Great British Invest off or Passive V Active Discussion

bostonerimus

ams25 wrote: »

I agree that there are many many poor performing active funds and you are better off with a tracker than those funds...and for those not able or inclined to reasearch the Actives that do add value then again trackers are probably best. But what I don't get is the logic that says that because there are many poor active funds it is better to go with passives, instead of an approach that says there are good actives bit you need to do some homework to find them.

Look at my vls60 vs active comparisons on the updates thread. That's worthwile outperformance in my opinion.

If you can consistently choose benchmark beating active funds over a 30 or even 60 year investing term then your logic is perfectly correct.

Audaxer

ams25 wrote: »

But what I don't get is the logic that says that because there are many poor active funds it is better to go with passives, instead of an approach that says there are good actives but you need to do some homework to find them.

Look at my vls60 vs active comparisons on the updates thread. That's worthwhile outperformance in my opinion.

Yes, your active portfolio has done very well compared to the VLS60, but if I invested in that exact same portfolio today and compared it to my VLS performance from today, there is no guarantee that it will do better long term. The active funds might perform particularly poorly in a crash and some active fund managers might make the wrong decisions, and you as portfolio manager will have to decide what action if any to take and you may make the wrong decisions to hold or sell. Some investors will be more contented to stick with the VLS60 satisfied than in the long term they will have the sort of returns they are happy with.

It's not just a case of being able to pick the right active funds, but being able to make the right decisions in managing the portfolio, which is my view makes it more difficult to get it right.

Linton

ams25 wrote: »

but what's missing is that there are hundreds/thousands of active funds that consisently perform poorly or just averagely yet have billions invested....

Not just active funds. Look at all the people who could be investing globally but choose to hold a FTSE100 tracker. And those who invest in VLS100 which has underperformed the global indexes every year since it started. All these people create counterweight space above the global all investor average. Many thanks!

One could carry this theme further. Even those people who have invested in what they think is a global tracker may well be in the underperforming group since these funds tend to be limited in the companies they can consider - eg by geography or size. It will be interesting to see how the new Vanguard Global all-cap fund performs.

bostonerimus

Linton wrote: »

Not just active funds. Look at all the people who could be investing globally but choose to hold a FTSE100 tracker. And those who invest in VLS100 which has underperformed the global indexes every year since it started. All these people create counterweight space above the global all investor average. Many thanks!

One could carry this theme further. Even those people who have invested in what they think is a global tracker may well be in the underperforming group since these funds tend to be limited in the companies they can consider - eg by geography or size. It will be interesting to see how the new Vanguard Global all-cap fund performs.

We should show monthly returns and the standard deviation as a metric of volatility as the higher returning funds will probably show the greatest volatility over time too.

Malthusian

ams25 wrote: »

But what I don't get is the logic that says that because there are many poor active funds it is better to go with passives, instead of an approach that says there are good actives but you need to do some homework to find them.

Why do you think all those thousands of rubbish active managers don't simply "do their homework", find one of those active funds which do really well, and copy their holdings?

bostonerimus

Malthusian wrote: »

Why do you think all those thousands of rubbish active managers don't simply "do their homework", find one of those active funds which do really well, and copy their holdings?

It would not be difficult to mirror the general holdings, but the details of all the buys and sells etc would be impossible to match, but each active manager must be convinced that they are doing that better than anyone else.

finellah

Malthusian wrote: »

Why do you think all those thousands of rubbish active managers don't simply "do their homework", find one of those active funds which do really well, and copy their holdings?

Honour????

bigadaj

finellah wrote: »

Honour????

In finance?

TBC15

Just a reminder that the October results for those participating or wish to participate will be due soon.

https://forums.moneysavingexpert.com/discussion/comment/73192349#Comment_73192349

I’ve rehashed the results opening post if anyone is missed out or thinks their classification is wrong please let me know.

As Octobers go it doesn’t look like a bad one.

TBC15

The results for October are starting to come in.

As the portfolios are supposed to reflect our actual holdings and investment patterns as far as the stock market is concerned adjustments in allocation are expected, just no new money.