The virtues of trackers

cheerfulcat

Thank you, dh and carnet.

dunstonh wrote: »

When I am investing for a client that doesnt want ongoing servicing, I will more often than not use trackers wherever possible.

Ah, now that is interesting. That is the sort of situation I envisage where trackers are useful.

Passive investing is never a good move and it does need active management, whether you do it yourself, get an IFA to do it or use a fund of funds.

I agree, but there are an awful lot of people who " can't be bothered " ( baffling but there we are ) and passive investment is better than no investment at all...

carnet wrote:

In other words, IMHO, 97.5% of fund managers are not worth following.

That's the impression I get. Out of interest, would anyone like to list the managers whom they rate most highly? I have mostly directly held shares and a few trackers but the two funds I hold are run by Graham Birch and Patrick Evershed respectively.

EdInvestor

Citywire's fund manager rating service may be of interest.

EdInvestor

mroller wrote: »

How do apply rule 1? do you place stop loss orders?

No - they don't work.Actually you have to be fairly unlucky - or a crazy gambler - to lose your investing capital, as long as you don't throw a large wodge in at the top of a bubble market (eg like all those people who bought tech shares in 1999 )

Stick to large blue chip household name type companies until you get some experience: size matters in terms of reducing risk. If you use funds, make sure you go through a discount broker which rebates charges, otherwise 5% is sliced off your capital before you start.

cheerfulcat

Thanks for that, carnet. Some familiar names and quite a lot of unfamiliar ones.

JayScottGreenspan

If you strategically shaved 1000 chimps, put them in pin stripe suits and got them to pick stocks you would almost certainly observe some of them consistently beating the market.
But you wouldn't pay them 3% pa of your hard earned wedge for their services.

There are probably some genuinely good fund managers. Most are pretty clueless. I wouldn't subsidise their extravagant lifestyles without some pretty compelling evidence that they are not just lucky chimps.

RayWolfe

dunstonh wrote: »

It is easy to strip out a vast quantity of managed funds just by removing passive managed funds (no point being in one of those), balanced, cautious, defensive and distribution funds (in my view jack of trades, master of none).

Fascinating discussion, folks. Thanks for all that insight.
Whilst I don't have trackers, my portfolio is mainly invested for growing income through equity income funds. However, part of the portfolio (c. 1/3rd) is in balanced, cautious, etc., etc. This gives me some exposure to bonds, property etc. and a slightly higher yield. I'm sure in my circumstances (retired, younger wife) you would agree that I need some of this sort of exposure, but are you saying that I may be better off if I did the same sort of investigation that I do on my core funds and selected my own bond, property etc., specialist funds?
Mmm, of course you are but I really don't think I could do better than someone like Midas! Although I could do better than New Star Managed Distribution! ;-)
Interesting thoughts.
Thanks again.

StevieJ

cheerfulcat wrote: »

Thanks for that, carnet. Some familiar names and quite a lot of unfamiliar ones.

Where did Carnets list go?

Paul_Varjak

JayScottGreenspan wrote: »

If you strategically shaved 1000 chimps, put them in pin stripe suits and got them to pick stocks you would almost certainly observe some of them consistently beating the market.
But you wouldn't pay them 3% pa of your hard earned wedge for their services.

There are probably some genuinely good fund managers. Most are pretty clueless. I wouldn't subsidise their extravagant lifestyles without some pretty compelling evidence that they are not just lucky chimps.

Try this: http://www.bestinvest.co.uk/fundmanagers/fmpro?-db=webprices.fp5&-format=index.htm&-token=&-token.1=99&-token.2=5&-token.3=3&-view

StevieJ

Paul_Varjak wrote: »

Try this: http://www.bestinvest.co.uk/fundmanagers/fmpro?-db=webprices.fp5&-format=index.htm&-token=&-token.1=99&-token.2=5&-token.3=3&-view

If I constructed a portfolio utilising the top ten managers on Bestinvest, would I likely have fund that outperforms a similar fund that is made up of trackers (including management costs)? It may seem obvious but I was wondering if I was missing something bearing in mind the mantra - Past performance does not etc etc.

Or is their a better way of sifting funds?

Paul thanks for the link, the thanks button does not appear to work.

nrsql

>> If I constructed a portfolio utilising the top ten managers on Bestinvest, would I likely have fund that outperforms a similar fund that is made up of trackers

Possibly, possibly not. Depends if your managers continue to perform.

People keep posting that managed funds have a potential to outperform the index for their sector. Whenthis is stated you should think of it as
"managed funds have a potential to outperform or underperform the index for their sector".
You can think of it as an expected greater tracking error than a tracker.
If you pick a good fund, the managers stay the same and the conditions which those managers predict stay the same then you are likely to do well.

If a managed fund was always a good idea you might wonder why cautious managed funds exist. Surely best would be to have a fund with no restrictions on what a manager could do so the investments would always be the best for the market conditions.