Professional Finance people no better than amateurs

darkpool

HelpWhereIcan wrote: »

Your 2.5% charges figure is not as representative as you would have us believe (although it is out there). You also - conveniently - ignore the fact that passive funds will have their own charges to come out of that same real return so it's not like active funds cost 2.5% more per annum on average than passive ones.

I post to help and add to the debate - as I am entitled to do no matter what my occupation. It is not my problem you have issue - and a not insignificant amount of paranoia - with that.

so what are the typical costs faced by a UT investor? Do you agree that Total Expense Ratio is a misleading term? After all it does not cover all costs.

Sorry for accusing all you IFAs for spreading pro IFA propaganda, it's just the financial industry isn't exactly renowned for it's honesty or being straight with the consumer

darkpool

HelpWhereIcan wrote: »

Also saves darkpool googling it himself and then telling us all he knew what it meant all along

LOL you still going on about that "synthetic ETF" thing? i write derivatives so i'd imagine i'd know slightly more about that counterparty risk stuff than you do.....

How many of your clients do you discuss derivatives with?

psychic_teabag

darkpool wrote: »

but share investments should be for at least 5/ 10/ 20 plus years. i think over that time the tracker will prove to be a superior investment.

You want the money invested for 20 years, but surely that doesn't mean you only get to make your selection once at the start and then must stick with it through thick and thin ?

Many active funds have a specific focus, and if you are using those, you might switch into a fund where you think there will be growth over the coming period.

psychic_teabag

darkpool wrote: »

so what are the typical costs faced by a UT investor?

Depends if it's an actively managed UT or a tracker UT. And probably where it's invested (eg emerging markets may have higher costs, whether active or tracker ; uk has stamp duty).

The TER underestimates costs for both actively-managed funds and trackers. Though a tracker may have lower additional costs since I think they tend to have less churn.

ISTR reading that Fidelity (?) are calling for a published TCO that includes all charges.

gadgetmind

psychic_teabag wrote: »

Many active funds have a specific focus, and if you are using those, you might switch into a fund where you think there will be growth over the coming period.

Yes, you might, and you might get it right, and the fund might stick to their stated remit rather than sloping off to chase gains in whatever all the other fund managers are currently doing.

Lots of "mights". Too many for me.

HelpWhereIcan

darkpool wrote: »

so what are the typical costs faced by a UT investor? Do you agree that Total Expense Ratio is a misleading term? After all it does not cover all costs.

Awww, has it been a hard day in the markets or are you just petulantly refusing to read any supporting information people link to - even though you keep insisting others read your links?

Never mind, just because it's you (and I have a soft spot for you) I'll remind you of where I posted a link to just that sort of information for both Actively Managed and Tracker Unit Trusts.

HelpWhereIcan wrote: »

http://www.investorschronicle.co.uk/2012/02/07/funds-and-etfs/isa-funds/the-true-cost-of-investing-in-funds-oUc8VLh2BcMBacjws7u9UM/article.html

which shows that the 2.5% figure you quote somewhat over-eggs the pudding, especially if you state that directly invested trackers would be 2.5% less thanan investment bought through an IFA.

HelpWhereIcan wrote: »

here are a some links to good explanations of Tracking Error - from a fan of passive investing no less.

http://monevator.com/2011/01/18/tracking-error-%E2%80%93-a-hidden-cost/

http://monevator.com/2011/01/25/choosing-a-tracker-using-tracking-difference/

http://monevator.com/2012/02/21/how-to-use-tracking-error-to-uncover-the-true-cost-of-an-index-tracker/

psychic_teabag wrote: »

ISTR reading that Fidelity (?) are calling for a published TCO that includes all charges.

They are - part of the information used in the Investors Chronicle article I linked to for darkpool is their suggestion. A little skewed because they did their figures claiming no Platform or advice charges etc for Moneybuilder where Vanguard etc will have them, but the principle is the same - and a good one.

darkpool wrote: »

LOL you still going on about that "synthetic ETF" thing? i write derivatives so i'd imagine i'd know slightly more about that counterparty risk stuff than you do.....

How many of your clients do you discuss derivatives with?

Wow! Really? I guess you were right when you told me your dad was Bruce Lee too! It wasn't you shorting HBoS in 2008 was it?

I see you don't believe in Efficient Markets

darkpool wrote: »

until fairly recently i believed the whole "all known information is reflected in the price" routine.

but then i got thinking, that only really works when the whole market is. driven by individuals investing their own money. we know this is not the case, most shares are owned by institutions.

and see there is room to exploit imperfections (hence all the derivatives you write and know so much about) yet are still such a fan of passive only investing for others (Granted EMH is only one part of the supporting argument for passive investing).

Obviously, you are one of the 'lucky' 24% who can make money. I'd love a bit of insight into your Investment and Risk Management Strategy.

I believe you could use Tate & Lyle between March 2009 and present as an example of how a FTSE 100 Tracker might lose out to an Active UK Equity fund - possibly using a call option you wrote - due to an imperfect market. I'd be interested in your thoughts on the matter.

darkpool wrote: »

Sorry for accusing all you IFAs for spreading pro IFA propaganda, it's just the financial industry isn't exactly renowned for it's honesty or being straight with the consumer

I am a little disappointed that such an industry player and expert does not know the difference between Financial Planning and Investment Management but, that's OK; you can make it up to me by answering the questions I've asked you.

You can put me in my place, educate me and save the gullible masses all in one go! :j

darkpool

HelpWhereIcan wrote: »

Awww, has it been a hard day in the markets or are you just petulantly refusing to read any supporting information people link to - even though you keep insisting others read your links?

I see you don't believe in Efficient Markets

and see there is room to exploit imperfections (hence all the derivatives you write and know so much about) yet are still such a fan of passive only investing for others (Granted EMH is only one part of the supporting argument for passive investing).

Obviously, you are one of the 'lucky' 24% who can make money. I'd love a bit of insight into your Investment and Risk Management Strategy.

I believe you could use Tate & Lyle between March 2009 and present as an example of how a FTSE 100 Tracker might lose out to an Active UK Equity fund - possibly using a call option you wrote - due to an imperfect market. I'd be interested in your thoughts on the matter.

I am a little disappointed that such an industry player and expert does not know the difference between Financial Planning and Investment Management but, that's OK; you can make it up to me by answering the questions I've asked you.

You can put me in my place, educate me and save the gullible masses all in one go! :j

The thing is I can't really be bothered reading in depth your long threads AND opening all the links you provide but thanks for going through my posting history, it makes me feel a little bit special

i think in the short term markets are sometime not efficient, but does that mean a UT charging 2% plus a year is a cost effective investment? Well, I think we both know the answer is no. The only evidence presented by the pro management lobby is "some managed UTs have done well", not exactly an argument to make me get my cheque book out.

Even if the total costs of a UT is 2%, it still means about half the likely long term is return lost to charges.

most of my portfolio is in dull ftse 350 shares, but yeah i do write derivatives a lot. i think that's the market to exploit the rational search for high risk products.

Tate and Lyle call option? tbh I woudn't write T&L because of the low volumes just checked there, and there is no open position at all for sept i also think i can make better returns in derivatives by writing more volatile shares.

HelpWhereIcan

darkpool wrote: »

The thing is I can't really be bothered reading in depth your long threads AND opening all the links you provide

Shame, you insist on others doing that very thing with your posts and reading recommedations.

darkpool wrote: »

but thanks for going through my posting history, it makes me feel a little bit special

Oh I think you're special ... just not in the way you - and your Bruce Lee dad - think

darkpool wrote: »

i think in the short term markets are sometime not efficient, but does that mean a UT charging 2% plus a year is a cost effective investment? Well, I think we both know the answer is no. The only evidence presented by the pro management lobby is "some managed UTs have done well", not exactly an argument to make me get my cheque book out.

Even if the total costs of a UT is 2%, it still means about half the likely long term is return lost to charges.

All granted, but if the true gap between Active and Passive investments is about 1% then the argument is less black and white than you would have us believe; especially if you believe in some element of market inefficiency - a weak-form EMH - which would make derivatives a viable option for you, and the professionals.

Now picking the right Investment Manager and the mix of Passive/Active for each market; that's a different discussion. One that Tim Hale engages in - and EMH and the Zero Sum Game are basic tenets of his version of Passive Investing.

As I said before, do not prejudge where I stand in the Passive/Active argument

darkpool wrote: »

Tate and Lyle call option? tbh I woudn't write T&L because of the low volumes just checked there, and there is no open position at all for sept i also think i can make better returns in derivatives by writing more volatile shares.

I would not disagree that something more volatile would be needed for a call option but I was talking more about how the movement of Tate & Lyle between March 09 and now could mean a FTSE 100 Tracker would lose out compared to an Active Fund Manager who, having confidence in T&L, held on to them in his portfolio and possibly used derivatives to enhance his position (although that is not needed for the example to work).

They dropped out of FTSE 100 in March 2009 at approx 240, stayed out until June 2011 - when they were in the 640s - and currently trade at around 700.

The enforced selling of TATE.L by a FTSE 100 tracker's remit to reflect the make up of the FTSE 100 would mean that a lot of growth would have been lost out on.

If you know the approach the Fund Manager takes to selecting investments and how they mitigate risk it can help narrow the choice down to those Managers who take an approach you agree with.

This does not guarantee success by any means - no more than you having faith in your ability to write call options on volatile stocks does - but it is one way to reduce the reliance on past performance when picking a fund manager.

An IFA may follow Fund Managers rather than Funds themselves. Some will rely on bought in research services to do some of the whittling down, but that does not equate to simply looking at past performance and then using a pin as you would seem to suggest.

An IFA (again different to a Fund Manager) with a different investment philosophy to yours will never work. One with a similar one may be able to add something ... you never know

darkpool

HelpWhereIcan wrote: »

All granted, but if the true gap between Active and Passive investments is about 1% then the argument is less black and white than you would have us believe; especially if you believe in some element of market inefficiency - a weak-form EMH - which would make derivatives a viable option for you, and the professionals.

I would not disagree that something more volatile would be needed for a call option but I was talking more about how the movement of Tate & Lyle between March 09 and now could mean a FTSE 100 Tracker would lose out compared to an Active Fund Manager who, having confidence in T&L, held on to them in his portfolio and possibly used derivatives to enhance his position (although that is not needed for the example to work).
know

but i think the true gap is closer to 2% than 1%. which makes the matter a little more black and white.

are you after advice on derivatives? if you think the market is going to rise you should buy (not sell as you said) call options. you could consider the financials or the miners, or maybe even a FTSE100 call (though obviously that is strictly a CFD)

GeorgeHowell

Most people could do just as well by reading the financial pages of newspapers etc, taking their advice about a balanced portfolio with appropriate risk/non risk for their situation, and reviewing it regularly, and following recommendations about which funds & accounts to go for, as they would by using a financial advisor. Newspapers generally publish unbiased advice because they have nothing to gain by doing otherwise.

Financial advisors survive largely because many people do not want to do that. They are either too frightened, too lazy, or too ignorant to carry out these tasks on their own behalf, and they also live under the illusion that FAs know far better than the rest of us ever could. Some people probably even think that FAs are highly qualified and trained professionals, akin to chartered accountants, solicitors, or even doctors.

For example the fact that some people are even willing to pay these PPI ambulance chasers to try to get their money back for them, rather than carrying out the relatively simple task of doing it themselves, says it all really.