Financial Professionals - What Do They Know?

dunstonh

OK - but it still says the same as it did last time I read it.

And i dont get what you are referring to.

Are you going to enlighten us as to these 'factual errors'?

It has moneybuilder as the cheapest fund - it is not. Both Vanguard and blackrock are cheaper. I think L&G & HSBC slips in cheaper as well.

It says ETFs are cheaper but they are not (closest like for like)

It says the average all share tracker would have returned the same as the FTSE All Share. Not the case.

It says advisers earn more on managed funds, when that is not the case any more.

Ilya_Ilyich

dunstonh wrote: »

It says advisers earn more on managed funds, when that is not the case any more.

Is trail commission not a thing now?

Ark_Welder

The article is over three years old, hence the out-of-date information. The original from This Is Money is dated 25th September 2008:

http://www.thisismoney.co.uk/money/investing/article-1612874/Active-fund-managers-failing-investors.html

It does explaing the references to Anthony Bolton...

But it doesn't explain the article's link to Fund tips for novice and experienced investor and the fund tips contained therein.

psychic_teabag

How old is that article? It quotes Justin Modray as a BestInvest IFA - if that's the bloke that does the Candid Money site, I thought he'd left a while back ?

Can we date the article from the returns it quotes ? Just need to know 3-year periods ending in July. I know HSBC used to have higher tracker fees. How long have the vanguard trackers been available ? Ah - if you read the html page source it mentions a date 2009-10-27. Or there's a version here http://www.thisismoney.co.uk/money/investing/article-1612874/Active-fund-managers-failing-investors.html dated 2008

Perhaps some of the errors are just things that have changed since the article was published.

Richie(UK)

JonnyBravo wrote: »

Yeah, not quite an exact quote.
But Gary Player said something similar.

You may well be right, Googling seems to suggest that along with Palmer and Player, Lee Trevino and Tom Watson are also possible contenders (with Player having simply used it as a title for his book). It's obviously a popular quote. I don't actually play golf so I'll just take your word for it.

dunstonh

Is trail commission not a thing now?

From 2013, charging is explicit and many platforms already exist that work on that way and these have existed for some time. So, whilst there are still some commission based ones, the unbundled ones refund any commission (whether adviser or platform). So, the adviser and platform is paid the same whether it is managed funds, tracker funds, shares, ETFs, cash or whatever.

I know HSBC used to have higher tracker fees. How long have the vanguard trackers been available ?

You have been able to buy the cheaper HSBC ones though for longer than the article. The vanguard trackers were mostly 2009. Blackrock was 2005 but limited on where you could buy class D. I have been using them since before that article though.

JonnyBravo

Richie(UK) wrote: »

You may well be right, Googling seems to suggest that along with Palmer and Player, Lee Trevino and Tom Watson are also possible contenders (with Player having simply used it as a title for his book). It's obviously a popular quote. I don't actually play golf so I'll just take your word for it.

Well you sent me googling and hey presto....

Dear Quote Investigator: I am a fan of the golfing legend Gary Player, and the Wikipedia article about him says he: “Coined one of the most quoted aphorisms of post-War sport”:

The harder you practice, the luckier you get.

Is that true? Which golfer said it first? Was it Arnold Palmer?
Quote Investigator: Gary Player is a very fine golfer, but he is not responsible for this well-known maxim. The best evidence that he did not coin the adage is in a book written by Player himself in 1962 where he credits the aphorism to fellow golfer Jerry Barber.

Full details here:
http://quoteinvestigator.com/2010/07/14/luck/




Jerry Barber.... ermmm.... never heard of him so I'll stick with Gary

Every day an education!

jamesd

bigfreddiel wrote: »

Its a well known fact that fund managers rarely beat the market - tracker funds do better that any managed fund.

It's not a well known fact, it's a well known theory backed by a lot of flawed academic studies which use approximations that don't reflect the real world. It's a lot more accurate as a theory in the US and in big markets than elsewhere and in small markets.

bigfreddiel wrote: »

"Even Warren Buffett, the world's most famous investor and stockpicker admitted earlier this year that a 'very low cost index fund is going to beat a majority of the amateur managed or professionally managed money'"

You should really read more about this quote. He was discussing the US situation where US taxes have a higher CGT rate on investments held for a year than for longer and where individuals are taxed each year on the sales made by their fund managers. The UK is very different, no higher CGT on holdings of less than a year and you don't have to pay tax on deals until you sell the fund instead of for each year's deals. In the US it actually makes sense to wait until January to buy a fund because if you buy in December you'll get the bill for the year's gains to pay even though you only held the fund for a month or less.

bigfreddiel wrote: »

IFAs are no different - what exactly do they know better than us in picking investments?

Enough not to take a story in Metro as gospel and to know more of the background to what Mr Buffett recommends for US investors who don't intend to pay much attention to their investments.

Remember that tracker fund managers also get paid, but for doing less work and being able to dodge all responsibility for how their investments perform.

If you aren't going to pay attention to the money or to selecting fund managers appropriate for the circumstances you should use passive tracker funds. They aren't going to be best - a guarantee that they will under-perform - but they also won't under-perform by much. Holding an active fund at the wrong time or after a manager change could be more expensive and someone who isn't paying attention won't notice those things or act on them.

I recommend that you use tracker funds.

You missed things like Mr Buffett being an active manager and him appointing a new active manager and having active managers already working for him. No surprise that if you missed big news like that you'd also miss knowing why dunstonh could correctly say that he doesn't do what he suggests most US consumers do. He also suggests buying his own company, one of the best known active money management companies in the world that has made a huge amount of money through active value investing. You might not even have realised that Mr Buffett is running an investment firm.

I use both active and passive funds. Each has a place.

LeoC

psychic_teabag wrote: »

Is that study (raw data and analysis) available anywhere, or was it internal to the asset manager company ?.

I did this study as the final dissertation for my Masters degree back in 1999... I'm not even sure where it is any more. Probably in a floppy disk somewhere?

But if you dig enough, you'll find lots of studies showing both that fund managers beat the market and studies showing that fund managers don't beat the markets!

There's a famous book called "Random Walk down Wall Street". It uses lots of chapters to try to show that stock markets are random and that fund managers don't beat the indices.

Then someone else wrote "A not so random walk down wall street" trying to show the opposite, more or less. So I guess reading these two would be a start!

There are lots of other arguments against using fund managers. For example, they always charge their fees, regardless of markets going up or down, so even when you are losing money, they are making some (well they have to make a living).

Another argument is that fund managers don't want to be contrarians. So if a fund manager has this brilliant investment theory that goes against the market trends, they won't likely use it, because if the fund falls with the market, it's easier to explain this to customers, than if the funds fall against the market. In that case, Hedge Funds are better for contrarian or "creative" investments.

I don't have any money on funds or stocks right now, but when I have enough to invest, I will definitely go into some sort of low-cost index tracker for the long run.

Linton

bigfreddiel wrote: »

Its a well known fact that fund managers rarely beat the market - tracker funds do better that any managed fund.

It may be well known, it's not a fact, and suffers from being meaningless, misleading, and dangerous.

Not a fact:
You will find over an extended period, as in a short one, trackers actually hang around the middle of the performance list.

Meaningless:

There is no such thing as THE index, there are dozens if not hundreds of them. Are you saying that all fund managers fail to beat all indexes? Clearly wrong. Are you saying that fund managers fail to beat indexes that match their universe of investments? - difficult to say, many funds dont completely match any specific index. Where you can match universes then there are indexes where most fund managers do better. And then there are the funds operating in areas where there is no meaningful index.

Misleading:
Long term performance isnt the only criterion for a good investment. Another one, that particularly concerns many inexperienced investors is volatility. Many funds deliberately chose a % of less potentially lucrative but more stable investments to reduce volatility. Other funds focus on providing a steady income stream, again at the possible cost of potential performance. Trackers attempting this do not have a good record. A tracker clearly isnt the answer to all investment objectives.

Dangerous:

It is very dangerous as it leads newby investors to believe that if they are buying a tracker they are buying a good , safe investment. 'fraid not, a bad sector in which to invest is bad no matter what vehicle you use to invest in it. Investing solely in the FTSE 100 is pretty high risk, doing it via a tracker doesnt make it any safer.