Weekend Reads: Smart Beta, Robo-Advisers, and What Makes a Good Life

It has been many weeks since I last compiled a Weekend Reads, but I do have a good excuse: I was back home in South Africa, enjoying a short holiday. (If you’ve never been to Cape Town, and are curious to see what it’s like, this drone video gives you a bird’s-eye view of the city and its surrounds.)

I don’t know about you, but I find that vacations — and by that I mean vacations that are largely free from the distraction and intrusion of email — offer a rare opportunity for reflection. It’s always helpful to have some distance from the office or one’s country of residence to get a fresh perspective.

I also find that when I’m off on an adventure, or enjoying a more traditional vacation, I think a lot about the word “thrive” and what it takes to truly thrive in one’s environment and in one’s personal and professional relationships. After all, most of us don’t want to simply exist, we want to flourish.

A couple of weeks after I got back, I happened upon an article based on the reporting by Barbara Bradley Hagerty for her book Life Reimagined, which outlines “8 Ways You Can Survive — and Thrive in — Midlife.” These types of lists can be hokey, but I think this one bears repeating because it doesn’t just apply to those who are in the throes of midlife:

1. Aim for long-term meaning rather than short-term happiness, and you will likely find both.
2. Choose what matters most.
3. Lean into fear, not boredom.
4. At every stage of life, you should be a rookie at something.
5. Add punctuation to your life.
6. A few setbacks are just what the doctor ordered.
7. Pay attention: Two of the biggest threats to a seasoned marriage are boredom and mutual neglect.
8. Happiness is love. Full stop.

(For more on that final point, watch this TED Talk on what makes a good life, based on a 75-year-old study on adult development.)

There was one thing, in particular, that stood out to me after reading the NPR article: “‘Ask yourself regularly: How will I use these glorious days left to me for the best purpose?'”

I’ll leave you to ponder that, but in the meantime, here are some good reads, in case you missed them:

Investing and the Business of Advising on Investing

• Patrick O’Shaughnessy, CFA, has a piece on the best and worst possible returns when your portfolio is unique: “Active share — the preferred measure of how different a portfolio is from its benchmark — is not a predictor of future performance, but it is a good indicator of any strategy’s potential excess return,” he writes. “The higher your active share, the more extreme your performance can be, good and bad.” “The More Unique Your Portfolio, The Greater Its Potential” (The Investor’s Field Guide)
• The ever-thoughtful Morgan Housel writes about the trap of conventional wisdom. He notes that while it’s impossible to say what the industry will look like in 10 to 20 years, he can see two big ways it could change. In “How the Investing Industry Could Change,” he tackles two pieces of conventional wisdom: “individual investors are dumb-money amateurs” and “financial professionals make inordinate amounts of money.” (The Motley Fool)
• Behavioral Economics 101: overconfidence, optimism bias, hindsight bias, attribution bias, confirmation bias . . . “Why We Think We’re Better Investors Than We Are” (The New York Times)
• Two memes, working in concert, have created a dangerous scenario for energy investors who thought that this time would be different: “Peak Oil and Runaway China: A Dangerous Combination of Memes” by my colleague Ron Rimkus, CFA. (69th CFA Institute Annual Conference)
• Jason Zweig on “The Three Worst Words of Stock-Market Advice: Trust Your Gut” (Wall Street Journal)
• Speaking of advice, Bob Seawright has a fun post, “Alternatives to Being an Evidence-Based Financial Advisor,” on the various types of financial advisers who are out there. (Above the Market)
• Two blog posts on smart beta: “Smart Beta Crash Coming?” and “Before You Trash Smart Beta . . .” (A Wealth of Common Sense, The Irrelevant Investor)
• Fidelity Investments, the second-largest US mutual fund company, announced it will test a robo-adviser service on a small group of existing customers. Called Fidelity Go, the program will be aimed at first-time investors between 25 and 45 years of age. (Bloomberg via WealthManagement.com)
• Tadas Viskanta put the following question to a panel of highly respected independent finance bloggers: “Venture capital has likely dried up for stand-alone robo-advisors. If so, where does the business of rob-advising go? Or said another way is robo-advising simply going to be the way advisors manage client accounts going forward?” Their answers provide some interesting finance blogger wisdom. (Abnormal Returns)
• Speaking of wisdom, a great list from Ben Carlson, CFA, on overused words in finance:

Words that are used too freely in the world of finance:

Guru
Proprietary
Contrarian
Black Swan
Crisis
Crash
Bubble
Differentiation

— Ben Carlson (@awealthofcs) March 28, 2016

Leadership, Feedback, and Negotiation

• “Communication isn’t as simple as saying what you mean.” An oldie, but a goodie, Deborah Tannen’s article, “The Power of Talk: Who Gets Heard and Why” from 1995, is just as relevant today. (Harvard Business Review)
• A while back, I read a wonderful post by Shane Parrish on how to provide great feedback that was based on the work of Roger Fisher and Alan Sharp, authors of Getting It Done: How to Lead When You’re Not in Charge. Parrish recently featured Fisher’s work in a post on a better way to negotiate. (Farnam Street)

And Now for Something Completely Different

• For the “WHOA!?!” category: “Black-Hole Computing: Might Nature’s Bottomless Pits Actually Be Ultra-Efficient Quantum Computers? That Could Explain Why Data Never Dies.” (Aeon)
• If you’re interested in the field of machine learning, or more specifically deep learning, you may enjoy this article: “Hedge Fund ‘Quants’ Win Heart Diagnosis Challenge” (Financial Times)
• A new study shows that what you think about while racing affects how fast you run. (Runner’s World)
• As every runner knows, pounding the pavement day in and day out will out our physical flaws: “Top 10 Design Flaws tn the Human Body: From Our Knees to Our Eyeballs, Our Bodies Are Full of Hack Solutions” (Nautilus)
• “Stop Playing Monopoly with Your Kids (And Play These Games Instead)” (FiveThirtyEight)
• Art meets conservation: (My Modern Met)

Life-size portraits of wildlife placed in the destructed African lands they once inhabited https://t.co/E4ng00xzNq pic.twitter.com/XCJJAGlnbq

— My Modern Met (@mymodernmet) March 5, 2016

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All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.

Image credit: ©iStockphoto.com/JLGutierrez