Beating the FTSE 100

TBC15

If ones investment picks beat the FTSE 100 on a regular basis should this be regarded as a job well done?

At what point of return should the amateur decide the job should be handed over to a professional?

gadgetmind

Questions:

1) Are all your holdings members of the FTSE100?
2) Are you benchmarking on a total return basis?
3) What does "regular basis" mean? A few months means nothing, a few years doesn't take us through even one full cycle, so you really need 10+ year figures.

Thrugelmir

What's a regular basis? 20, 30 years?

masonic

TBC15 wrote: »

At what point of return should the amateur decide the job should be handed over to a professional?

Picking professionals that can consistently beat the market is just as hard as picking individual investments that do so.

BillJones

I can come up with a strategy guaranteed to beat the FTSE 99 years out of 100. It's a horrible, horrible trading strategy, though, that is expected to lose you money every year, on average.

Those last two words in the paragraph above really, really matter.

gadgetmind

BillJones wrote: »

guaranteed

Small print: Your guarantee is only as good as the financial institution backing it, so not really guaranteed at all when it all goes wrong.

colsten

A few links to read on the subject

http://monevator.com/passive-investing-uk-evidence/

http://monkeywithapin.com/

http://www.telegraph.co.uk/finance/personalfinance/investing/10402153/Where-do-human-fund-managers-beat-computers.html

http://www.telegraph.co.uk/finance/comment/tom-stevenson/7908517/Beating-the-market-is-dogged-by-difficulty.html

TBC15

gadgetmind wrote: »

Questions:

1) Are all your holdings members of the FTSE100?
2) Are you benchmarking on a total return basis?
3) What does "regular basis" mean? A few months means nothing, a few years doesn't take us through even one full cycle, so you really need 10+ year figures.

1) No they are not.All my investments are in Unit Trusts and OEICs
2) I'm benchmarking on a total return basis, I think ie at the end of the year how much more is the investment worth. The FTSE was chosen at random. It would probably been a better question to ask what benchmark should the private investor use to gauge his performance. When I started of my criteria for performance was 10% a year.
3) I've been investing for 16yrs.

masonic

TBC15 wrote: »

1) No they are not.All my investments are in Unit Trusts and OEICs
2) I'm benchmarking on a total return basis, I think ie at the end of the year how much more is the investment worth. The FTSE was chosen at random. It would probably been a better question to ask what benchmark should the private investor use to gauge his performance. When I started of my criteria for performance was 10% a year.
3) I've been investing for 16yrs.

The most appropriate benchmark will depend on the nature of your investments. For example, for a portfolio consisting of global equities, you might use the MSCI World Index, which has doubled in 15 years (noting that performance is measured in USD, but that exchange rates between 1999, when the chart starts, and now are comparable).

gadgetmind

TBC15 wrote: »

It would probably been a better question to ask what benchmark should the private investor use to gauge his performance.

Perhaps a multi-asset portfolio that matches the risk level of yours?

dunstonh

TBC15 wrote: »

If ones investment picks beat the FTSE 100 on a regular basis should this be regarded as a job well done?

At what point of return should the amateur decide the job should be handed over to a professional?

Its a doddle to beat the FTSE100 assuming you want a 100% equity risk. The FTSE100 does not include payment of dividends. So, picking virtually any UK equity fund would do the trick.

In reality, most people do not have the risk profile to be 100% invested in equities. So, its not really a fair match. The FTSE100 doesnt have a good track record either.