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Funds fees query
Comments
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I usually just go with eliminating the ones managed by retail banks and then look for funds that remain which have a decent long term history of adding value within a mandate that matches my investment strategy. That has tended to work quote well for me so far.teddy_ruckspin wrote: »Forgive the potentially silly question but, how does one 'filter out' the passive managed active funds?
You can deliberately eliminate the passive managed funds if you're happy to look through the charts, but as they'll invariably lag behind the sector average across any timescale, they will be eliminated using the above selection criteria.
If I can't find one, I use a tracker. My exposure to the US largely comes from trackers at present, for example.I am a Chartered Financial Planner
Anything I say on the forum is for discussion purposes only and should not be construed as personal financial advice. It is vitally important to do your own research before acting on information gathered from any users on this forum.0 -
I must apologise for expecting an IFA to know about gaussian distibutions.
Perhaps Lokolo could look out his A level maths books and explain what they are?
I don't need to because you aren't making any sense. It does not matter whether the performance distribution is higher if the extremes match. The average will still be the same.
If we have 5 managed funds and compared to the index; -10%, -5%, 0%, 5%, 10%
If we then have 5 index funds compared to the index; -3%, -1%, 0%, 1%, 3%
There is no difference between the Index and the Managed overall even though the performance distribution of the managed fund is larger.0 -
Forgive the potentially silly question but, how does one 'filter out' the passive managed active funds?
Either your research software does it or you need to do it manually. As Aegis says above, bank and insurance company ones are often passive managed. Especially legacy funds from providers that have closed their doors to new business.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
I don't need to because you aren't making any sense. It does not matter whether the performance distribution is higher if the extremes match. The average will still be the same.
If we have 5 managed funds and compared to the index; -10%, -5%, 0%, 5%, 10%
If we then have 5 index funds compared to the index; -3%, -1%, 0%, 1%, 3%
There is no difference between the Index and the Managed overall even though the performance distribution of the managed fund is larger.
trackers have an annual fee of about 0.5%. Managed funds will charge about 2.5%. The difference in annual fee is 2%. How can the average return from trackers and managed funds be the same? the difference in average return is likely to be........2%0 -
trackers have an annual fee of about 0.5%. Managed funds will charge about 2.5%. The difference in annual fee is 2%. How can the average return from trackers and managed funds be the same? the difference in average return is likely to be........2%
Why does it matter what the charge is? The returns do not then have charges taken off them, the return have the included charges. You say there would be a difference of around 2%, which would be the case if the all managed funds performed the same as trackers. How you seem to not have considered, what if the managed funds average did 2% better than the tracker meaning the extra cost was cancelled out?
You seem to assume a lot in this thread without any factual evidence.
You quote mathematical theory yet you don't seem to understand a lot of it yourself.0 -
You missed the point again. If trackers appear mid-table, then if you assume a normal distribution of active manager performances the average will be more or less where the trackers are.
If you then eliminate the passive managed funds and the funds with track records of woeful performance, where will that leave the average of the remaining
You really expect the normal distribution of trackers and managed to be centred on the same average return?
you suggest the way to find average returns of managed funds is to ignore the worst performing funds? do you know what average means? if you had to find the average weight of a group of people would you ignore the underweight people to find the average?0 -
Why does it matter what the charge is? The returns do not then have charges taken off them, the return have the included charges. You say there would be a difference of around 2%, which would be the case if the all managed funds performed the same as trackers. How you seem to not have considered, what if the managed funds ALL did 2% better than the tracker?
You seem to assume a lot in this thread without any factual evidence.
You quote mathematical theory yet you don't seem to understand a lot of it yourself.
You suggest TER has no impact on returns? If a adviser said that to me I wouldn't do business with him.
active fund management is a zero sum game - one fund that overperforms is matched by a fund that underperforms.
mathematical theory? it's all fairly standard maths i'm using. though some here struggle with basics like finding averages
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You suggest TER has no impact on returns? If a adviser said that to me I wouldn't do business with him.
active fund management is a zero sum game - one fund that overperforms is matched by a fund that underperforms.
mathematical theory? it's all fairly standard maths i'm using. though some here struggle with basics like finding averages
Er no of course it does, but it doesn't mean the cost outweighs the benefit.
The math you are using is fairly standard I agree, but when you come up with comments like:ehhmmmm because managed funds have a wider performance distribution.
When Dunston asked you the reasoning for tracker funds being typically mid table if they beat most of the rest, it just makes me wonder.
And as for the average, I have already explained I know what an average is in post #105
I also find it odd that you want to use the average of all funds in a category for your argument, as for most people in this forum they will invest in the best, so will only look at the top 20 or so funds, which in fact will be mostly filled with managed funds (for most areas).0 -
Er no of course it does, but it doesn't mean the cost outweighs the benefit.
The math you are using is fairly standard I agree, but when you come up with comments like:
When Dunston asked you the reasoning for tracker funds being typically mid table if they beat most of the rest, it just makes me wonder.
And as for the average, I have already explained I know what an average is in post #105
I also find it odd that you want to use the average of all funds in a category for your argument, as for most people in this forum they will invest in the best, so will only look at the top 20 or so funds, which in fact will be mostly filled with managed funds (for most areas).
trackers are likely to have returns in a narrow band. managed funds will have performances from rubbish to brilliant. so some funds will beat trackers. but the average return of trackers is likely to be higher than managed due to the lower costs. i wouldn't think this should be a revelation......
my "averages" comment wsn't aimed at you.
so all financial adverts warn "past performance is no guide to future performance" yet you choose to ignore this advice?0
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