Is my M&S stakeholder pension OK?

edited 30 November -1 at 1:00AM in Pensions, Annuities & Retirement Planning
39 replies 8.2K views
13

Replies

  • DiggingOutDiggingOut Forumite
    770 Posts
    You and Paul666 are completely wrong.

    I assume I'm the "you" in that sentence. ;D

    I only invest in trackers anymore, FWIW.

    I still maintain that anyone who has consistently under-performed the market in the past in both good and bad markets either A) doesn't know what he is doing or B) is guessing and guessed badly. In which case his future performance might be great, but its strictly a gamble.

    So if you want an actively managed fund, past performance of the manager (not the fund itself) can tell you something. Some have consistently over many years out-performed the index in bull markets and under-performed in bear markets. That past performance also tells you something.

    Your description of fund managers and research departments is not completely accurate. It is true of many, but not all. Some of these people are top quality, and skilled at spotting good long-term opportunities.
    I have five stars! This doesn't mean that I know anything about any of the things I post. I could be a raving lunatic, or a brilliant genius, or just some guy on the internet. In fact, I could be all three at the same time.

    If anything I say makes sense, then do it. If not, don't. Don't blame me or my stars if you do something stupid because I suggested it. I'm responsible for my own stupidity only. You are responsible for yours.

    Why, I don't even have five stars anymore! Aren't you glad you aren't responsible for my stupidity?
  • paul666paul666 Forumite
    95 Posts
    Pal wrote
    I assume that you are an IFA advising individuals?
    I'd rather eat my own vomit. I'd also be identifying my self as one here for all to see.
    I've only dealt with one IFA in my life and I think he was totally motivated by greed and I did badly out of it. However, I think even he'd be able to at least tell a cautious fund from an aggressive one or a risky one from a fixed interest one and as such was better suited to advise me at the time. Of course, in my (limited) experience, he'd only make a usefull decision if they all paid him the same...
    I'm prepared to believe this is not always the case.
  • PalPal Forumite
    2.1K Posts
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    I assume I'm the "you" in that sentence. ;D

    Yep.

    What does "FWIW" mean?
    I still maintain that anyone who has consistently under-performed the market in the past in both good and bad markets either A) doesn't know what he is doing or B) is guessing and guessed badly.  In which case his future performance might be great, but its strictly a gamble.

    I completely agree with this statement.  

    However I also believe that the vast majority of fund managers with good past performance records both A) doesn't know what they are doing" AND "B) were guessing".  They just happen to have guessed well over the period.
    So if you want an actively managed fund, past performance of the manager (not the fund itself) can tell you something.  Some have consistently over many years out-performed the index in bull markets and under-performed in bear markets.  That past performance also tells you something.

    Nooooooooo!  With all due respect this is complete and utter drivel  ;), and is a sign that you have fallen for the "Star manager" hype that the sales departments of investment companies use to pull in the punters.

    In any large enough sample (and there are many many fund managers worldwide) some of them are going to achieve long term track records by pure luck, just as some are going to utterly fail by pure luck.  The majority of individuals who claim to have good 5 year track records have done so through luck however their companies (spotting a competitive marketing advantage) pass it off as the individual's skill.  

    The rare few who outperformed but did not rely on luck had a very good, high skilled team and a company with rigourous investment processes and procedures behind them, and without them would also have failed utterly.

    It is impossible for a single person to achieve decent stock returns through skill because of the amount of individual company research that would need to be undertaken. The fund managers also depend very heavily on the "house view" i.e. the position that their employer wants them to take in their funds in order to reduce the risk of underperforming and so losing customers.  This gives them a benchmark allocation away from which they are allowed very little freedom to deviate.

    While this sounds like a good thing, it has three main impacts:

    - It vastly reduces the amount of risk being taken, resulting in tracker-like performance for active management fees (never a good thing);
    - The house view is a committee view of the markets and is generally slow to make changes.  It is also based around what competitors appear to be doing more than what the company believes is right for its customers;
    - It stifiles what little talent the individual team members may have. (If you believe in luck it probably stifles that as well  ;D)

    Also, half the time the people who supposedly run the funds are not actually involved on a day to day basis.

    Don't fall for the sales spin!
    Your description of fund managers and research departments is not completely accurate.

    Yes it is.  Everything I say is completely accurate unless I have left a deliberate error to give you something to do.
    Some of these people are top quality, and skilled at spotting good long-term opportunities.

    I have met a large number of them and the number of good people is vastly outweighed by the dross.   Remember it is the new graduates (basically the office juniors) who carry out most of the company analysis on which the stock picking is based.  

    I agree that a few rare companies have TEAMS and PROCESSES that are top quality.  But how do you and I find them?  You can't use past performance or sales blurb. What other information is there?

    I am not saying it is impossible to do.  I am saying it is very difficult for professional investment consultants to do, and impossible for IFAs or the man on the street.  Which is why I would always suggest that investors go for tracker funds, gamblers go for horses or the lottery and gambling investors go for active funds by drawing a name out of a hat.

    Alternatively, find a manager that offers a "fund of funds" or "manager of managers" product.  These funds have someone else doing the detailed research and manager selection for the fund in which you invest.

    They are the only active equity funds I would consider investing in.  Unfortunately even some of them are a bit dodgy.

    Paul666

    Apologies for the insult.  I have never seen anyone who is not an IFA jump to their aid before so you surprised me!  :)

    I believe that all competant IFAs would be capable of making asset allocation decisions for a client (i.e. whether to invest in cash, equities, bonds, property etc) but I believe they choose active funds for all the wrong reasons, which include:

    - commission
    - the belief that they can pick a good fund by looking at past performance graphs
    - Whether they have heard the name of the individual "fund manager" before;
    - The articles written in crappy IFA magazines that they read instead of doing real fund research.

    I do not believe that IFAs have time (or the skill) to research funds properly, so they really ought to stop recommending active equity funds at all apart from to those clients who are happy to gamble in the hope of achieving an extra 1% a year on their money.

    As for the methods employed by the posters on Fool.  Oh dear, oh dear.
  • Joe_BloggsJoe_Bloggs Forumite
    4.5K Posts
    Wow!!!
    @mrsturn. What did you say to provoke PAL ?

    I am right handed but consistantly perform better with my left hand at darts. The less deliberate the thought and practice, the better the outcome is my theory for this.

    Has the original idea behind the stockmarket been lost over time. If you had lots of shares in one place you can sit on the board and hear the inside story and influence things. If you have 1% of a hundred companies you have little affect unless you can liase with a significant proportion of similar holders to hopefully affect future performance.

    Clearly I am out of touch with reality. It's accrual world.
  • DiggingOutDiggingOut Forumite
    770 Posts
    What does "FWIW" mean?

    "For What It's Worth".
    However I also believe that the vast majority of fund managers with good past performance records both A) doesn't know what they are doing" AND "B) were guessing". They just happen to have guessed well over the period.

    I agree with this, too.
    Nooooooooo! With all due respect this is complete and utter drivel ;), and is a sign that you have fallen for the "Star manager" hype that the sales departments of investment companies use to pull in the punters.

    I guess I have to spell it out for you (FWIW :D). If someone always performs well in bull markets and poorly in bear markets, it tells you he is likely to be quite aggressive. If vice versa, he is probably quite cautious.
    The rare few who outperformed but did not rely on luck had a very good, high skilled team and a company with rigourous investment processes and procedures behind them, and without them would also have failed utterly.

    And since they often have significant input into the makeup of that team, some people would think that they get some of the credit for that performance.
    Yes it is. Everything I say is completely accurate unless I have left a deliberate error to give you something to do.

    Thanks for clearing that up. I wondered why there were so many errors in your posts. ;D

    I actually mostly agree with you, and have nothing in actively managed funds right now. But if I were looking to go into actively managed funds, I would indeed use past performance to rule out some of the clowns before making my decision.

    And I wouldn't trust a guy with great performance in good and bad markets any more than I would trust one with bad performance. Real investors (as opposed to speculators) buy for the long term, so they will have short to medium periods where their performance won't look that great.
    I have five stars! This doesn't mean that I know anything about any of the things I post. I could be a raving lunatic, or a brilliant genius, or just some guy on the internet. In fact, I could be all three at the same time.

    If anything I say makes sense, then do it. If not, don't. Don't blame me or my stars if you do something stupid because I suggested it. I'm responsible for my own stupidity only. You are responsible for yours.

    Why, I don't even have five stars anymore! Aren't you glad you aren't responsible for my stupidity?
  • dunstonhdunstonh Forumite
    107.2K Posts
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
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    Ahh, i think we are getting some where. It is more a case of ruling out the worst consistent performers rather than picking the best past performing.

    Even if its luck, its better to be with consistant good luck than consistant bad. ;D

    I also want to point out that commission is paid on the product and not the fund so it doesnt matter if index tracker, default crud fund or extra charging external fund is selected. The commission would be the same.
    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.
  • Joe_BloggsJoe_Bloggs Forumite
    4.5K Posts
    @DD
    Can I paraphrase your last sentance as:-
    Good bad or indifferent advice, I'll get paid the same.
  • PalPal Forumite
    2.1K Posts
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    As I am unlikely to sway your opinion on this subject, I will content myself with just pointing out the parts of your post that (IMHO) are incorrect ;):
    If someone always performs well in bull markets and poorly in bear markets, it tells you he is likely to be quite aggressive.  If vice versa, he is probably quite cautious.

    Or perhaps that he is "cautious" but just got lucky during a bull run? Or that he is "aggressive" but chose the wrong stocks so he didn't perform well during a bull run? How do you differentiate between a lucky cautious manager and an unlucky (or crap) aggressive manager if they have both outperformed during a bull run?
    And since they often have significant input into the makeup of that team, some people would think that they get some of the credit for that performance.

    Many of them have very little input to their teams, it is mainly handled by HR departments. Staff selection and retention is one of the internal processes that needs to be in place to ensure a decent investment team, and it is one of the main things lacking from most investment companies.
    Thanks for clearing that up.  I wondered why there were so many errors in your posts. ;D

    I have to give you something to do. ;D
    I would indeed use past performance to rule out some of the clowns before making my decision.

    But it doesn't rule out the clowns for the reasons I mentioned before. However even if you believe that it does, it fails to rule out the current clowns because you are always using past statistics and the underlying people are changing all the time. It doesn't even guarantee that someone you believe to be a "non-clown"(?) will still be there in a week after you have invested your money.
    Real investors (as opposed to speculators) buy for the long term, so they will have short to medium periods where their performance won't look that great.

    To be honest I am not even sure this is true any more. I believe that real investors buy investments that they can control and have input to, and they are always working to relatively short timescales to get out again. For example buying a share in a small company, buying property to convert and sell on, BTL property, starting a business and so on.

    Buying listed stocks is speculating. If you believe the economic theories regarding stock prices growing generally in line with GDP, then investment in equities should work over the long term, but it is still speculating to all intents and purposes because you are investing in something completely out of your control.

    Nothing wrong with speculating though, as long as the speculator is aware of what they are doing.

    @ Joe - yes, I believe that the stock market has changed. 50 years ago it was about buying companies that would grow over time, but now there are so many speculators and so little real information that it is impossible to do. Fear, greed and herd instincts now run the world's stock markets.
    It's accrual world.

    LOL ;D
  • DiggingOutDiggingOut Forumite
    770 Posts
    Or perhaps that he is "cautious" but just got lucky during a bull run?  Or that he is "aggressive" but chose the wrong stocks so he didn't perform well during a bull run?  

    Silly me. I said "likely" and "probably". I should have said:
    LIKELY and PROBABLY
    so you wouldn't miss it. ;D
    I have to give you something to do. ;D
    Cheers. ;)
    However even if you believe that it does, it fails to rule out the current clowns because you are always using past statistics and the underlying people are changing all the time.

    But since I was talking about fund managers rather than funds....
    It doesn't even guarantee that someone you believe to be a "non-clown"(?) will still be there in a week after you have invested your money.

    True.
    To be honest I am not even sure this is true any more. I believe that real investors buy investments that they can control and have input to, and they are always working to relatively short timescales to get out again. For example buying a share in a small company, buying property to convert and sell on, BTL property, starting a business and so on.

    These are all somewhat speculative, as well.
    @ Joe - yes, I believe that the stock market has changed. 50 years ago it was about buying companies that would grow over time, but now there are so many speculators and so little real information that it is impossible to do. Fear, greed and herd instincts now run the world's stock markets.

    I don't think there is less real information than there was. In fact, I think the information is available to far more people -- so the bargains quickly disappear because too many other people know they are a bargain. When a market becomes more efficient as information becomes more available, the main thing that drives market changes is speculation.

    This is certainly true in Europe and America, possibly less true in Asia. Recently a fund manager in Japan discovered a company with more cash on hand than the company's market capitalisation! He bought enough shares to be in a position to force a large dividend payout, and made a killing on his investment. There was no speculation involved -- the company was, just based on cash holdings, worth more than the market price.
    I have five stars! This doesn't mean that I know anything about any of the things I post. I could be a raving lunatic, or a brilliant genius, or just some guy on the internet. In fact, I could be all three at the same time.

    If anything I say makes sense, then do it. If not, don't. Don't blame me or my stars if you do something stupid because I suggested it. I'm responsible for my own stupidity only. You are responsible for yours.

    Why, I don't even have five stars anymore! Aren't you glad you aren't responsible for my stupidity?
  • Joe_BloggsJoe_Bloggs Forumite
    4.5K Posts
    British Airways has been described as a pension fund with an airline. The assets of the fund are 3-4 times the market capitalisation of the company.

    There is a lot of untapped power in pension funds that is not used. Often the reason behind a takeover was to 'liberate' the pension fund.

    @Dug your last point demonsrates that the market does not reflect value but greed, fear and ignorance.
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