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Tim Hale - Smarter Investing
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My own take is that a moderately interested amateur can probably beat trackers by choosing good active managers even in better researched areas.
In those areas, active funds of funds don't generally manage it, but the extra layer of fees is at least part of the explanation for that.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 -
Well I did say that was a portfolio 'at its simplest'If you look at asset allocation you are effectively having two options at opposite end so the scale and nothing in between.
But it wouldn't do for financial advisers to simplify matters would it
Where would that leave them
“It is difficult to get a man to understand something, when his salary depends on his not understanding it.” --Upton Sinclair0 -
Right -- this would be interesting.
The standard argument for passive investing is that "most active fund managers fail to beat the market", but that by itself is not good enough: you need to know what the distribution of returns of active funds is, and similarly for the passive index funds, before you can draw a conclusion from this.
The Which news story
http://www.which.co.uk/news/2013/04/most-active-fund-managers-fail-to-beat-the-market-317423/
discusses funds benchmarked on the FTSE all-share index, and says:
"Just 37 of the 96 actively managed funds that aim to beat the return of the index managed to do so over the past decade. The average performer returned 164% over this period, with dividends reinvested, compared to 171% for the index."
--- sounds like a bad outcome for the active funds. But,
"we also found striking differences in the performance of tracker funds aiming to match the index. The best tracker, M&G UK Index, which has an ongoing charge of 0.46%, returned 160%. The worst performer, Halifax UK FTSE All Share Index, achieved only 136%"
So the BEST passive fund did worse than the AVERAGE active fund.
But without knowing exactly what they mean by average, and what the distributions are in the two data sets, you can't conclude much.
I completely believe that it is hard to pick an outperforming fund manager. But to do better than a tracker, the above suggests that you only have to pick a not-too-far-below-average fund manager, and I have no idea how hard this is!
And if you're going the passive route, you need to avoid an under performing tracker. How hard is it to pick a close-enough-to-average tracker? Again I have no idea.
So yes, I'd like to see data and analysis on this, too.
Well you certainly would see data and analysis supporting passive investing in Tim Hales book, with pages of reference to studies and books. I haven't waded through it myself because there is so much of it. If you want to see the evidence supporting his view you need to get the book, its just too much to post here.“It is difficult to get a man to understand something, when his salary depends on his not understanding it.” --Upton Sinclair0 -
Bear in mind that active management is a zero sum game, so they have to make enough to cover their fees before they start to beat the index. Statistically you have a better chance of picking good shares than picking good fund managers.My own take is that a moderately interested amateur can probably beat trackers by choosing good active managers even in better researched areas.
If you can't pick the best shares what makes you think you can pick the best fund managers?“It is difficult to get a man to understand something, when his salary depends on his not understanding it.” --Upton Sinclair0 -
gadgetmind wrote: »In those areas, active funds of funds don't generally manage it, but the extra layer of fees is at least part of the explanation for that.
The point I am making is that we don't need to invest in the average IMA fund - if you select out the disguised trackers (trackers with big fees!!) and those funds that lag for other reasons such as keeping volatility very low. Then picking from the rest you have a more than average chance of picking one that beats a tracker - fees and all. Many of these funds over perform the index year after year - they also do it typically with a lot less volatility than a tracker.0 -
Then picking from the rest you have a more than average chance of picking one that beats a tracker - fees and all.
It would be nice if the world did work that way, but it doesn't. Your fund, carefully chosen based on its out-performance and star manager, stands more chance of reverting to mean that it does to continue to out perform.
The only active management I use is for areas that are illiquid or niche, where there isn't a suitable tracker, or where I want to make use of IT discounts to even more value from unloved assets.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 -
Tim Hale does acknowledge there are a tiny minority of managers with exceptional talent/luck, like Anthony Bolton. But what was your chances of picking him when he started in 1979? Very very few people picked Bolton at that time and stayed the course. Most bailed out when he went through a bad patch, or joined the bandwagon when the big gains had already been made. A lot more joined him when he went to China and his luck ran out.
Statistically, you seem to have a better chance of picking great shares than great fund managers.“It is difficult to get a man to understand something, when his salary depends on his not understanding it.” --Upton Sinclair0 -
Glen_Clark wrote: »Bear in mind that active management is a zero sum game, so they have to make enough to cover their fees before they start to beat the index. Statistically you have a better chance of picking good shares than picking good fund managers.
If you can't pick the best shares what makes you think you can pick the best fund managers?
It is a lot easier picking good funds than good companies IMO. A single fund combines many companies. The track records of the fund managers is very well documented. My portfolio is heavily biased to SC - some of the leading funds in this area have put on over 50% the last year - the sc & 250 index only 30% fees and all.0 -
Same Heregadgetmind wrote: »The only active management I use is for areas that are illiquid or niche, where there isn't a suitable tracker, or where I want to make use of IT discounts to even more value from unloved assets.
“It is difficult to get a man to understand something, when his salary depends on his not understanding it.” --Upton Sinclair0 -
But thats past performance....... no guide to the future etcThe track records of the fund managers is very well documented. .
(even then its often unreliable because they are selective about which funds and periods they report on)“It is difficult to get a man to understand something, when his salary depends on his not understanding it.” --Upton Sinclair0
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