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Fund managers
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But why would anyone want to invest solely in the FTSE100? If you are right in your projection of 5% per year, surely one will do better elsewhere.
Or are you claiming that the FTSE100 is in a sense representative of Emerging Markets, Far East, Small Caps, Technology etc?
i've travelled to a fair few emerging markets. i think the chance of the chinese etc allowing westerners to extract large profits from the country are limited.
the FTSE does have a fair share of oil and mining companies. i'd argue the oil price is a fairly good proxy to the world economy. i'd also argue the copper price reflects the strength of the chinese economy.....
don't get me wrong, i do agree that niche UTs provide diversification/ exposure, however i don't think the returns justify the fees.
5%, yeah there are better returns elsewhere. but i wouldn't invest in a UT to get these better returns.0 -
That was with financial spread betting and leverage. Definitely not for everyone!nice return! if you're making money from it you might as well stick to your method.
A pension pot that I started just three years ago has ended with a gain of more than 20%, that one using mostly passive trackers and uncommonly low charges. Others have done reasonably using managed funds.it seems a better method than some of the UT investors on this thread who pay high annual charges but get little in return.
At the moment I'm using a mixture of active funds, passive tracker ETFs, leveraged ETFs and spread betting. There are uses for them all and for passive tracker funds. If you know what you're doing in each area just pick whichever is appropriate for what you're trying to do. No one is perfect for everything.
Really? Using averages I suppose? When we've already established that averages are meaningless for actively managed funds and when studies show that underperformance persists, so you can eliminate the consistently poorly performing trackers and active managed funds, improving your odds over those with less choice. They may be stuck with the dogs due to the limited investment choices in their pension, ISA or whatever but there's no need to live with that, usually.gadgetmind wrote: »They go on the say that the average in managed funds masks the *huge* performance between them. (Trackers differ very little)
This is to be expected. Managed funds are a coin tossing contest. Do you feel lucky? Can you pick the winning fund, or might you instead get a motley collection of dogs?
And don't think that searching for a star manager, or using "recentism" and going for the sectors that have done well over the last few years (months!) will help, because statistical analysis shows that it won't.
Recentism, in the form of momentum investing, can pay. Depends on the situation.
cepheus has pointed out two of the systematic flaws that's invariably present in studies comparing actively managed funds and trackers: ignoring the humans doing the managing and their moves. And also ignoring money flows, not weighting by what people are actually investing in.
Maybe they just didn't want to be explicit in pointing out that people would have been better off with the average performance of a managed fund rather than a passive one for the period, getting 0.2% greater return?Well it's typically (for a journalist) imprecise.
'the average tracker fund '
What is the 'average tracker fund'? Overpriced crap sold to captive pension fund holders? Does it include all kinds of trackers or only FTSE All Share trackers?
Personally I think I suspect it's a lot of rubbish:
'Active managers also underperformed the index over five years, with returns of 4.3pc against 7.3pc. Trackers produced 4.1pc on average.'
Eh? Trackers returned 4.1% versus 7.3% for the index? Impossible I say - unless the 'trackers' were not all tracking the same thing.
In which case what's the point of this article? They can choose a different index, the FTSE 350 or something and use it to come to different conclusion.
And yes, the average tracker fund and the average active managed fund both will include the overpriced rubbish sold to captive audiences. The stuff that you, I and just about everyone reading this discussion will know to avoid.
Comparing averages of trackers only works well because the dispersion is so low, in part because the impact of manager performance is also minimal. It's an extremely poor tool for measuring active managed funds because of the far higher variance. For active managed funds you need to be looking at the humans, not just the fund name, and as with trackers eliminating the systematic underperformers. Then if you were serious about using active funds you'd pay attention to manager style and pick the right style for the economic situation, something that's not doable at all for trackers within a particular sector.Then we compare the average return of the index, minus TER and tracking error, with the average return of managed funds. Not this nonsense about the 'average tracker', implying they are tracking very badly, which isn't the case.....
That's the sort of bogus rubbish that's routinely used to criticise active managed funds.i have seen other evidence that trackers beat managed funds. i think over longer periods trackers show their superiority.
"Historically, the majority of managed funds have failed to even equal, let alone "beat" passive index tracking funds. For example, one of the top performing United States funds over the last 20 years has been the Vanguard Standard and Poors 500 index fund, only a handful of the thousands of active funds available to the public have equalled or surpassed its return, and those that have have managed to do so only by a small margin."
The reason it's bogus rubbish is that there aren't going to be many or any active managed funds that have had the same manager (not just management company, human) for 20 years and of those that have, many of those using any underperformers would have switched to a better fund before the underperformance had a substantial effect. Those things are largely irrelevant with passive funds but are hugely important for active, and are normally systematically ignored in studies that compare the types.
Anyone who isn't going to pay attention to managers and performance over the long term should not be considering active managed funds. That lack of interest illustrates that they would be better off using passive funds and avoiding the chance of larger underperformance, sacrificing the chance of overperformeance for more predictable tracker low underperforming of the index.0 -
I seem to have missed the evidence that shows niche funds consistently outperform.
Me too, which I guess is because (like you) I don't regard arm waving and cherry picking over short terms as evidence.I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
gadgetmind wrote: »Me too, which I guess is because (like you) I don't regard arm waving and cherry picking over short terms as evidence.
OK - Looking at Trustnet for the HSBC FTSE100 tracker and using the relevent IMA Index (average of all funds in sector) for all 8 niche equity sectors to give a list of 9 possible investments:
The position (out of 9) of the FTSE100 tracker was for the past 5 years:
Year0:5
Year-1:8
Year-2:7
Year-3:4
Year-4:8
Eight sectors: Far East, China, Japan Small Cos, US Small Cos, Tech & Telecoms,Euro Small Cos, UK Small Cos, Emerging Markets.
So only in one year (the year of the credit crunch share collapse) did the FTSE tracker edge above the mid point. Of course it could be pure chance. I make that about a 20% probability but stats isnt my subject.
The only sector to perform worse than the FTSE100 tracker was Japan Small Companies, and I doubt that many people knowing the state of the Japanese economy for the pasrt 10-15 years would have put their hard-earned into such funds. Shame about those people who did put all their money into a FTSE100 tracker and similar investments.
For the actual 5 year performnace.......
5-year return of HSBC FTSE100 tracker: 1.6%
arithmetic average 5 year return of 8 sectors: 31%
Now what about some numbers showing I am wrong. Actual numbers not some selective quote from a journalists summary of a US academic paper.0 -
Now what about some numbers showing I am wrong.
What was it you though you were trying to prove?
Was anyone suggesting that investing 100% in a FTSE tracker is always (or even ever!) the best strategy? I certainly wasn't, and neither (by a long way) do any of the books I have referenced.
Have you even bothered to read them?I doubt that many people knowing the state of the Japanese economy for the pasrt 10-15 years would have put their hard-earned into such funds
A portfolio that uses a combination of asset classes across a number of sectors would have been slowly investing in Japan, just as it would have been moving out during the bubble. Ditto for all of the bubbles, and all of the times when certain territories and asset classes were shunned.
Read the background material and you'll see why this is a good thing.I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
So only in one year (the year of the credit crunch share collapse) did the FTSE tracker edge above the mid point. Of course it could be pure chance. I make that about a 20% probability but stats isnt my subject.
Sorry my stats really isnt up to scratch. The chance of a result as bad (or worse) as the one shown happening by chance is about 0.6%.
Calculated from 5/9 * 2/9 * 3/9 * 6/9 * 2/90 -
gadgetmind wrote: »What was it you though you were trying to prove?
Was anyone suggesting that investing 100% in a FTSE tracker is always (or even ever!) the best strategy? I certainly wasn't, and neither (by a long way) do any of the books I have referenced.
Have you even bothered to read them?
A portfolio that uses a combination of asset classes across a number of sectors would have been slowly investing in Japan, just as it would have been moving out during the bubble. Ditto for all of the bubbles, and all of the times when certain territories and asset classes were shunned.
Read the background material and you'll see why this is a good thing.
er darkpool has been in this whole thread, because the 3% fees "aren't worth it" at anytime.0 -
OK - Looking at Trustnet for the HSBC FTSE100 tracker and using the relevent IMA Index (average of all funds in sector) for all 8 niche equity sectors to give a list of 9 possible investments:
The position (out of 9) of the FTSE100 tracker was for the past 5 years:
Year0:5
Year-1:8
Year-2:7
Year-3:4
Year-4:8
Eight sectors: Far East, China, Japan Small Cos, US Small Cos, Tech & Telecoms,Euro Small Cos, UK Small Cos, Emerging Markets.
So only in one year (the year of the credit crunch share collapse) did the FTSE tracker edge above the mid point. Of course it could be pure chance. I make that about a 20% probability but stats isnt my subject.
The only sector to perform worse than the FTSE100 tracker was Japan Small Companies, and I doubt that many people knowing the state of the Japanese economy for the pasrt 10-15 years would have put their hard-earned into such funds. Shame about those people who did put all their money into a FTSE100 tracker and similar investments.
For the actual 5 year performnace.......
5-year return of HSBC FTSE100 tracker: 1.6%
arithmetic average 5 year return of 8 sectors: 31%
Now what about some numbers showing I am wrong. Actual numbers not some selective quote from a journalists summary of a US academic paper.
ehhhmmmm i honestly thought everyone knew that different markets were likely to have different returns. but thanks for the recap.
i thought you were going to find some evidence that niche Unit Trusts outperformed the relevant tracker? By that I mean a small company UTs outperforms the small company benchmark. I don't mean finding evidence that a random UT managed to outperform a tracker in a completely different market.
no, stats is definitely not your subject.0 -
er darkpool has been in this whole thread, because the 3% fees "aren't worth it" at anytime.
i run my portfolio like a business, if some IFA suggested I buy UTs i would want to know the 3% fees are worth it. I would want to know that i get a benefit for the considerable annual fees. Can you understand that?
it just seems strange that so many people invest in UTs. They have high charges and under deliver on performance. I just guess some people are born to be poor....0 -
gadgetmind wrote: »What was it you though you were trying to prove?
Was anyone suggesting that investing 100% in a FTSE tracker is always (or even ever!) the best strategy? I certainly wasn't, and neither (by a long way) do any of the books I have referenced.
Have you even bothered to read them?
A portfolio that uses a combination of asset classes across a number of sectors would have been slowly investing in Japan, just as it would have been moving out during the bubble. Ditto for all of the bubbles, and all of the times when certain territories and asset classes were shunned.
Read the background material and you'll see why this is a good thing.
Darkpool (not you) is claiming that a FTSE tracker investment strategy is a good one as all sector/share selection on average must fail in performance terms especially taking into account charges. My numbers show that for the past 5 years where detailed data is available a FTSE100 tracker approach is actually far worse performing than almost any combination of a random selection of funds from the available niche equity sectors.
It also calls into question the attitude that a FTSE100 tracker is a sort of safe average vanilla investment.0
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