Help me rebalance my failing S&S ISAs Portfolio - Sept 2011

Linton

MrMalkin wrote: »

I don't understand, if active funds generally return the same as passive funds then surely the default position should be to go with the cheaper passives - otherwise you're just giving money to the fund managers for no particular reason.

It's a pretty big premium to pay for a small chance of outperformance, a larger chance of underperformance, and a belief that fund managers can time the market in order to beat the bear markets - which I doubt they can do, and even if they can they largely do it by having a big cash position, which I can do myself for nothing.

I think overall asset allocation is far more important than choosing individual funds in terms of meeting investment goals, and when paired up with a range of index funds the strategy works very well.

You are missing a key point: the returns for managed funds include the fees. So fund managers are doing well enough to pay the extra fees.

I dont care whether I give money to fund managers or not, what I care about is how much money I get. Whether I go for managed funds or passive ones in general there is no significant advantage to me either way.

But that only applies in those sectors where passive investing is effective. in many of the sectors I find most lucrative there are no broad passive funds, or those that do exist perform less well than average.

I have come across another good example. Until recently there were no Emerging Market passive funds. Now L&G have one which tracks the FT Emerging Index. The L&G fund is too new to have a performance record, but we can look at the FT Emerging Index.

Over 1, 3 and 5 years it substantially underperforms the sector fund average.

MrMalkin

Linton wrote: »

You are missing a key point: the returns for managed funds include the fees. So fund managers are doing well enough to pay the extra fees.

I dont care whether I give money to fund managers or not, what I care about is how much money I get. Whether I go for managed funds or passive ones in general there is no significant advantage to me either way.

I didn't miss the key point, I fully understand how costs are factored in. None of what you said explains why you would go with active over passive - unless you subscribe to some sort of reverse socialism and like giving money to the finance industry?

Linton wrote: »

I have come across another good example. Until recently there were no Emerging Market passive funds. Now L&G have one which tracks the FT Emerging Index. The L&G fund is too new to have a performance record, but we can look at the FT Emerging Index.

Over 1, 3 and 5 years it substantially underperforms the sector fund average.

Right, but 1, 3 and 5 years is too short a time period to be able to determine whether this is genuine performance or just plain luck. Over longer periods of time (i.e. since trackers were invented) the evidence is that trackers are a better bet. Performance comes and goes, but charges are forever.

DavidLaGuardia

Linton wrote: »

I have come across another good example. Until recently there were no Emerging Market passive funds. Now L&G have one which tracks the FT Emerging Index. The L&G fund is too new to have a performance record, but we can look at the FT Emerging Index.

Over 1, 3 and 5 years it substantially underperforms the sector fund average.

But Dimensional (a passive fund manager) has an emerging market fund that is in the top performers over 3 and 5 years.

Linton

MrMalkin wrote: »

Right, but 1, 3 and 5 years is too short a time period to be able to determine whether this is genuine performance or just plain luck. Over longer periods of time (i.e. since trackers were invented) the evidence is that trackers are a better bet. Performance comes and goes, but charges are forever.

I am comparing with the average managed fund, not an individual one subject to a wide range of good and bad luck.

The evidence is that the relative performance of trackers is highly dependent on the sector.

Linton

DavidLaGuardia wrote: »

But Dimensional (a passive fund manager) has an emerging market fund that is in the top performers over 3 and 5 years.

I am interested in this and have been searching for info on what Dimensional's passive approach is but cant find any reference - can you oblige?

Also I note the following from a chartered planners website ...

"Dimensional funds are available only via fee-based financial advisers."

Is it true??

darkpool

Linton wrote: »

I am comparing with the average managed fund, not an individual one subject to a wide range of good and bad luck.

it has been you that has been using individual funds to further your argument. everyone accept that individual funds will sometimes outperform - but this seems more to do with luck than skill.....

do you work in the financial industry?

gadgetmind

darkpool wrote: »

do you work in the financial industry?

Does anyone? :rotfl:

Linton

darkpool wrote: »

it has been you that has been using individual funds to further your argument. everyone accept that individual funds will sometimes outperform - but this seems more to do with luck than skill.....

do you work in the financial industry?

You havent been reading my posts - my comparisons have been with sector averages, not individual funds.

No I dont work in the financial industry - I dont actually work at all having retired early thanks in part to successful investing.

DavidLaGuardia

Linton wrote: »

I am interested in this and have been searching for info on what Dimensional's passive approach is but cant find any reference - can you oblige?

Also I note the following from a chartered planners website ...

"Dimensional funds are available only via fee-based financial advisers."

Is it true??

Yes, the latter bit is true something to do with them being institutional investoors who only want access to the retail market through certain advisers to keep their costs down (otherwise there would be contant streams in and out like in other funds) they are a bit differentin outlook to the mainstream.

darkpool

Linton wrote: »

You havent been reading my posts - my comparisons have been with sector averages, not individual funds.

No I dont work in the financial industry - I dont actually work at all having retired early thanks in part to successful investing.

"Fidelity South East Asia and First State Asia Pacific" the ones you compared against the FTSE100.