Hard to believe we’re nearing the end of December again, and another year is in the rear view mirror.
We hope it’s been a rewarding and enjoyable year for everyone out there. From an investment perspective, it’s been a positive year, which always makes Christmas and the holidays a more enjoyable period.
Again, we’d like to thank everyone for the support and engagement over 2024. We’ve enjoyed meeting everyone (in and out of the office) and offering our advice and guidance throughout the year.
What did we learn in 2024?
Given we maintain a consistent investment philosophy it’s always going to be hard to learn a lot, especially in the areas that we advise on, unless there’s a legislative change. That doesn’t mean we don’t keep an open mind, we’re always looking out for any valuable new ideas, but ideas and change require rigorous data and proof behind them. The types of ideas that become guiding principles don’t come along very often. So, we’ll reiterate the things that guide us and have once again proven reliable this year.
Markets work.
Risk and return are related.
Asset allocation largely determines performance.
Diversification remains an investor’s best friend.
And none of them are worth a damn unless an investor maintains their discipline!
The discipline one is always important because at this time of year there’s always a number of calls about where the market’s going in the year ahead. This time last year, it was JPMorgan whose head of technical strategy said the S&P 500 could be down by 23% by June 2024.
The S&P 500 could drop to 3,500 by mid-2024, says JPMorgan’s Jason Hunter
The S&P 500 finished June up 15.29%, end of November it was up 28.07%.
What’s going to happen in 2025? Who knows! As always, the most important thing is aligning our portfolio with our goals, and the risk required to achieve those goals. Always rebalance when our adviser suggests, ensuring we retain the appropriate weightings. That way financial markets are controlled in the best way possible, by harvesting gains when and where they appear, and ensuring there’s enough liquidity available in lower volatility assets to ride out the bumps.
What We Got Wrong
This will be a one-off segment, hopefully. We usually don’t get things wrong because we don’t make predictions! But we also think it’s important to own our mistakes. We could have ignored this, and most would have forgotten about it, but back in our 2022 End of Year Wrap we said the following about bitcoin and cryptocurrency:
On the “new asset” side, eventually reality catches up to speculative hype. 2022 was a reckoning for crypto currency. Many coins have been wrecked. And while bitcoin still remains above where it was pre pandemic, it now exists in a different reality where a significant number of people have gone from being interested in it, to having their pants pulled down by it.
There are two distinct groups of crypto investors: a small group of true believers who invested early, know the technology inside and out, and likely have custody of their own coins offline in a cold wallet. Then there’s a large group of everyone else who wants (or wanted to) speculate later and took the fact that platforms existed, meant that platforms were safe to put their money onto. They didn’t bother to investigate further, nor could be bothered to. The average person does not want to be their own banker or custodian. The first group likely won’t go away, but the second group likely will go away because they’ve been burned badly by massive price drops and fraud. The second group disappearing will ensure cryptocurrency now stays on the fringes of finance.
Clearly, we were wrong on that one. As much as we think it should be, cryptocurrency hasn’t stayed on the fringes of finance. The hype came back in 2024, bitcoin hit an all-time high, and we’re despondent to inform you that Fartcoin (yes, you read that correctly) hit a billion dollar market cap recently.
The world’s largest asset manager, Blackrock added a Bitcoin ETF in 2024, while one of Australia’s more maligned financial services companies, AMP added Bitcoin to their superannuation portfolios. As far as the thinking behind these decisions, Blackrock seems to be focused on providing access to investors who want it. We suspect at AMP it’s part of a strategy to appeal to a younger demographic. AMP took a massive hit after the Banking Royal Commission and have been flailing ever since. In the last couple of years, it’s been apparent AMP have been trying to revamp their image, “be cool”, and appeal to younger investors.
This is probably a reminder of the old adage that you never bet against the church (or a cult), but we’re not changing our opinion on cryptocurrency, and it’s worth noting the world’s second largest asset manager, Vanguard, haven’t changed their opinion either.
Duncan Burns, the chief investment officer for Vanguard’s Asia-Pacific business, said the investment merits of bitcoin, and cryptocurrencies generally, were “weak”.
“While many speculators have made money on cryptocurrencies, there are as many if not more who have made a loss,” he said. “And I suspect a lot more will lose money in the future.”
Our Best of 2024
No Country for Old Stock Pickers: as index investing has continued to grow it has done significant damage to the businesses of once renowned investment managers.
Investing Has Been Solved: there’s little doubt now that there is an optimal way to invest, but one thing stands in our way: how we all behave.
You Could Do Better… there’s always someone out there who will promise investors they can do better than they’re currently doing, but often they end up doing worse.
Five Years is a Long Time: memory issues may go formally undiagnosed for some years, but when financial data is analysed the signs are there early.
Changing Gears: retirement is often accompanied by the question of of how much we can spend, but there’s the other question of how will we spend our time?
Other interesting stories (with a tech theme) to read over the holidays
Drowning in Slop: A thriving underground economy is clogging the internet with AI garbage — and it’s only going to get worse.
The text file that runs the internet: For decades, robots.txt governed the behavior of web crawlers. But as unscrupulous AI companies seek out more and more data, the basic social contract of the web is falling apart.
“We’re Living in a Nightmare”: Inside the Health Crisis of a Texas Bitcoin Town.
The Cloud Under the Sea: The invisible seafaring industry that keeps the internet afloat.
How the Vagus Nerve Could Influence Physical and Mental Health: The healing potential of the brain’s most interconnected nerve intrigues researchers.
With that, the MFG office will be closed from Friday 20 December at 4pm and we will reopen on Monday 6 January 2025.
This represents general information only. Before making any financial or investment decisions, we recommend you consult a financial planner to take into account your personal investment objectives, financial situation and individual needs.
