Woodford is the Reason you should no longer Buy and Hold

iglad

I'm an active investor and has seen the foley of holding stocks and funds too long, such as Woodford ( didn't invest) and Lloyds shares (held far too long, now sold). This article in the Money Observer explains someof my own strategy very well which is at odds with many who believe in the 'buy and hold' strategy.

I don't agree with his 3-6 month switching approach as most successful fund mangers can perform well over 1.3.5. & 10 years. However once the fund starts to fall behind then by all means take your profit and sell. I'm not one for watching a fund underperform for 3 years as my money could be better spent elsewhere.

https://www.moneyobserver.com/why-buy-and-hold-investors-should-switch-to-momentum-strategy.

MaxiRobriguez

"Momentum strategies do away with this problem. They target the managers who have been impressive in recent months, hoping they will continue to be so for some time to come and that when they start to decline the system will issue an alert.

This approach is not very fashionable."

I mean, apart from being the investing style with the largest amount of capital inflows for a decade now, investing in Woodford when he set up his fund would very much align with "target(ing) the managers who have been impressive in recent months, hoping they will continue to be so for some time to com"

Momentum investing, in my view, has seen capital allocated inefficiently to FAANG and passive in general. I expect in the next recession a return to investors caring about value/quality yield.

Linton

All short term strategies like Momentum work for a while until they dont. If momentum doesnt work you can always switch to something else like investing in the "dogs". Its the complete opposite but sometimes works well until it doesnt.


Buy and hold by definition is not a short term strategy and so the two cannot be compared except perhaps in 20 years time. There is no such thing as holding too long whilst the investment is satisfying the reason for buying it. Do you really believe Lloyds is now downhill forever until it goes bust or has ceased being a major bank? Woodford is a one-off failure caused by the funds contradictions. I cant think of anything else similar in my 20 years of investing. TBH your folly was holding Woodford in the first place unless your portfolio had a hole into which it slotted nicely.

bostonerimus

The article assumes you advocate paying for a fund manager. Momentum/rebalancing/buy and hold are all just black magic that will work sometimes and fail other times. If you are going to implement a momentum strategy at least do it in a low cost way, and don't trade too often.

sendu

From the article:

Ocean Liner set sail three years later, in November 2013, and has produced gains of 37.3%, ahead of, again, what Chadwick considers the fairest sector to pit performance against, IA mixed investment 20-60% shares, with the average fund in that sector returning 31.6%.

Sure, it may look OK vs what they choose to compare against. But compared to a simple global index tracker, the approach seems pretty awful. VWRL, excluding dividends, made 67% in the same time period.

Picking funds that have done well recently, then switching when they underperform, is clearly a good way of losing money. You will end up buying high, and selling low. You ought to realise this is the opposite of what you should be doing.

iglad

bostonerimus wrote: »

The article assumes you advocate paying for a fund manager. Momentum/rebalancing/buy and hold are all just black magic that will work sometimes and fail other times. If you are going to implement a momentum strategy at least do it in a low cost way, and don't trade too often.

I'm not interested in the frequent trading as that's a tad silly and costly imho. Tt's the length of holding when the active fund starts to underperform I'm more interested in as a strategy. A perfect example being Baillie Gifford American, who have gone from upper quartile performers to not even on the radar. HSBC American has produced better returns foe the year so far.

DrSyn

iglad wrote: »

I don't agree with his 3-6 month switching approach as most successful fund mangers can perform well over 1.3.5. & 10 years.

https://www.moneyobserver.com/why-buy-and-hold-investors-should-switch-to-momentum-strategy.

It easy with hind site, to tell who are the most successful fund mangers over 1.3.5. & 10 years. The difficulty is to spot them at the start of their successful run. I very much doubt that even you have the power to foretell the future.

The articular assumes active buy and hold. Those in some like the FTSE All World Index have nothing to complain about when they buy and hold over 10 years.

Prism

iglad wrote: »

I'm not interested in the frequent trading as that's a tad silly and costly imho. Tt's the length of holding when the active fund starts to underperform I'm more interested in as a strategy. A perfect example being Baillie Gifford American, who have gone from upper quartile performers to not even on the radar. HSBC American has produced better returns foe the year so far.

Baillie Gifford American is 20th out of 145 funds on Trustnet YTD with a return of 29.5%. The S&P trackers are running at about 24% (including HSBC). If you are going to use an example at least find a good one or failing that just one that is accurate.

Prism

Momentum has certainly been one of the most successful strategies over the last 5 years or so but it doesn't come without its risks. You can see from the momentum ETFs that they are pretty volatile and if things drop quickly they tend to drop even quicker giving you a very small window to get out. They also recover very quickly and you tend to miss that if you did get out.

Malthusian

Why buy and hold investors should switch to a momentum strategy - Money Observer, August 14 2019

Why momentum investors should switch to buy and hold - Money Observer, August 14 2020

Where can I find Chadwick's "Salty Dog" multi-manager fund on Morningstar so we can see how his strategy actually performed in the real world, without any backtesting or other cheating?

iglad

Prism wrote: »

Baillie Gifford American is 20th out of 145 funds on Trustnet YTD with a return of 29.5%. The S&P trackers are running at about 24% (including HSBC). If you are going to use an example at least find a good one or failing that just one that is accurate.

I am looking on my platform watchlist (same on Trustnet) which shows HSBC American 1yr 8.38% and BG A 7.22%.

Looking at Trustnet BGA is 5th in the THIRD quartile over 1 year and it's currently at 63 out of 104 funds.

HSBC American is 11th in the 2nd quartile which makes it 47th out of 104 funds.

Is that accurate enough for you?