Global Muliti Assett Fund/Global Index tracker, difference?

coastline

Individual stock picking can be very difficult to get right. Inexperienced investors would be far better in multi-asset funds and trackers.
Just to give an example over the last year some sectors have been in and out of favour at extreme levels. Growth stocks outperformed for the first six months of 2020 then Value had its day in the latter part of the year. The result in the USA even with this rotation shows the SP 500 sits on all time high. If an individual investor had picked the wrong sector they'll have probably underperformed. ?
In the UK many old favourites have performed well under this rotation. The likes of BT BP MKS BARC all have done well since the autumn. If you'd bought earlier then again you'd have a different result.

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Bobziz

coyrls said:

Bobziz said:

If you're picking individual stocks then I can see that you could easily avoid bubbles, but I wonder, and have no idea, how many funds have at least 1 bubble stock in them ?

I wouldn't assume that it's easy; you need to be able to tell the difference between a bubble and a justifiable rise in prices.  If you sold any shares that start to increase at a rate greater than the average, you would have terrible returns.

Yes, badly worded on my part. I meant that if you pick individual stocks then you are, in theory, in control of whether you pick bubble stocks and if you do, can chose to exit before they pop. With an index you have no such control, and with an active fund, you are of course at the mercy of the fund manager.

I don't invest in individual stocks because I have neither the time nor the interest to do what I would consider to be an appropriate level of DD.

Thrugelmir

JohnWinder said:

Thrugelmir said:

JohnWinder said:

Thrugelmir said:

If you throw endless money, or just enough, at a limited selection of stocks you can get a bubble. If you throw endless money at an index fund that holds large, medium, small and micro cap stocks in cap weighting, then they all go up in proportion to their cap weighting.

Same result. Money invested without thought drives prices upwards with no reference to underlying fundamentals ultimately peaking and bursting. That's the nature of markets. 

Over a 5 month period more money was invested in global equity funds in the US than the previous 12 years combined. Speculation rather than investing I'd say. 

The inclusion of Tesla into the S&P 500 (and correspondingly global equity trackers) highlights the downsides of index investing. Much of the best return is made in the run up. Very different markets to trade in compared to even a decade ago. 

 

Firstly, well secondly, you won't find me suggesting SP500 - go all cap instead as it's more diversified, then you acquire Tesla when it's a tiddler.

And firstly, the last 12 months of inflow to US funds wasn't all to index funds. A lot was stock picking. That's the active investors forming bubbles, not the indexers, and it's only the active investors who can get hurt as the indexers are there for the long term share of company earnings not the speculative component of stock prices.

Which global all cap fund are your referring too? 

Seems as if you totally misread my observation. Nor do you understand the mechanics of index tracking funds. 

JohnWinder

Thrugelmir said:

Which global all cap fund are your referring too? 

Seems as if you totally misread my observation. Nor do you understand the mechanics of index tracking funds. 

I didn't have any particular one in mind, thinking it was relevant to all. You're right about me and index fund mechanics; which bit would help me or anyone?

Thrugelmir

JohnWinder said:

Thrugelmir said:

Which global all cap fund are your referring too? 

Seems as if you totally misread my observation. Nor do you understand the mechanics of index tracking funds. 

I didn't have any particular one in mind, thinking it was relevant to all. You're right about me and index fund mechanics; which bit would help me or anyone?

Always best to do ones own research as there's a myriad of choice. Capitilisation alone doesn't guarantee entry into any given index. As an example, if Amazon split their stock thereby reducing their share price then it would qualify to enter the Dow Jones index. Only Bezo's ego is stopping such a move possibly. 

Eco_Miser

Deleted_User said:

Bobziz said:

 if you pick individual stocks then you are, in theory, in control of whether you pick bubble stocks and if you do, can chose to exit before they pop.

You certainly can't choose to exit before they pop, because you don't know when they will!

Well you can, provided you don't wait too long.

If they haven't popped when you choose to exit, then you have chosen to exit before they pop.