Also, those funds are PIE funds. For many people, that’s awesome. For some people, that’s not ideal. How each of these characteristics and nuances should be weighed is personal to everyone. That’s where the magic is.
I also don’t think it’s worth going granular with your investments. If you want to decide what proportion of your portfolio should be in NZ shares vs Australian shares vs certain industries, go for your life. But if you believe in index investing, picking the “optimal” proportion of NZ vs Australian vs US shares etc in your portfolio is kind of equivalent to picking stocks in the first place.
The illusion of precision
Numbers can create an impression (or illusion) or precision, and help promote a mindset that there’s an “optimal” way to make financial decisions, or live your life.
That’s not how life works, and it’s definitely not where the magic is.
It’s the soft stuff that matters
When I speak to clients, only a small part of my conversation relates to the dollars and cents.
Even when I talk about the dollars and cents, we often go on tangents and discuss the soft stuff about the assets they own, and the income they generate. (When did you buy that asset? What was your experience of buying the asset and what has your experience been? Has this flavoured what you want to do? Do you have any attachment to that asset beyond the dollar value? Is your income secure? Do you think you’ll maintain that sort of income over the long run? How is it likely to change?)
The conversations relate to values and priorities. The conversations are about what people care about, what they want to achieve, and what they worry about.
Money is a means to lots of different ends. For most people, the aim isn’t to end up with as much money as possible when they die. They want to live the way they want, and money is best used when it facilitates that.
The numbers are part of it.
But the soft stuff is where the magic is.
That’s why I’ve drifted more to the “soft stuff” with this blog. The “squishy” stuff.
I don’t talk about numbers because numbers are usually less important than the “squishy” stuff.