Simple Strategy for Beginner

chiang_mai

Investing in the top fund alone is a poor idea, simply, the day after you invest it can easily become one of the worst and there will be no other eggs in your basket. Why not spread your investments both by asset type and geography, devise a mix you're happy with and then check it once a year to make any adjustments. My guess is that a managed Mixed Asset fund or two (equities and bonds) would suit well, you just need to figure out your risk appetite and determine the percentage split.

jimjames

I remember an old HL article with 2 fictional characters who either invested in the last year's top performer or the coming year's top performer. The last year's top performer was invariably the worst performer the next year.

Malthusian

capital0ne wrote: »

I think it has some legs, after all the article says it worked over 22 years, 5,662pc cant be sniffed at, worth a go if you ask me.

5,662% is a laughably pathetic return for someone who has the benefit of total hindsight.

An even better strategy would be this: invest all your money in the Turkish stockmarket. Every penny. Then sit back and wait. Over the last 22 years this strategy worked so well it delivered an amazing 41,531% return - minus costs. (MSCI Turkey GR.) And you don't even have to faff about with reviewing the fund performance tables every six months and switching funds.

What could possibly go wrong? The backtesting is conclusive.

If you read that thread and my post in it and still can't see why simulated backtesting (past performance's idiot cousin) is worthless, then I have nothing else to say.

A while ago I did a similar back-testing exercise and looked at the returns someone would have made if they invested all their money in the best-performing sector every year - that is, last year's best-performing sector - since 1994. The answer was 1.5% per annum. Worse than cash.

Then I looked at the returns someone would have made if they invested in the worst-performing sector every year over the same time period, which delivered a much better return of 4.8%pa. However, this is still terrible compared to the 6-8%+ you would have made in any remotely decent balanced portfolio, especially once you factor in the huge extra risk. The problem with the contrarian strategy is that while markets bounce back, they don't do so at timely intervals - the worst sector one year is often the worst sector next year as well.

capital0ne

jimjames wrote: »

I remember an old HL article with 2 fictional characters who either invested in the last year's top performer or the coming year's top performer. The last year's top performer was invariably the worst performer the next year.

Now if I could only know which was the coming year's top performer..............

Biggles

ChesterDog wrote: »

You are, as you say, a beginner to investments.

He said that in this thread.

Only a week later, he claimed to have 20 years' experience!
http://forums.moneysavingexpert.com/showthread.php?p=73270737#post73270737