Fund managers

darkpool

gadgetmind wrote: »

However, I don't think the active versus passive debate will *ever* end, so I guess we need to do our own thing while trying to disagree without being disagreeable.

100 years ago people used to think smoking was healthy as it cleaned the lungs. it did take a good couple of generations and a lot of academic research before people accepted smoking was actually bad for you.

darkpool

qpop wrote: »

If you subscribe to the argument that fund managers aren't able to pick winners consistently against the indices, then don't invest in shares (as mentioned earlier) - as you must surely conclude you will do no better either.

i believe long term a share portfolio is a good investment. however i don't think it sensible to give away 3% of your portfolio away each year.

i consider my portfolio like a business - if i cut costs my profits go up.

IronWolf

I believe there are managers around that are capable and can beat their indexes. Warren Buffett being an obvious example.

But I think they are only 1 in 100, so you have to be pretty informed to judge who to trust with your money.

mellowtimes

Guys - Index Tracking only works so long as the markets are efficient. We need the active fund managers in place to keep the efficiency there. No point in trying to convince people about the merits of passive investing when all it will do is erode the reasons for doing it in the first place.

IMHO of course

gadgetmind

IronWolf wrote: »

But I think they are only 1 in 100, so you have to be pretty informed to judge who to trust with your money.

Just so, and it's hard to predict in advance which it will be. Tim Hale actually praises one manager (forget who) several times in "Smarter Investing" but then also makes the point that even then performance was lackluster at times and few people would have stuck in that fund from start to finish.

gadgetmind

mellowtimes wrote: »

We need the active fund managers in place to keep the efficiency there.

Well, that does assume you subscribe to EMH (no, not Emergency Medical Hologram!) but even so, just because we might need fund managers, it doesn't mean we need to give them *our* money when so many others are prepared to do it on our behalf.

darkpool

IronWolf wrote: »

I believe there are managers around that are capable and can beat their indexes. Warren Buffett being an obvious example.

But I think they are only 1 in 100, so you have to be pretty informed to judge who to trust with your money.

but say there were fund managers that had the magic touch, do you not think it likely they would command such huge fees that the actual return to the investors was mediocre?

i agree that buffet is a complete legend though.

mellowtimes

gadgetmind wrote: »

... just because we might need fund managers, it doesn't mean we need to give them *our* money when so many others are prepared to do it on our behalf.

Absolutely agreed. Just putting forward that it may not be the most sensible use of time and effort to argue in a public forum in favour of indexing when convincing people to go down that route may be detrimental to the returns from passive investing........

Te effect is likely to be marginal but every little bit makes a difference IMO

andybenw

I currently have around 12000 cash to invest and will be adding around 2000 per month for the next couple of years.

How many different shares to pick.

Would 6 at 2000 each be the best way to go, adding a new share each month till I get to 20 or so.

Or would it be best to diversify immediately say 24 shares at 500 each. I assume the dealing costs would be making this inefficient.

gadgetmind

andybenw wrote: »

Or would it be best to diversify immediately say 24 shares at 500 each. I assume the dealing costs would be making this inefficient.

I personally treat £2k as a minimum, but diversity is also good. And while on that subject, note that sticking to UK only holdings isn't too sensible, and neither is being 100% in equities. Adding some trackers for other markets, and some bonds to let you rebalance, will greatly help your ability to sleep at night.