Maximising investment portfolio performance

mollycat

Oggers wrote: »

.....but as banana republic states, the granny sookers may have gone down - relative to other funds - as they are under-performing, the mix is just wrong, or they have a manager who is unable to make the necessary adjustments. I agree that buying low and selling high is ideal, but then again in some instances, things are relatively cheap for a reason - they are rubbish!

Except that you have already researched the ingredients, packaging and marketing of both sweets and have made judgements on their quality to the extent these are exactly the correct 2 sweets you want to spend your money on!

Why would changes in price (in the short term) cause you to doubt this.

It's an opportunity.

"5 bags of granny sookers please!"

Malthusian

Oggers wrote: »

.....but as banana republic states, the granny sookers may have gone down - relative to other funds - as they are under-performing, the mix is just wrong, or they have a manager who is unable to make the necessary adjustments.

A month's worth of past performance is not sufficient information to make that conclusion.

A further sweets analogy: I hand you a brown paper bag and say that it is full of soor plooms and granny sookers. You draw out two sweets and both are soor plooms. Assuming I'm telling the truth, what is the next sweet you draw out most likely to be?

If you said "soor ploom" you have a cognitive bias. The correct answer is "I have no idea". The distribution of sweets inside the bag is unknown and the past performance of pulling sweets out of the bag tells you absolutely nothing.

As Mollycat says, if the mix was wrong or the manager is incompetent why did you invest in that fund a month ago in the first place?

BananaRepublic

Malthusian wrote: »

A month's worth of past performance is not sufficient information to make that conclusion.

As said by many people. Still, worth repeating, since it is being ignored.

Sorry I have no comment to make about sweeties. Hope that is okay ...

BananaRepublic

ColdIron wrote: »

Nice cup of tea with some chocolate Hobnobs?

In which case I could justly complain that Bowlhead's posts make me wee, and induce dental decay and diabetes. If only Bowlhead had thought of the consequences of his/her post before carelessly releasing it into the internet.

Oggers

Except that you have already researched the ingredients, packaging and marketing of both sweets and have made judgements on their quality to the extent these are exactly the correct 2 sweets you want to spend your money on!

....Except that I could have got it wrong! I was thinking of comparative performance over a year or so, rather than a month. If only a month, then I would agree a dip in the granny sookers fund may well present an opportunity to buy more, but taken over a year of constant dipping, and assuming nothing as regards my ability to pick a winner, it could perhaps also be a sign of a poorly managed/under-perfomring fund and thus a time to sell and re-invest - hopefully in something more lucrative.

mollycat

Oggers wrote: »

Except that you have already researched the ingredients, packaging and marketing of both sweets and have made judgements on their quality to the extent these are exactly the correct 2 sweets you want to spend your money on!

....Except that I could have got it wrong! I was thinking of comparative performance over a year or so, rather than a month. If only a month, then I would agree a dip in the granny sookers fund may well present an opportunity to buy more, but taken over a year of constant dipping, and assuming nothing as regards my ability to pick a winner, it could perhaps also be a sign of a poorly managed/under-perfomring fund and thus a time to sell and re-invest - hopefully in something more lucrative.

A year is too short a time frame!

Read Bowlhead's post again, and again if you need to.

Admittedly ive distracted you from this with my daft analogy, so apologies for that.

Constantly churning on the basis of short term price movements spooking you will be the road to the poorhouse.

Malthusian

Oggers wrote: »

....Except that I could have got it wrong! I was thinking of comparative performance over a year or so, rather than a month.

This is excellent news. In your opening post you were talking about changing investment decisions on a month-to-month basis based on monthly performance data. You are now talking about comparing performance over a year. At this rate of progress, within the next few pages you will be comparing data over a period of time that actually provides useful information.

If only a month, then I would agree a dip in the granny sookers fund may well present an opportunity to buy more, but taken over a year of constant dipping, and assuming nothing as regards my ability to pick a winner, it could perhaps also be a sign of a poorly managed/under-perfomring fund and thus a time to sell and re-invest - hopefully in something more lucrative.

It could be. Me pulling two soor plooms out of my brown paper bag could mean that it is full of soor plooms. Or it could mean that I have already removed all the sour plooms and so the next one must be a granny sooker. There is still not enough data to say which.

A year of poor returns could indicate that the fund is poorly managed or it could mean that the sector is out of favour. This is useless information because it doesn't give you anything on which you can base a decision.

Oggers

Mollycat

I had already read it twice! He does say a year may be adequate...However, to re-phrase the question perhaps, what do you believe is the best way of understanding if the fund is performing well or not?

mollycat

Oggers wrote: »

Mollycat

I had already read it twice! He does say a year may be adequate...However, to re-phrase the question perhaps, what do you believe is the best way of understanding if the fund is performing well or not?

The easy bit is following a funds performance; but you need to put that into context.

The fund will have a role within your portfolio, (if not why did you select it?), is it achieving that role?

Is it behaving in a way that keeps your portfolio balanced? etc etc.

Does it aid your overall strategy?

Me? I tend to stick with underperformers unless there is an obvious reason they are not going to recover. Has worked well for me over the years, and to me makes more sense than (potentially) jumping to another fund thats unknowingly about to lag its sector.

But, I think you are getting caught up with, and overthinking this one aspect of investing; some people look at their investments infrequently and have strict rules on say, rebalancing rather than being led by "noise".

It's about getting a strategy youre comfortable with and sticking to it.

If you have read Bowlheads post x2, i doubt i can help any further.

Good luck though!

Oggers

Chaps

This is all good stuff. Many thanks. i delight in the sarcasm by the way - I reside in Scotland where they take such things all too seriously, so the opportunity to indulge in it is limited.

I have already taken on board the advice and diversified my portfolio in terms of country and sector. So far, about 32% UK weighted, 21 %,US, Far East 33% and the rest a fairly even split across Europe. Sector wise, fairly even distribution among 20 plus sectors. It's a start I feel....

The role of any fund I possess is to make as much money as possible!