We’d like to remind Forumites to please avoid political debate on the Forum.
This is to keep it a safe and useful space for MoneySaving discussions. Threads that are – or become – political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.
📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!
How to invest on a (weeny) budget
Comments
-
gadgetmind wrote: »I'm happy to do that research but most aren't.
Any interest in (someone) setting up some sort of collaborative site thingy (wiki or some such) for some open active-vs-tracker research ? With evidence and numbers rather than just arguing, hopefully. Or perhaps some already exist.0 -
If you buy a copy of Hale he kicks off by referencing a lot of the academic work on the subject.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 -
Yeah, I've got a copy of that. Would just be interesting to have info on an open site that everyone can see, rather than spread over lots of different books that only a subset of the combatants can see, so that everyone can extend it, update it, argue about flaws, etc. The many-eyes collaborative model that works on open-source, wikipedia, etc.0
-
psychic_teabag wrote: »the combatants
I don't like this word.
I see these discussions as being us all exploring the arguments, and unearthing new facts and new points of view. We might not always agree, but I like to think we can disagree without being disagreeable.
Let's face it, investing in equities is a complex subject, and it's floating on a sea of volatility and confusion that confounds all of those who try to make sense of it.
Active investing has a lot of "it stands to reason" on its side, as skilled humans really should be able to beat a passive strategy, or at least that's what skilled humans would have us believe.
Passive investing OTOH tends to trigger reactions such as "nothing that easy can work" and "yak, average performance, not for me", and both of these are VERY understandable reactions, particularly for me as they were very much my first reactions.
Maybe there is no one right answer?
Active investing requires the investor to have fund picking skill, and even experienced multi-fund managers can't add enough out-performance to cover their fees (1% ish?) so what chance does a private investor have?
Passive investing involves battling the fee structures of the various platforms, after which choosing territories, cap size and a few bonds is trivial!
I'm currently running 95%+ passive portfolios and 100% active portfolios, and am finding the former easier and more rewarding, but it's too early to tell regards performance. My plan was to ditch my (much smaller) active portfolios but I might run them in parallel for a decade as an experiment.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: »No, they have tracked actual managers to see if any do have persistent "hot hands".
In hindsight, yes.
Please explain.
Do we? I know which investment strategies have been shown to work best over the long term but I don't have a clue which active funds will do best/worst over future decades.
Ah yes, the "never back a horse that's going to lose" principle.
And it just the same way, the funds themselves have to outperform the market by more than their costs. So, if adding layers of management doesn't seem to work ...
Just as we look for probable future out performance by investing in shares that have value, then what is to stop us using a similar method to evaluate a manager. EG the potential for out performance is enhanced if the share is undervalued relative to its peers, all other things being equal that is. If we use this method to evaluate a manager we should, out of a list of Alpha Managers, choose those that have temporarily 'dropped the ball' so to speak and are going through a rough patch.0 -
Just as we look for probable future out performance by investing in shares that have value, then what is to stop us using a similar method to evaluate a manager
There are ways to get a handle on the value of a company, some quantitative/objective but a few qualitative/subjective, and together they let you decide what's a fair price.
How do you do this for funds? You can look at their top holdings (which often delivers serious deja vous!) but it's all sounding like a right lot of work.
As for share buying, I buy two types: 1) tech shares where I *know* the technology is solid and they will more than likely soar, 2) solid dividend blue chips. With the latter, I don't expect to beat the market, but I do expect to get 4%-5% dividends per annum without a fund manager helping himself to 1% of it. And yes, I know some funds pay out more, but they do this by by taking on more risk; I've got plenty of risk elsewhere!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: »There are ways to get a handle on the value of a company, some quantitative/objective but a few qualitative/subjective, and together they let you decide what's a fair price.
How do you do this for funds? You can look at their top holdings (which often delivers serious deja vous!) but it's all sounding like a right lot of work.
Peaks and troughs in sectors and markets are caused by capital movements. Eg if the herd moves out of Emerging M into resources then relative price fluctuations/volatility follow. So one or more sectors will be down. Now we look for Alpha Managers who specialise in the out of favour sector. Now choose the AM who is currently underperforming their peers. This is a simplistic view but is not far off the mark. And before you quote Japan as a 'value punt' 10 or more yrs ago, please remember we also have to put in our pound of flesh into the process. Which in my case resulted in dismissing Japan because even though its price had collapsed it was still on an astronomical P/E and was thus to be avoided at all costs - then and possibly now even. Maybe a small punt?0 -
Now we look for Alpha Managers who specialise in the out of favour sector.
How do we know who's an alpha manager and who isn't?Now choose the AM who is currently underperforming their peers.
Ah, so alpha managers are those that underperform? What do we therefore call those who outperform?This is a simplistic view but is not far off the mark.
Simplistic? It's sounding complex and risky to me, but what do I know.And before you quote Japan as a 'value punt' ... Maybe a small punt?
That's the size of the punt I'm having, and only that because it's long enough since I was out there once or twice a month that I'm starting to miss the place.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: »How do we know who's an alpha manager and who isn't?
Ah, so alpha managers are those that underperform? What do we therefore call those who outperform?
Simplistic? It's sounding complex and risky to me, but what do I know.
/QUOTE]
I thought you were a serious/ experienced investor. But obviously you're not. This is just another ego driven blog. From now on DYOR0 -
I thought you were a serious/ experienced investor. But obviously you're not. This is just another ego driven blog. From now on DYOR
Was that supposed to be an answer to my perfectly reasonable questions?
You used the phrase "Alpha Manager" so perhaps you'd care to define it and explain how someone can differentiate between "alpha managers" and other managers. And remember, said definition needs to include under-performing managers as this was part of your fund investment heuristic.
So, what objective criteria should be used to identify Alpha Managers?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
This discussion has been closed.
Confirm your email address to Create Threads and Reply
Categories
- All Categories
- 351.7K Banking & Borrowing
- 253.4K Reduce Debt & Boost Income
- 454K Spending & Discounts
- 244.7K Work, Benefits & Business
- 600.1K Mortgages, Homes & Bills
- 177.3K Life & Family
- 258.4K Travel & Transport
- 1.5M Hobbies & Leisure
- 16.2K Discuss & Feedback
- 37.6K Read-Only Boards