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Funds fees query
Comments
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darkpool, did you read kar999 post #99, and wouldn't you agree that that is a reasonable and fair summary of the situation regarding the possible merrits and drawbacks for managed and tracker funds?
If a person is an active investor then investing in a fund which makes large charges is acceptable as long as they consistently outperform the other funds, i.e. they charge 10% (well in excess of the norm) but they, on average, achieve 20% better returns. Simple maths means thats a no brainer. Should the returns fall below the accptable level (premium) then an active investor would move to another fund.
Trackers are fine for people who are unable or unwilling to carryout investment analysis / research.
Please read kar999 post as I think it is the most reasoned and reasonable summary.Personal Responsibility - Sad but True
Sometimes.... I am like a dog with a bone0 -
You really expect the normal distribution of trackers and managed to be centred on the same average return?
I don't merely "expect" any such thing. I look at the actual returns (i.e. real data) and note that trackers typically end up close to the 50th percentile for funds in most sectors. Sometimes a little above on average, sometimes a little below.
It's all well and good theorising, but at some point you need to account for the actual data.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?
Please read my responses. I clearly said that if you took your sample and ignored the persistent worst offenders and most funds managed by retail banks, then the average of the remainder would be higher. The idea of analysing a subset of data should be alien to you if your criticism of other people's maths skills are based in any way on your own knowledge and experience of the field.
Do you really have any problem with using experience to highlight the worst offenders and getting rid of them before picking a fund?You suggest TER has no impact on returns? If a adviser said that to me I wouldn't do business with him.
Did anyone suggest this? I'd like to see such a quote.
What people have said is that you need to look at actual returns, not the theorised returns based on the assumption that all funds perform the same before charges.active fund management is a zero sum game - one fund that overperforms is matched by a fund that underperforms.
Exactly, or not quite? Very important distinction here, especially since a notable quantity of instututional shareholders will be nominee trading accounts.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 -
To me, an important aspect of a fund is how the manager is rewarded. One good aspect of some hedge funds is that the managers get paid a pitiful basic salary, but take 10-20% of what they make in profit. This does lead to some hedge fund managers becoming exceeding wealthy, but don't they deserve it?
Thats how funds should work imo, with managers having a personal interest in making money.Faith, hope, charity, these three; but the greatest of these is charity.0 -
It's all well and good theorising, but at some point you need to account for the actual data.
Please read my responses. I clearly said that if you took your sample and ignored the persistent worst offenders and most funds managed by retail banks, then the average of the remainder would be higher. The idea of analysing a subset of data should be alien to you if your criticism of other people's maths skills are based in any way on your own knowledge and experience of the field.
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do you not think it likely that financial instutions have looked at the data? yet they don't seem to have any evidence that active is best? does this not suggest something?
how can you possible think it right to find the average return by ignoring data that doesn't suit your position? That's best described as wooly thhinking.0 -
"It isnt the fees that make them underperform or over perform. its the different investment strategy."
That statement is totally correct. You seem to be thinking that all funds have the same objective and will result in the same return minus charges and therefore the higher the charges the more it will underperform. That is not the case. If they all returned the same then cost would be the only consideration. They dont all return the same and therefore cost is not the only consideration.
Higher charges do create a drag but if the assets have returned 10% more after charges then it doesnt matter. Would you rather have say 10% after charges of 0.2% or 15% after charges of 1.5%?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 -
Higher charges do create a drag but if the assets have returned 10% more after charges then it doesnt matter. Would you rather have say 10% after charges of 0.2% or 15% after charges of 1.5%?
obviously i'd rather have the 15%. but the evidence is i'd pay the higher fees and not get anything to show for it
unless you can prove otherwise? 0 -
obviously i'd rather have the 15%. but the evidence is i'd pay the higher fees and not get anything to show for it unless you can prove otherwise?
The evidence is that if you picked from random, you would have around a 50% chance of getting one that gives you more or less. Thats without any research or elimination.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 -
The evidence is that if you picked from random, you would have around a 50% chance of getting one that gives you more or less. Thats without any research or elimination.
more or less what? aplha return? substandard returns?
was woodford not going to get thrown out from his job at perp high income at one stage? something about him not performing? then he gets lucky and every fool in the kingdom throws money at him?0 -
was woodford not going to get thrown out from his job at perp high income at one stage? something about him not performing? then he gets lucky and every fool in the kingdom throws money at him?
Gets Lucky??
His funds have been relatively out of favour in recent years though, as many question his defensive stock strategy.
I wouldn't call investors fools if they are wise enough to invest in his INDEX beating (after fees) funds even when others doubt his strategy.
....or maybe it's only fools that go where others fear to tread and gain as a consequence.If the ball had gone in the net it would have been a goal.If my Auntie had been a man she'd have been my Uncle.0
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