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Professional Finance people no better than amateurs
Comments
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well the managed fund industry seems to find it hard to beat the relevant trackers.
You make it sound like there is just one option. Tracker or managed. It is not the case. It is different investment strategies. Benchmark tracking is a strategy and because it is computerised, it is cheap. Managed funds will have their own investment strategy. Many you can eliminate (passive managed for example). Others will have valid strategies. Some may only work well at certain points of the economy and not other times.
Personally, i wouldnt go with a UK growth fund (managed) but would pick a tracker over that. However, if i wanted equity income or was looking at value investing then I would not use a tracker but go managed. It is that sort of decision making that should be leading how you invest. Not elimination of perfectly good options which may cost more but offer greater potential first. Decide where you want to invest first then eliminate the inappropriate and poor quality options next and then look at cost. You shouldnt let charges dictate where you invest as the primary driver.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
You shouldnt let charges dictate where you invest as the primary driver.
but you should let likely returns dictate where you invest. like it or not, with UTs the likely returns will be mediocre because of the charges investors pay.
it's not rocket science to work out that any investment with 2.5% charges is likely to underperform the general market by ........ 2.5%0 -
but you should let likely returns dictate where you invest.
Almost. You should let future potential on what you think is best be the primary driver.like it or not, with UTs the likely returns will be mediocre because of the charges investors pay.
Depends on what you class as mediocre.it's not rocket science to work out that any investment with 2.5% charges is likely to underperform the general market by ........ 2.5%
Except that it doesnt work out like that.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
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: »It does over the long term.
Any evidence? The 10 year Trustnet data shows trackers roughly in the middle of the performance list - surely if they really had a 2.5% or even 1% performance advantage over other funds that would have become very obvious over 10 years.
For example:
in the UK Allshare sector there are 160 funds which have 10 year data. The best tracker is the ScotWid Allshare at position 72. Most FTSE100 trackers are around the 120 position - 3rd quartile. The worst tracker is 4th quartile.
Doesnt seem to be much evidence of a long term advantage. Either trackers dont have a 1-2.5% annual advantage over other funds, or if these figures do include the advantage the underlying investment approach is rather unsuccessful.0 -
Any evidence?
Yup, plenty.The 10 year Trustnet data shows trackers roughly in the middle of the performance list
The funds that have (mostly for no real fault of their own) underperformed tend to get dropped, which slightly raises the active average.
Also, the fees of trackers themselves has dropped markedly over the last decade, but the same isn't true for active funds.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 -
Any evidence? The 10 year Trustnet data shows trackers roughly in the middle of the performance list - surely if they really had a 2.5% or even 1% performance advantage over other funds that would have become very obvious over 10 years.
For example:
in the UK Allshare sector there are 160 funds which have 10 year data. The best tracker is the ScotWid Allshare at position 72. Most FTSE100 trackers are around the 120 position - 3rd quartile. The worst tracker is 4th quartile.
Doesnt seem to be much evidence of a long term advantage. Either trackers dont have a 1-2.5% annual advantage over other funds, or if these figures do include the advantage the underlying investment approach is rather unsuccessful.
You're ignoring persistency. There is an obvious selection bias when you're looking at actively managed funds which have been in existence for 10 years and haven't been closed.
You're also comparing FTSE100 trackers against the Allshare sector.0 -
gadgetmind wrote: »Yup, plenty.
The funds that have (mostly for no real fault of their own) underperformed tend to get dropped, which slightly raises the active average.
Also, the fees of trackers themselves has dropped markedly over the last decade, but the same isn't true for active funds.
If you could share the evidence I really would be grateful. The 10 year FTSE Allshare evidence really looks pretty strong to me.
As you say, seriously underperforming funds may well be dropped but also as you say the effect is likely to be small. It wont be anything like enough to push 3rd and 4th quartile trackers into 10-25%+ over performance against the median. Not that many funds disappear and those that are dropped will tend to be merged with better ones which will keep the average up.0
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