What Bali Taught me About Investing

I spent the school holidays in Bali with my family. We travelled through Sanur, Uluwatu, Ubud, and Canggu. We'd never been to Uluwatu before, it was our first time this year. And it was amazing. Beautiful weather, spectacular beaches, really cool vibes, it was incredible.

I learnt a lot while in Uluwatu. Because we'd never been here before, we did all the touristy things, and ate at the most "fashionable" places. Think Instagram, think selfies, think pouting and posing. I was so disappointed. What a load of bullshit*t. Expensive food, sub-par food, service - meh. What we also did was, eat at the some of the best local, no frills, true to label warungs - food made with love, attention to detail, and incredible service.

Investing is no different. It all looks good on the gram, the photos, the colours, the advocates, the celebrities, they're expensive, and don't perform over the long run. There's so much "fakeness".

The warung is overlooked. It's not sexy, there are no celebrities, they're not on Instagram, they're not expensive, they're simple, done well, and serve consistently good food for cheap - they're great value.

SPIVA prepares an annual scorecard, ranking the best performing fund managers and their persistence into the future. The results are staggering.

Of 2021’s top quartile equity funds, only 2% remained in the top quartile for each of the next two years (versus a 6.25% expectation under random distribution). The result was much better for bond funds, with 44% of the top quartile remaining in the top quartile for the next two years.

196 out of a total 329 Australian Equity General funds outperformed the S&P/ASX 200 in calendar year 2021, and only 4 of those 196 winners—about 2%—managed to continue outperforming annually through December 2023.

As illustrated in the below chart, the persistence of alpha (outperformance) over the past three years was generally worse than would be expected from a coin flip. The Australian Bonds category was an exception, helped by a majority of active bond managers outperforming their benchmark in 2023.

As you do when travelling, you want and probably need to do the tourist things first, get a sense of what is going on - the lay of the land so to speak, before you can truly appreciate the local attractions, amenities, and food. What's hot now generally doesn't last, tradition and staples last centuries. Where do you think the term "tourist trap" came from? Play the long game.

If you're heading over to Bali, hit me up, I'd be happy to share my tips with you.