My answers to your most popular questions this year

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Anyone who has watched the film Crocodile Dundee knows we don’t have mental health issues in Australia. As Mick explains: “No. Back there, if you have a problem, you tell Wally. And he tells everyone in town, brings it out in the open. No more problem.”

I mention it because in this final Skin in the Game of 2024 my plan is to answer the five most common questions I have received via email this year. Oddly, for an investment column, most of them have to do with your emotional wellbeing.

Namely, lots of readers hate managing their life savings. And even I understand the reasons. We’re super busy and yet are expected to find space to generate high enough returns to retire. Meanwhile, a fear of losses constantly gnaws.

Well, my recommendation is to copy my father. Get someone else to do it and disappear off on your motorbike touring the country for a few decades (or until someone knocks you off). Barely look at your portfolio.

This works for the reasons I’ve outlined many times. Less churn means lower costs. Staying invested makes sure you’re in the market on those massive rebound days that follow sell-offs — when everyone else has bailed.

But dad pays no fees because he was an early client and keeps introducing his mates to his adviser. For the rest of us, the next best option is a simple and diversified portfolio of exchange traded funds. Set it up. Ignore.

Many readers send me a list of their holdings — often hundreds of companies. Even if these outperform an index (doubtful, most handpicked by professionals don’t) the effort alone guarantees misery.

Paying trading commissions or capital gains tax. Offsetting losses. The admin of dividends and buybacks. Corporate activity, such as mergers or acquisitions, governance and voting. It stresses me writing the words. And I used to do it for a living.

Plenty of emails also suggest a worry that even potential gains from your portfolio will not be enough to provide a dignified retirement — let alone a debauched one. How can you maximise returns without insane risk?

Again, I have written often on the long run performance of various asset classes. You cannot realistically expect more than a 6 per cent real return from equities — much less from government bonds. Double digits? You’re dreaming.

How do the wealthy do it, then? Mostly via complex structures, leverage or minimising tax. The latter is key. Why be anxious over trying to earn another odd percentage point here, a dozen basis points there? It’s peanuts versus reducing your tax bill.

This is the only reason in my view to spend money on a financial adviser. Forget their macro forecasts or stock views. They have no idea like the rest of us. Find one who mumbles tax law in their sleep, however, and you too can rest easy.

Sure, but is there a more mindful approach to growing one’s retirement pot quickly, dozens of you have also asked me this year? There is. Spend less! After minimising tax, this is the second-fastest path to retirement.

It is hardly talked about either — which is mad. Consider the £8 for your two flat whites each day. This is paid out of your net income. So in effect you have to earn £10 to £14 in order to fund them, depending on your tax bracket.

That’s approaching five grand of gross income per year, which could have been invested in a tax-free vehicle such as a pension at a 5 per cent nominal return. Over two decades the two morning coffees have lost you £173,000.

Extend that logic to the other crap you purchase but don’t really need. I should know. Over a 30-year career my compensation has gone from a little to a lot to a little to a lot to a little to a lot to a little again. My spending rose and dropped in tandem. I hardly noticed.

Consuming less is also the best way to help the environment. Infinitely more so than anything claimed by sustainable finance. Readers asked me a lot about this too in 2024. Does green investing still make sense?

Absolutely. But it is crucial to alter your approach depending on asset class. For secondary market securities such as equities — which are simply traded — the most impact comes from owning them, engaging with management and voting.

For money itself to have influence, it must be deployed or withdrawn in primary markets — that is, to and from companies themselves. This is where true investing happens. Where you can write a cheque if businesses are a force for good or refuse to if they are not.

In other words, the best asset classes when investing sustainably are private equity, venture capital, direct lending, and private credit. Even corporate bonds are good, as they need to be rolled over often, allowing pressure to be exerted.

The final two topics I have been questioned about the most are the same in my view — though many disagree. First, will the dominance of US companies last? Second, UK readers want to know what the 88 delistings this year mean for their homegrown equity market.

My answer is simple. Forget liquidity and regulation and the like. The reason British companies are flocking to US exchanges is because they trade at higher earnings multiples and hence their senior executives (and their bankers) will be richer.

When this reverses (most likely after the technology bubble pops) the Wall Street Journal will soon be crammed with stories about US companies queueing to list on the “exceptional” Footsie 100.

Happy new year and thanks for all your messages. Keep ’em coming.

The author is a former portfolio manager. Email: [email protected]; X: @stuartkirk__

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