Index Trackers Are So Widely Recommended..... But...?

kinger101

jamesrichards808 wrote: »

Hi folks,


So I read a lot about investments and Index Trackers are widely recommended due to their low cost, and the fact that according to stats a large number (most?) Active Funds perform worse than Index Trackers.


I struggle with this fact, bearing in mind (for example) that the FTSE100 is currently only 2% higher than it was 19 years ago!


Am I really supposed to believe that the average Active (Managed) Fund has only made less than 2% over 19 years???


Would one really have been better off buying a tracker in 1999 than some funds?


Be grateful for your thoughts and comments!


Cheers!

Aside from the fact of the dividends which has already been mentioned, you also have to consider that most people drip feed. They wouldn't have bought all their investments the day before the dotcom bubble popped.

Prism

Davy_Jones_II wrote: »

The price is set at the margins, you only need a handful of people fully analyzing a stock to push it to the rational price.

Yes, if there are none then the price becomes meaningless, but if ten out of a million do their research then the market will still clear at the “right” price most of the time.

Using price as a major selection factor of what to buy hasn't worked for years - at least for large caps. It more about stock selection nowadays.

capital0ne

kinger101 wrote: »

Aside from the fact of the dividends which has already been mentioned, you also have to consider that most people drip feed. They wouldn't have bought all their investments the day before the dotcom bubble popped.

Its well known that lump sum investments just pre-crash points still does better in the long term than drip feeding.

capital0ne

Prism wrote: »

Using price as a major selection factor of what to buy hasn't worked for years - at least for large caps. It more about stock selection nowadays.

Nope, just look at any fund or IT in the same sector, they're all made up in virtually the same manner! may as well buy an index tracker it's cheaper! remember also no stamp duty on ETFs!

capital0ne

Thrugelmir wrote: »

Might work well for the US markets not so for the far less researched ones. Which was the premise for Jack Bogle's concept.

Of course, the UK market is hardly researched - I forgot that!

capital0ne

Thrugelmir wrote: »

Didn't realise that Buffett ran a single share portfolio. :cool:

When everybody invests in global index trackers who is going to set the market price of the underlying shares? Active investing will come back into fashion. Fads are cyclical. Every new generation believes they've found the Holy Grail of investing success. Until an unexpected event dispels the myth.

Didn't you, oh well never mind.....
The market price is set by those who think they can beat the market when they can't, as you say newbies who think they know better than their predecessors until many years later they realise what a complete waste of time it's all been. It's those folk the tracker mob can sleep well at night and see their portfolio grow and grow. Nice innit!

Prism

capital0ne wrote: »

Nope, just look at any fund or IT in the same sector, they're all made up in virtually the same manner! may as well buy an index tracker it's cheaper! remember also no stamp duty on ETFs!

If you think that, then you are not looking hard to enough - to be expected since you only use passive funds

Thrugelmir

capital0ne wrote: »

Of course, the UK market is hardly researched - I forgot that!

Which UK market are you referring to. Not that I made any reference to the UK. Suggest you read my comment again with the emphasis on less.

Thrugelmir

capital0ne wrote: »

It's those folk the tracker mob can sleep well at night and see their portfolio grow and grow. Nice innit!

As Warren Buffett is quoted as saying. If making money were that easy everyone would be a librarian. :eek:

bostonerimus

Thrugelmir wrote: »

As Warren Buffett is quoted as saying. If making money were that easy everyone would be a librarian. :eek:

In 2007/8 making money didn’t seem that easy, but losing money was like falling off a log. However, with a 30 year perspective it has actually been ridiculously easy to make money; simple as 60/40 and rebalance. That got me through the good times and the bad times and I remember selling bonds to buy equities in 2008 with the Dow Jones close to 6000 and now its at 26000. The thing is investing is only one component of success. When it’s combined with budgeting to control spending and aggressive saving everything starts to compound.