Some of you may remember that less than a year ago this column went dark for a while. I had rushed to Sydney after my dad was knocked off his motorbike by a driver who considered red lights merely a suggestion to stop.
He survived that one — just. A few weeks ago, however, when my phone rang for a second time in the wee hours, I knew it was the call we life-long expats dread, but know one day must come.
There is no just-swiping the bumper of a massive haemorrhagic stroke. I was on a plane three hours later and at dad’s unconscious side for six days. No food, no water — just morphine and his fave albums on repeat.
We felt sure he kept breathing just to embarrass those of us who had forgotten to mail him a birthday card. In the end my sister and I got away with it. He died five hours short of 83.
So apologies for my absence. That’s twice in a year, dad — you owe my readers big time. As Skin in the Game is about investing, how about some of his nuggets of wisdom? He never usually needed to be asked twice. Or even once.
In my father’s honour then, here are Andrew Kirk’s Eight Investment Rules for a happy and prosperous life (and retirement).
First, study hard and stay curious. Dad’s parents had low aspirations. But he did night school while his friends partied, eventually graduating in economics at Sydney University, then an MBA at Chicago.
Going through his files recently with mum, he had scores of meticulously indexed folders crammed with academic papers and articles on every aspect of investing from diversification to the efficacy of share buybacks.
That said, he mostly read with his eyes shut each afternoon and I’m sure these blissful slumbers were thanks to his second investment rule: never equate money with contentment.
After opening the Sydney office for McKinsey in the early 1970s, dad went on to run Planters in Australia (nuts, yay!), Nestlé (chocolate, yay!) and Ciba Geigy (toilet cleaner, boo!). A high-flyer, his friends said.
Then he had an epiphany, or so the story goes. What am I doing this all for? He hated the long hours and loathed firing people, so quit the corporate game. Moved into headhunting and never missed dinner with his family again.
Dad retired at 50 — younger than I am now. And not with piles of money either. How did he make it last so long? Mostly due to rule number three. Shield as much of your savings from the taxman as possible.
Whether that means putting a tad more each month in your pension, superannuation, or 401k, or maxing out on tax-effective vehicles, such as Isas here in Britain, the benefits make other investment decisions a sideshow.
Dad enjoyed tax-free capital gains and dividends for more than three decades. Nor did he pay a cent to the bozos in Canberra whenever he drew down capital.
Indeed, the latter is rule number four. Sure, income and capital are often taxed differently, but my father never had a problem blowing his children’s inheritance if dividends and coupons didn’t cover his latest madcap hobby.
Thus, despite his assets growing in the high single digits on average each year, and spewing a yield of 3.5 per cent, his portfolio is half the size it was 15 years ago. I bet he’s cross now that he didn’t spend even more.
What explains the good returns? Luck, mostly — it was a great era for investors. And you won’t be surprised that someone lectured by Milton Friedman believed in efficient markets. Hence, dad was an early advocate of cheap index funds.
That in itself — rule number five — boosted his performance versus active funds by about 1 per cent per annum. Compounded over 30 years buys a lot of ocean kayaks, motorbike upgrades, and flights to visit his wayward son in England.
Dad’s portfolio also benefited from a much higher allocation to equities than textbooks would advise for a retiree in his 60s and 70s. I would like to say this sixth rule was due to my influence — having written much on this topic when I was an asset manager.
But aloofness was the reason. While off on yet another road trip, equity markets outperformed bonds and hence dad’s weighting rose ever higher — especially to booming Aussie stocks.
Constant rebalancing would have hurt his returns, as I wrote about recently in this column. It is also why “stay diversified” is not investment rule number seven. Dad always moaned about not having even more in equities. US ones in particular.
He didn’t share my negative view on US shares. Put “ignore Stuart” as another rule, I can hear him tease. Bugger off, dad, I’m writing this. Where it did pay to listen to me, however, is staying invested.
This final rule is as important as minimising tax. My father never panicked when shares tumbled. Not during the dot.com implosion. Not when the financial crisis almost halved his savings. Nor when US equities fell by 34 per cent due to Covid.
I worked through each of those periods and promise you that being near the action brings no insights whatsoever. Supposed experts told me that clocks would stop, banks would disappear, and we would never hire a car or take a cruise ever again.
Blank the noise, I reminded him. Or I would have if he wasn’t off sculpting marble or pounding out his morning laps. The S&P 500, meanwhile, has almost doubled since the all-time high it reached just before the pandemic.
No one dies wishing they’d managed their portfolio more.
The author is a former portfolio manager. Email: stuart.kirk@ft.com; X: @stuartkirk__