Do funds ever lose money over time?

[Deleted User]

masonic said:

coyrls said:

ZingPowZing said:

Google Amerindo funds .. Qed..

Yes, a good example of funds losing value.  I can't see how this is relevant to your suggestion that your money is less safe in funds than in individual shares because "most funds are worth far less than the majority of companies in which they are invested".  The reason funds lose value is because the shares in which they are invested lose value, not because they are worth far less than the majority of companies in which they are invested.

 by picking mainstream investments with sufficient diversification - it is impractical for most people to directly hold enough shares to replicate such a strategy without funds.

What would be "sufficient diversification", masonic?

I prefer correlation.

masonic

ZingPowZing said:

masonic said:

coyrls said:

ZingPowZing said:

Google Amerindo funds .. Qed..

Yes, a good example of funds losing value.  I can't see how this is relevant to your suggestion that your money is less safe in funds than in individual shares because "most funds are worth far less than the majority of companies in which they are invested".  The reason funds lose value is because the shares in which they are invested lose value, not because they are worth far less than the majority of companies in which they are invested.

 by picking mainstream investments with sufficient diversification - it is impractical for most people to directly hold enough shares to replicate such a strategy without funds.

What would be "sufficient diversification", masonic?

I prefer correlation.

I don't know what you mean by correlation, but what I mean is at least a passive global core which captures FTSE All World or MSCI World index (developed markets would be acceptable), or several active and/or passive funds that give broad exposure to several hundred constituents therein with a similar geographic and industry spread. Avoid single sector investing, avoid highly concentrated portfolios. Same general principles would go to adding exposure to smaller companies and other themes.

[Deleted User]

masonic said:

ZingPowZing said:

masonic said:

coyrls said:

ZingPowZing said:

Google Amerindo funds .. Qed..

Yes, a good example of funds losing value.  I can't see how this is relevant to your suggestion that your money is less safe in funds than in individual shares because "most funds are worth far less than the majority of companies in which they are invested".  The reason funds lose value is because the shares in which they are invested lose value, not because they are worth far less than the majority of companies in which they are invested.

 by picking mainstream investments with sufficient diversification - it is impractical for most people to directly hold enough shares to replicate such a strategy without funds.

What would be "sufficient diversification", masonic?

I prefer correlation.

I don't know what you mean by correlation,
Avoid single sector investing, avoid highly concentrated portfolios.

In principle, two related outcomes would advance the chance of overall success (say, Kane to score and England to win).
As opposed to diversification, which is like the machine gun scene in Millers Crossing. 

masonic

ZingPowZing said:

masonic said:

ZingPowZing said:

masonic said:

coyrls said:

ZingPowZing said:

Google Amerindo funds .. Qed..

Yes, a good example of funds losing value.  I can't see how this is relevant to your suggestion that your money is less safe in funds than in individual shares because "most funds are worth far less than the majority of companies in which they are invested".  The reason funds lose value is because the shares in which they are invested lose value, not because they are worth far less than the majority of companies in which they are invested.

 by picking mainstream investments with sufficient diversification - it is impractical for most people to directly hold enough shares to replicate such a strategy without funds.

What would be "sufficient diversification", masonic?

I prefer correlation.

I don't know what you mean by correlation,
Avoid single sector investing, avoid highly concentrated portfolios.

In principle, two related outcomes would advance the chance of overall success (say, Kane to score and England to win).
As opposed to diversification, which is like the machine gun scene in Millers Crossing. 

If you're going single sector/theme and concentrated, then going on that ride in a closed-ended collective fund with a bunch of other investors that are liable to panic-sell and drive the price down at an inopportune time is a risk. Perhaps in that situation it is better to self-select your own shares and hold them directly. It's not an investment style many can or should try to stomach, however.

noclaf

An earlier post mentioned funds falling out of favour and then being closed or combined with other funds. I was thinking about this the other day, never has fund or etf investing been so accessible than it is now.
Add to that the sheer number of social media channels appearing giving out investment advice.. some good, others just rehashing the same info and some just rubbish..it makes me wonder if investors will become more picky and likely to hop between funds if they feel it's not the current 'in vogue' fund.
Taking that one step further let's imagine a fairly well known Vanguard product such as VLS 100 or FTSE Global All Cap suddenly becomes unpopular and investors funds start flowing out...does the price of the fund tank irrespective of what the market is doing? It might be obvious but struggling to get my head around it at the moment.

masonic

noclaf said:

An earlier post mentioned funds falling out of favour and then being closed or combined with other funds. I was thinking about this the other day, never has fund or etf investing been so accessible than it is now.
Add to that the sheer number of social media channels appearing giving out investment advice.. some good, others just rehashing the same info and some just rubbish..it makes me wonder if investors will become more picky and likely to hop between funds if they feel it's not the current 'in vogue' fund.
Taking that one step further let's imagine a fairly well known Vanguard product such as VLS 100 or FTSE Global All Cap suddenly becomes unpopular and investors funds start flowing out...does the price of the fund tank irrespective of what the market is doing? It might be obvious but struggling to get my head around it at the moment.

Open ended funds buy and sell underlying assets to meet net inflows and outflows of capital, so while rampant selling in the whole market can drive down share prices, surviving investors won't be in a worse position than if they held the assets directly in the market. ETFs are a bit different as they are traded in real time and price anomalies can come about in extreme market conditions.

On the other hand, closed ended investment trusts have a fixed capital pool and do not need to buy or sell anything when the trust is traded. The market price of the trust's shares is driven by supply and demand, so can differ substantially from the net asset value. This is one reason why ITs are not generally recommended for novice investors.

Private investors still account for a minority of all trading activity, and their trades are generally exploited by institutional market participants - giving rise to a transfer of wealth from private investors to institutions. In other words they still have a tendency to buy high and sell low. Such investors will probably favour direct share holdings, ETFs and ITs as open ended funds can take a few days to switch.

[Deleted User]

noclaf said:

An earlier post mentioned funds falling out of favour and then being closed or combined with other funds. I was thinking about this the other day, never has fund or etf investing been so accessible than it is now.
Add to that the sheer number of social media channels appearing giving out investment advice.. some good, others just rehashing the same info and some just rubbish..it makes me wonder if investors will become more picky and likely to hop between funds if they feel it's not the current 'in vogue' fund.
Taking that one step further let's imagine a fairly well known Vanguard product such as VLS 100 or FTSE Global All Cap suddenly becomes unpopular and investors funds start flowing out...does the price of the fund tank irrespective of what the market is doing? It might be obvious but struggling to get my head around it at the moment.

No, that would nor precipitate a run on the fund because, if the underlying investments are sound, value-seekers will rush in.

Bigger danger is a Woodford type situation where the value of  the investment depends on the endorsement from Woodford rather than its own viability.
Woodford used his heft to pump up his favourites - early success as he doubled down on the investments he made at Invesco and squeezed up the price. Flat track bully. In many of the more speculative investments, the fund were the biggest % owner. It came undone in the end but it is hard to call out that sort of practice when you're on board, as Hargreaves Lansdown certainly were.

coyrls

ZingPowZing said:

coyrls said:

ZingPowZing said:

Google Amerindo funds .. Qed..

Yes, a good example of funds losing value.  I can't see how this is relevant to your suggestion that your money is less safe in funds than in individual shares because "most funds are worth far less than the majority of companies in which they are invested".  The reason funds lose value is because the shares in which they are invested lose value, not because they are worth far less than the majority of companies in which they are invested.

Because in some cases funds lever their influence on the companies in which they are invested and, because fund oversight is pretty weak, see maverick fund managers such as Neil Woodford (backed by Hargreaves Lansdown) deviate from the proposition the fund offers to blind investors. 

So that's exactly the opposite of your original point where you said "most funds are worth far less than the majority of companies in which they are invested", meaning that they have small stakes in large companies, now you are saying that the problem is that they have large stakes in small companies over which "they lever their influence".  It's quite hard to follow your logic.

[Deleted User]

coyrls said:

ZingPowZing said:

coyrls said:

ZingPowZing said:

Google Amerindo funds .. Qed..

Yes, a good example of funds losing value.  I can't see how this is relevant to your suggestion that your money is less safe in funds than in individual shares because "most funds are worth far less than the majority of companies in which they are invested".  The reason funds lose value is because the shares in which they are invested lose value, not because they are worth far less than the majority of companies in which they are invested.

Because in some cases funds lever their influence on the companies in which they are invested and, because fund oversight is pretty weak, see maverick fund managers such as Neil Woodford (backed by Hargreaves Lansdown) deviate from the proposition the fund offers to blind investors. 

So that's exactly the opposite of your original point where you said "most funds are worth far less than the majority of companies in which they are invested", meaning that they have small stakes in large companies, now you are saying that the problem is that they have large stakes in small companies over which "they lever their influence".  It's quite hard to follow your logic.

Two concerns then, 

1) To compare a fashionable fund - Baille Gifford American - with its main investments, most of the companies are at least a hundred times bigger. So, to my mind, it is safer to invest in a company that could buy the fund out of its petty cash. Not that it would, because the company would only buy its own shares or that of an upstart potential competitor. Whereas,  whatever the prospectus says, a fund's direction is at the mercy of its svengali, as seen in the case of Neil Woodford's fund so..

2) Less control over the management of a fund. Notionally, the Woodford fund was restricted to a topline 10% in unlisted investments; this was circumvented by introducing companies via the Guernsey Stock Exchange, (which I believe is the unroofed loft of a building in St Peter Port).

And a third, hitherto unconsidered worry..

3) When it hits the fan for a fund, your money can be tied up for ages.

coyrls

The concept of a company buying a fund makes no sense at all.  A company could buy the fund management company that manages the fund but that would make no difference to the funds managed by the fund management company.