Sell at a loss now and buy new to make gains

grey_gym_sock

ah, hadn't seen jamesd's post with the 5-year graph.

but 5 years is too short to conclude anything!

i hold a lot of equity income (mainly directly, rather than via funds), but that's more because i think it can be lower risk than the general market (especially given where i think the economy is going). i don't even care much whether they beat the market. they let me sleep at night, and give me a return broadly similar to other equities (as opposed to broadly similar to cash on deposit).

gadgetmind

jamesd wrote: »

That is three year data. Have a look at the horizontal axis of your graph. You appear to have somehow presented a screen shot of graph for three years with a time span pulldown that says five years.

Ah, thanks, that's why the numbers didn't match the graph. How odd.

What the real five year figures say is that all but Newton Higher Income beat the FTSE.

However, we were looking at those funds that have done best over the last three years, so they have been pre-filtered. I'll try and find time to run this again with a more random dart.

It's a shame that BestInvest only use three year data for "spot the dog".

Oh, and if we can come up with an *objective* way to know when to drop a fund, and which to move to, we can backtest this. Remember, we need a heuristic that anyone can apply and that doesn't rely on Jedi mind skills.

If you didn't know its stance then you should consider whether using active investments is appropriate

Yes, and also even if you did know its stance. Who's to know whether the stance is right or wrong?

gadgetmind

grey_gym_sock wrote: »

but 5 years is too short to conclude anything!

Agreed, but that brings us back to how many years of under-performance an investor should tolerate before switching. How do you "spot the dog" before it's seriously impacted your wealth?

i don't even care much whether they beat the market. they let me sleep at night, and give me a return broadly similar to other equities (as opposed to broadly similar to cash on deposit).

I care but find the dividends dropping in helps to soften the blow.

I also agree that comparing equity income with all share isn't too helpful, particularly over shorter periods. Different cap sizes and defensive/cyclical behave differently at different times. Which will do best over the next 12 months? No-one knows!

gadgetmind

grey_gym_sock wrote: »

that graph says it's for 3-and-a-bit years (28/01/2009 - 01/06/2012), not 5.

Ah hah!

I think I accidentally added a different fund at one point, and its in the nature of active funds for new ones to kick off as old ones are quietly dropped, and this reset the graph to less than three years but left the pull down as it was.

jamesd

gadgetmind wrote: »

Oh, and if we can come up with an *objective* way to know when to drop a fund, and which to move to, we can backtest this.

Try looking at the funds I've mentioned here for those seeking income. The sample is now between six and seven years. You'll find that Invesco Perpetual High Income or its close companion Invesco Perpetual Income have featured regularly. Newton Higher Income is mentioned also, but less often. Invesco Perpetual Monthly Income Plus is also mentioned regularly.

I did less well for a low volatility mixture but that did manage to deliver on its low volatility objective and benchmark (roughly beating mortgage interest rates) anyway. Been a long time since I'd have mentioned that mixture.

You could also look at my old study of global growth funds here which found that out-performance of the top ten persisted for several years except when there was a manager change. But my last update was before the 2008 events so that may well have caused some substantial changes, with the end of a run of similar investment conditions.

gadgetmind wrote: »

Remember, we need a heuristic that anyone can apply and that doesn't rely on Jedi mind skills.

Heuristic:

1. Eliminate those with consistent under-performance compared to funds in the same sector, using one, three, five and ten year periods. Same sector does not apply to those where it's obviously inappropriate because the funds differ radically. Don't use just total returns, also use volatility.

2. Eliminate those where there has been a manager change as soon as that change happens. Do not reconsider them for at least a year, better three years. Possibly allow some modest hold-on period since the fund selection may not change substantially and quickly but it's a risky option if an alternative with known record is available. Manager is human or company.

Now apply jedi or monkey with a pin skills to the remaining choices. Look at manager views and past performance and your view of economic conditions and whatever else takes your fancy.

Apply to both active and passive funds. Passive funds that do stock lending - who to lend to? - have some active management and have different charges, expenses and tracking errors so they also vary in performance, even if by less.

gadgetmind wrote: »

Yes, and also even if you did know its stance. Who's to know whether the stance is right or wrong?

Well, you seem to be engaging in some active management of you own, so maybe you? consider the objective. If you're of a cautious inclination, you'd perhaps want to favour a manager with a cautious outlook.

gadgetmind

jamesd wrote: »

1. Eliminate those with consistent under-performance compared to funds in the same sector, using one, three, five and ten year periods.

Sorry, that's just woffle. What weighting do we give to those different periods, how do we defined "consistent" and what constitutes under-performance?

Words and equations are very different things. We need the latter!

Don't use just total returns, also use volatility.

Again, woffly words, let's turn these into algorithms or not bother.

Eliminate those where there has been a manager change as soon as that change happens.

That's easy to do, but back-testings suggests it's wrong to do it.

Now apply jedi or monkey with a pin skills to the remaining choices. Look at manager views and past performance and your view of economic conditions and whatever else takes your fancy.

None of these take my fancy. What possible use can what you're suggesting be given how vague it is and how much it relies on investors (you and me) having skills that even experienced professional managers clearly lack?

Passive funds that do stock lending - who to lend to?

https://www.vanguard.co.uk/documents/inst/literature/securities-lending-still-no-free-lunch.pdf

have some active management and have different charges, expenses and tracking errors so they also vary in performance, even if by less.

Much, much, much less.

Well, you seem to be engaging in some active management of you own.

Yes, but, 1) it's only with a small amount of my portfolio, 2) I'm doing it for the tax advantages as much anything else, 3) I'm not charging myself 2%-3% pa for doing it.

gadgetmind

nxdmsandkaskdjaqd wrote: »

I have some underperforming funds (e.g Standard Life UK Equity High Income ) which has had average performance.

Out of interest, when did you buy this one and why?

Did it have anything to do with its 3 and 5 year performance, looking at total returns and volatility, and checking that the manager hadn't changed and had a good track record?

What's interesting about this fund is that BestInvest, who seem to have a good reputation for fund research and tipping, gave this fund four starts (their top mark) until very recently, and they have now reduced it to three stars.

If BestInvest don't have a reliable heuristic, what chance does an amateur investor have?

C_Mababejive

More and more I'm thinking that the very best investment is in yourself. Travel,look after your health both physically and mentally,have friends,enjoy life. Dont fear debt too much.

ashleypride

nxdmsandkaskdjaqd wrote: »

I have some underperforming funds (e.g Standard Life UK Equity High Income ) which has had average performance. Based on the actual time of purchase, some purchases of the fund are in a small profit, others are not.

I know you should buy low and sell high, but given the current cliamte, what is the best strategy.

Should I wait for the fund to return profit and sell, or, should I dump the fund and start making better gains from the new fund? Which is the best way?

Toss a coin, as good as any other method