On June 9, 1954, during the Army-McCarthy Hearings held in Washington, D.C., Joseph N. Welch, Special Counsel for the Army, uttered this rebuke: “Have you no sense of decency sir, at long last? Have you left no sense of decency?”

More than a half-century later, recent events made this poignant comment relevant again.

Holly Butcher, a resident of Australia, died all too young at age 26, after a long battle with a rare bone cancer. Before she died, Butcher penned some thoughts about life, which struck a chord with many.

I found this observation particularly meaningful: “Whinge less, people! And help each other more.” “Whinge” is Australian slang for “whine.”

I want to focus on “help each other more.”

Simple vs. complex

Intelligent, sound investing should have these two characteristics: It should be simple and boring.

Financial author and journalist Allan Roth demonstrated this principle in this excellent blog post. He compared Schwab’s free robo Intelligent Portfolio, consisting of 16 funds against the performance of a simple 3-index fund portfolio and an even simpler Vanguard Target Date Fund, for the three-year period commencing March 27, 2015.

While three years is too short a time to draw meaningful conclusions, the results were interesting.

The three-index fund portfolio consisted of the Vanguard Total Stock Market ETF (VTI), the Vanguard Total International Stock Fund ETF (VXUS) and the Vanguard Total Bond Market ETF (BND). Readers of my Smartest Investment Book You’ll Ever Read, originally published in 2006, will recognize this portfolio. It’s the same one (although I recommended Vanguard’s index funds instead of ETFs) in my book. I summarized these recommendations in this blog post.

The three-index fund portfolio was the winner, with annualized returns of 9.40%. Vanguard’s Target 2050 fund (VFIFX) was in second place, with annualized returns of 9.10%. Trailing badly was the complex, “sophisticated”, 16-fund Schwab portfolio, annualized returns of only 7.70%.

You should heed Roth’s conclusion: “I’ve long since learned that complexity, expenses, and emotions are the enemies of the investor. So far, Schwab remains part of a very large group of investors that seek to outsmart simplicity.”

Bad advice

Robin Powell, a financial journalist based in the United Kingdom, reports that a review of assets held on UK adviser platforms found that only 10% of assets are in passive (index-based) funds.

From my perspective, that means that 90% of the investors being “served” by those advisors are getting advice that lowers their expected returns.

While the number of index investors is higher in the U.S.,  a majority still invest in actively managed mutual funds. Most do so on the advice of their brokers, or they rely on the daily grist of self-styled investment “gurus”, who appear in the financial media, touting their purported expertise.

The securities industry in the U.S. incentivizes irresponsible investing. According to an article in The Wall Street Journal dated January 10, 2018, employees at Fidelity, Schwab and TD Ameritrade are rewarded with extra pay and other incentives to recommend investments more profitable to these firms. You can be assured these products don’t include low management fee index funds.

No sense of decency, ethics or morality

You have to wonder about the mindset of those who harm the ability of their clients to reach their retirement goals in order to enrich themselves and their firms. When they reflect back on their lives, will they have regrets?

As she was dying, Holly Butcher clearly saw the value of “help[ing] each other more.” I can only imagine her view of those who spend their days harming others. I think she would agree with Joseph Welch that they have left no sense of decency, ethics or morality.

May she rest in peace.

Resource of the Week

Allan Roth’s article on the benefit of simplicity over complexity in investing is a must read for all investors.  This is information Wall Street really doesn’t want you to know.

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