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Independent Financial Advisers fees vs Novice Investor!
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What research do you do? Look at its name, if it says tracker it must be good, if it doesnt keep clear?
If the low TER tracker and the high TER fund both invest in the same sector and both aim to beat the same benchmark, then even this simplistic approach is far from being wrong.
Of course, if you have ninja skills in somehow picking the fund that's going to do well, then hats off to you. Most people don't and tend to rely on "recentism", which the evidence shows to be a flawed approach.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: »If the low TER tracker and the high TER fund both invest in the same sector and both aim to beat the same benchmark, then even this simplistic approach is far from being wrong.
Of course, if you have ninja skills in somehow picking the fund that's going to do well, then hats off to you. Most people don't and tend to rely on "recentism", which the evidence shows to be a flawed approach.
But it's not always picking an equity that's going to do well, it could be getting out of a bad equity (example, HSBCs share price crashed over 6 months, a tracker wouldn't get out of that. Over a month a fund manager could have got rid of his holding, minimising the loss).
Same for small cap, companies do well and companies fail. Sometimes it is easy to spot a failing business and getting out would prevent losses.
By all means that's just picking the equities, picking the right fund is different. Some funds have different aims, different geography. For me that's the key part, I will pick funds which have the same ideas and aims that I do. A tracker doesn't always do this. (for example theres certain asset areas I think where there is great growth potential, there is no tracker for this, so I'll use a managed fund with the same ideas)0 -
But it's not always picking an equity that's going to do well, it could be getting out of a bad equity (example, HSBCs share price crashed over 6 months, a tracker wouldn't get out of that. Over a month a fund manager could have got rid of his holding, minimising the loss).
If only there were some way for us to test this hypothesis.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: »If only there were some way for us to test this hypothesis.
Sarcasm is the lowest form of wit....0 -
Sarcasm is the lowest form of wit....
And a picture can speak a thousand words.
Of course, that's the average of all UK Equity Income UTs, and some will have done better than the tracker, but that also means that many will have done worse. How do we choose a good one? Or maybe we buy a few different ones just to be sure ...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: »If the low TER tracker and the high TER fund both invest in the same sector and both aim to beat the same benchmark, then even this simplistic approach is far from being wrong.
Funds tend not to invest entirely and fully in a specific sector and so cannot strictly be compared with any given benchmark. For example income funds often invest in both dividend paying equities and bonds. Recovery funds may only invest in a subset of available shares meeting an "under-valued" criterion. With a tracker however you are forced to invest in one of a very limited subset of all possible groupings of share.
So by only accepting trackers you are fighting with one arm tied behind your back, or perhaps one arm and four fingers.
I look forward to your evidence that the lack of investment range provided by trackers is compensated by their out performance - the conclusions of the highly academic and widely cited paper I referred to earlier suggests that this may be difficult to find.
If you really believe in trackers surely you would simply put all your money in a global tracker. Or do you believe you have some extra skills that enable you to outperform the global market?0 -
gadgetmind wrote: »And a picture can speak a thousand words.
Of course, that's the average of all UK Equity Income UTs, and some will have done better than the tracker, but that also means that many will have done worse. How do we choose a good one? Or maybe we buy a few different ones just to be sure ...
The objective, oddly enough, of an equity income fund is to provide equity income. The HSBC FTSE All Share tracker has a yield of 3.1%, the median equity income managed fund has a yield of 4.2%. Do you really believe that the tracker is a viable alternative to an average equity income fund?
If you wanted the income, how would you do it with a tracker?0 -
Funds tend not to invest entirely and fully in a specific sector and so cannot strictly be compared with any given benchmark.
However, on those occasions when they beat their benchmark, they shout it from the hilltops.So by only accepting trackers you are fighting with one arm tied behind your back, or perhaps one arm and four fingers.
Yet still they win the fight. Perhaps it's because all those active managers flail about so much that they wear themselves out?I look forward to your evidence that the lack of investment range provided by trackers is compensated by their out performance
I'm happy to just enjoy the outperformance, but there's nothing to prevent someone using a core and satellite approach should they so wish.If you really believe in trackers surely you would simply put all your money in a global tracker. Or do you believe you have some extra skills that enable you to outperform the global market?
A slight home bias reduces currency risk, and fixed interest is necessary alongside to provide diversity and reduce volatility, but a global tracker is definitely a good choice for the core of a portfolio.
As for whether I "believe" in trackers is a difficult one. Yes, I can see why an active manager should be able to beat the market, and I can nod along in agreement with the arguments, but the stark truth is that such outperformance is too unpredictable and ephemeral, and comes at too high a price.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 -
If you wanted the income, how would you do it with a tracker?
It depends on my investment horizon. Going for income today at the expense of growth is robbing from your future self.
Anyway, here is the chart again with UT UK All Companies and I've also gone for total return to remove yield from the picture. 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 -
As an example, use your favourite tool to create a 5 yr chart of the FTSE All Share, then add PNL to it
Golly, you just happen to choose one of the best performing ITs of the last decade, wasn't that lucky!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
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