The enthusiasm for ‘meme’ stocks that gain cult-like social media followings has thrown a spotlight on the ‘lottery effect’ in investing. This refers to people’s willingness to accept extremely poor odds in return for the remote possibility of hitting the jackpot. On one level, the practice seems mad. On another, it appears quite understandable.

Ever been on holiday where the weather wrong-footed you? The brochures promised tropical bliss, so you packed accordingly. Instead, you are greeted by bone-chilling wind and rain. Shivering and exposed, you resemble an undiversified investor.

As with the weather, financial markets can be unpredictable. Yet, in their own glossy brochures, investment providers often promise the equivalent of endless sun. Excited, investors pile in like bucket shop holidaymakers. This rarely ends well.

History is full of surprises, as recent events have shown. The world is complex and the future is messy. Just because we want an explanation does not mean one is in reach. As Ben Carlson writes, basing predictions based on the past is like watching ‘The Sixth Sense’ when you already know Bruce Willis was dead the whole time.

If we have a hard time explaining the past what chance do we have at consistently predicting the future?

We’ve all been conditioned to see meme investors and Wall Street in opposition, but it seems to me that they have a lot in common. Both believe in picking stocks and think they can beat the market. In my mind, the important distinction is that Wall Street stands to make a lot of money off meme investors, simply from trading costs. For those who say apps don’t charge for trading, think about it: When was the last time Wall Street gave away anything for free?

Yes, until very recently, I thought complicated and complex were pretty well synonymous, too, but after reading General Stanley McChrystal’s book, Team of Teams, I was admonished and educated.

The book, ostensibly geared toward leaders in business, walks us through the fascinating philosophical and practical framework required to bring together a myriad of the world’s elite fighting forces in pursuit of a common cause. And the big takeaway for me, that has serious implications in financial planning, was, “Being complex is different from being complicated.”

I have been passionate about investing since I started studying finance in 1977. The first investment class I took was dominated by the Capital Asset Pricing Model (CAPM) of Sharpe (1964) and Lintner (1965). The CAPM says every investor’s ideal portfolio is some combination of the risk-free asset and the value-weight (VW) market portfolio of all stocks, bonds, and other investible assets, and every portfolio’s expected return is a linear function of its beta, which is its sensitivity to the market return. The academic view of investing is far more complicated today.

When the world feels particularly uncertain, you can feel tempted to over-analyse everything in the hope of building a ‘perfect’ portfolio. But a better goal for investors, says communications expert Carl Richards in this short video, is to give up on perfection and build a portfolio that you feel you can live with.

The golden rule of investment applies more than ever when the world is turbulent. Diversification is still the closest we get to a “free lunch”. It is motherhood and apple pie for investors.

Since Harry Markowitz, father of modern portfolio theory, called it “the only free lunch in finance” in the 1950s, everyone has agreed that it is a good thing. I’ve certainly banged on at length over the years about the merits of holding a balanced portfolio. And the current “commodities up, shares down” environment has done nothing to change my mind.

In response to the Russian invasion of Ukraine, Western governments have united in implementing punitive sanctions on Russia, including:

• Sanctions on Russia’s main development bank and its military bank, and enacting comprehensive curbs on Russia’s sovereign debt, a move intended to cut off the country from Western financing.

• Removal of large Russian banks from Western financial markets and removing some Russian banks from the SWIFT financial messaging system, essentially barring them from international transactions.

• Sweeping restrictions on technological imports.

Russia’s invasion of Ukraine is an important reminder that geopolitical risk is a part of investing in global markets. Dimensional’s systematic active approach is designed to adjust to new information in real time, including information about geopolitical events and their potential repercussions for markets.

What are the potential geopolitical, economic and asset implications of the conflict unfolding between Russia and the West over Ukraine?

Goldman Sachs Research's Allison Nathan, senior strategist, explores the topic in her latest Top of Mind through interviews with notable Russia watchers who interpret the lead-up to recent events very differently.

When Russia invaded Ukraine on Wednesday night, stock markets around the globe immediately sold off in the futures markets.

U.S. markets were down around 3% across the board. The S&P 500 opened the next morning down 2.5%. The Dow fell 800 points. The Nasdaq 100 was also off more than 2%.

By the end of the day Thursday stocks had a furious rally, with the Dow finishing in positive territory, the S&P 500 up 1.5% and the Nasdaq 100 soaring more than 3%.

As the Russia-Ukraine crisis is unfolding, it is understandable that many of us are worried about the impact of the invasion on the rest of Europe and the global economy. The conflict has also caused increased volatility in global share markets which were already unsettled by fears of increasing interest rates and rising inflation.

Australia’s core consumer price inflation topped the midpoint of the Reserve Bank’s 2-3% target in the December quarter, for the first time in seven years.

In NZ, the annual CPI hit a three-decade high for the same period. But here’s some good news.

What is investing?

This is a much more subtle and challenging question than you might imagine, one that should not be dismissed lightly. Rather, it is one of the more difficult problems you will confront in your lifetime.

Vanguard founder Jack Bogle’s passed away 3 years ago today. In 2016, I was lucky to have had the opportunity to interview him in his office for Masters in Business.

Bogle argued for an approach to investing defined by simplicity and common sense.

At The Private Office, we stay abreast of financial academic research both current and going back to the early days of the share markets. One of the first topics in financial research was the study of seasonal trends in share prices. You may have heard of the "January effect”.

As we have just observed another January data point, we thought this would be an opportune time to have a dive into at the academic literature on the January effect to see whether it would be wise to incorporate this in our investment process.

Achieving expectations and aspirations for retirement will be very challenging for the majority of New Zealanders unless they prepare and plan.

That’s one of the main conclusions of the latest Retirement Expenditure Guidelines.

The guidelines have been produced by Massey’s NZ Fin-Ed Centre and are sponsored by Consilium and Financial Advice New Zealand.