Foreign & Colonial Investment Trust

talexuser

kidmugsy wrote: »

The merged outfit seems to have had some disappointing years lately. Perhaps F&C will have a bad spell too. Stuff happens.

I bought Alliance in early 2017 for a short term capital gains crystallisation alternative, but having looked at the new multi fund approach decided to stick with it for a while to see if it turns out as good as Witan.

Iain_For

firestone wrote: »

Get where your coming from but a lot of people have probably bought Global trackers over the last decade so by and large will have seen positive results and think that is the norm so some will get a surprise when in the future they don't do what they did in the past

I suspect we will all get a surprise in the future! The reality of the market is that fundamental return, dividend yield and earnings growth, drives long term return. If that future long term return is lower than in the past, as seems more likely, say down to 5% pa, then after inflation the cost of investment is likely to become critically important. Will be interesting to see how active fund managers respond to trying to outperform the market in a low long term return environment. Low turnover funds like FRCL are perhaps better placed than others.

firestone

Iain_For wrote: »

I suspect we will all get a surprise in the future! The reality of the market is that fundamental return, dividend yield and earnings growth, drives long term return. If that future long term return is lower than in the past, as seems more likely, say down to 5% pa, then after inflation the cost of investment is likely to become critically important. Will be interesting to see how active fund managers respond to rely and outperform the market in a low long term return environment. Llow turnover funds like FRCL are perhaps better placed than others.

Hopefully One works as i have left a small pension invested using F&C and a tracker!.It was just that rightfully passive performance is often compered to bad funds and the benefits to be gained but when a good fund is shown it sometimes gets shot down with the old chestnut of it won't do as well in the future.Which could be true or not but should be in the context that the passive may not post past returns either which sometimes goes unmentioned in articles

seacaitch

Iain_For wrote: »

The reality of the market is that fundamental return, dividend yield and earnings growth, drives long term return.

In addition to Dividends and EPS Growth as drivers of stock prices, there is also Valuation, ie. changes in the price/earnings ratio (PER).

Changes (trends) in PERs over time can be a significant component of returns and may have a substantial effect on the returns someone experiences during their investment career because mean reversion of PERs might occur on a longer timescale than an individual's own investment time horizon.

eg. see the sustained pink areas in the chart below, such as the mid-80s-to-mid-2000s period where disinflation drove PER expansion, and the earlier mid-70s-to-mid-80s period where rising/high inflation drove PER contraction; and note how these valuation changes may at times dominate the other two drivers of stock prices:

atush

I have been holding this (and adding to it monthly) for nearly 20 years.

Am super happy with the performance.

Thrugelmir

seacaitch wrote: »

EPS Growth as drivers of stock prices,

EPS can be manipulated. In 2017 around 20% of US quoted companies bought back their own shares. Not neccessarily with cash, but debt.

Iain_For

Thrugelmir wrote: »

EPS can be manipulated. In 2017 around 20% of US quoted companies bought back their own shares. Not neccessarily with cash, but debt.

I thought this recent interview with Jack Bogle summed things up well, I like his take on speculative versus long-term return.

https://youtu.be/x5fX0CdESMk

seacaitch

Thrugelmir wrote: »

EPS can be manipulated. In 2017 around 20% of US quoted companies bought back their own shares. Not neccessarily with cash, but debt.

Managers may be incentivised by attempts at shorter-term window-dressing but it's likely all a wash looking beyond that:
(i) the debt's associated interest expenses will reduce the E of EPS (impacting EPS growth) on an ongoing basis
(ii) and the higher debt will increase business fragility causing sensible investors to ascribe a lower PER to that EPS, as its source will be of a reduced quality.

Thrugelmir

Iain_For wrote: »

I thought this recent interview with Jack Bogle summed things up well, I like his take on speculative versus long-term return.

https://youtu.be/x5fX0CdESMk

Thanks for posting this.

Interesting view on expected future market performance (in the US). Far below that achieved over the past 25 years. Before costs a net 2% above (US) inflation. If £ strenghens against the $ in time. Could make holding US investments a negative sum game.

dividendhero

While trackers certainly have their place in larger markets, they can be dangerous in small markets - all the trackers will follow the same limited number of shares. This will boost the returns which in turn will attract more funds...this will work until the music stops.