FTSE Pessimism

grizzly1911

cleeside wrote: »

I read Monkey with a Pin a few months back and I thought it was very misleading and poorly researched. The quote above is simply incorrect.

I don't think the book claims to be an in depth research piece more layman's observations with a fair bit of digging. It doesn't mean all of those observations are necessarily incorrect. Moneyweek seems to get mentioned ocassionally though.;)

If you are dropping your weaker players and replacing them with fit subs you are more likely to win the match than letting injuries build up. I appreciate they have still got to make up for lost time.

jem16

grizzly1911 wrote: »

The question is would it even be listed as an option with pluses and minuses to give the punter the choice?

Would ways to mitigate against a taking on higher risk options be shown if this was the punters assessed risk appetite?

You misunderstand the role of an IFA. That role is to offer best advice and a recommendation based on the review and fact find. If the advice simply left you with a set of options from which to choose, how would you pick?

By all means you can discuss various options with the IFA but I would still expect to be given his/her best recommendation.

In the (real) example I used a fixed fee was quoted to provide the review, fact find, assessment recommendation. Implementation is separate, based on a percentage of value, from which the minimum fixed element would be absorbed if the percentage is sufficient.

Then the fixed fee would still be payable directly by the client and there would be no further percentage due if not implemented.

A_Flock_Of_Sheep

There seemed to be a stark fast drop in and around August 2011 what caused that? Also again in May 2012 any ideas of the cause?

grey_gym_sock

grizzly1911 wrote: »

Have you read the example given based on 10year FTSE experience?

he seems to be surprised that the biggest 20 stocks in the FTSE100 haven't performed similarly to the index. never mind that some of the biggest 20 have changed over the period (so which 20 does he mean?), why would that be at all surprising?

cap-weighted and equal-weighted indexes are going to perform differently.

also, the biggest 20 is more slanted to a few areas of business than is the FTSE100 as a whole. (if you were buying your own portfolio of 20 stocks, you wouldn't stick to the biggest 20, because you could get much better sector diversification by looking further.)

also, the stock-specific risk of the biggest 20 and of the FTSE100 are different.

you would expect the FTSE100, the biggest 20 stocks, and a more balanced portfolio of 20 stocks, all to perform differently. with some winning in some periods, others in other periods. what is 1 beating another in a single period supposed to prove?

grey_gym_sock

grizzly1911 wrote: »

If you are dropping your weaker players and replacing them with fit subs you are more likely to win the match than letting injuries build up.

it's unclear whether that's a good strategy in investment. or rather it depends what the rest of your strategy is. without knowing, 1 can't really comment on whether that's a sensible rule to add.

how do you decide who are weak players, and who are just going through a bad patch, but will bounce back even stronger? because the market does overreact sometimes.

there is a difference between selling because a company has fallen - something like a stop loss - and selling because your assessment of the company's merits has changed for the worse. it partly comes back to why you were buying in the first place.

in any case, the tracker strategy is a sound 1 in at least many markets, and you can follow it for very little cost. if the "monkey" had said that, due to the uncertainties of buying 20 stocks, he'd rather buy a tracker, i wouldn't argue with him.

jabba42

grey_gym_sock wrote: »

it's unclear whether that's a good strategy in investment. or rather it depends what the rest of your strategy is. without knowing, 1 can't really comment on whether that's a sensible rule to add.

how do you decide who are weak players, and who are just going through a bad patch, but will bounce back even stronger? because the market does overreact sometimes.

there is a difference between selling because a company has fallen - something like a stop loss - and selling because your assessment of the company's merits has changed for the worse. it partly comes back to why you were buying in the first place.

in any case, the tracker strategy is a sound 1 in at least many markets, and you can follow it for very little cost. if the "monkey" had said that, due to the uncertainties of buying 20 stocks, he'd rather buy a tracker, i wouldn't argue with him.

I have some uranium shares that have been beat up badly. I think there is some mileage in them in the next year or 2 so I will keep them. No point selling now unless I think they are going to zero.

grizzly1911

jem16 wrote: »

You misunderstand the role of an IFA. That role is to offer best advice and a recommendation based on the review and fact find. If the advice simply left you with a set of options from which to choose, how would you pick?

By all means you can discuss various options with the IFA but I would still expect to be given his/her best recommendation.



Then the fixed fee would still be payable directly by the client and there would be no further percentage due if not implemented.

Thanks for bearing with me jem.

I haven't misunderstood the role.

I then question what the real value the full extra £2650 makes to the client. I accept there is an administration charge that needs to be covered.

gadgetmind

grizzly1911 wrote: »

If you are dropping your weaker players and replacing them with fit subs you are more likely to win the match than letting injuries build up.

Sorry, the analogies are doing my head in.

What's the argument here?

1) The FTSE index doesn't represent what an investor in the index will experience?
2) Someone buying selected or random stocks will under/out perform the index.
3) Active management will beat the index?
4) Something else?

Whatever the argument is, backtested evidence and/or Monte Carlo modelling will impress me more than hand waving.

gadgetmind

grizzly1911 wrote: »

I then question what the real value the full extra £2650 makes to the client.

If the client understands how to invest for themselves, then the value is the square root of Sweet Fanny Adams.

If they are a complete numpty with no idea of the difference between equities, bonds, cash, etc., no idea of risk/volatility, not a clue of how to construct a portfolio, and no understanding of taxation, pensions, ISAs, and much more, then that £2650 will save them from the cruel fate of having to spend £50 on books and 5-6 hours reading them.

Jegersmart

May 21 (Bloomberg) -- Government of Singapore Investment Corp., which manages more than $100 billion of assets, said it’s more cautious about seeking higher returns as yields remain low ahead of the “end game” in the next five to 10 years.



The average annual return on bond yields will be about 1.9 percent over the next decade, while equities may offer a 1.6 percent median real return a year during that period, said Lim Chow Kiat, chief investment officer of the fund, citing different portfolio models.



“We are getting more cautious in reaching out for higher yielding assets,” Lim, who assumed his position in February, said at a conference in Singapore today. “No one can predict when the end game will be, but we can prepare for it.”



Central banks are putting downward pressure on benchmark borrowing costs, leading investors to seek higher-yielding assets outside of government bond markets. U.S. 10-year rates fell to an all-time low of 1.38 percent in July, and the Standard & Poor’s 500 Index rallied to a record this week.



“Central banks will find it hard to exit from this quantitative easing policy,” Lim said, adding that “substantial risks remain.”



Investors have had “largely good returns” over the past three decades, Lim said, and they are seeing the latest part of a 30-year credit expansion cycle with low interest rates.



‘Bubbles Everywhere’



“We see bubbles everywhere,” Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., said on Bloomberg Television last week. “As long as the Fed, and the Bank of Japan and other central banks keep writing checks and don’t withdraw, then the bubble can be supported.”



GIC said in July its cash allocation almost quadrupled to 11 percent of its portfolio in the year ended March from 3 percent a year earlier. Stock holdings fell to 45 percent from 49 percent as it pared equities in developed markets, while bond investments dropped to 17 percent from 22 percent, it said in its annual report.



The so-called 20-year annualized real return was 3.9 percent as of March 2012, unchanged from the previous year, it said. The annualized nominal rate of return in U.S. dollar terms was 3.4 percent over five years, 7.6 percent over 10 years and 6.8 percent over 20 years, it said. The fund, which doesn’t report an annual return or disclose the actual size of its portfolio, is expected release its next performance figures for the year ended March in July.



More Temptations



“As price of risk assets improve, there are more pressures and temptations to reach out,” said Lim, 42, who previously oversaw GIC’s investments and relationships in Europe, Africa and the Middle East.



Lim said there are investment opportunities in technology, such as China’s growing online retail market, as well as the rising middle class in emerging economies. About one in two middle-class consumers will come from Asia within seven years, he said.



“Though valuations are not low currently, longer-term prospects are not to be missed,” he said.



GIC is ranked the eighth-largest government investment fund globally by the Sovereign Wealth Fund Institute, which estimates it manages $247.5 billion.



To contact the reporters on this story: Pooja Thakur in Singapore at pthakur@bloomberg.net ; Klaus Wille in Singapore at kwille@bloomberg.net



To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net