Poor Financial Advice in Newspaper?

bostonerimus

talexuser said:

I read the Borisgraph and the Guardian to try and see a sensible middle ground in reporting, but would never use any of the Borisgraphs' fund recommendations. They are generally useless, as the end of the year portfolio updates show.

I'm very much a Guardian and Private Eye reader, but the Guardian has terrible personal finance reporting and journalism...it's also useless.

eskbanker

bostonerimus said:

I'm very much a Guardian and Private Eye reader, but the Guardian has terrible personal finance reporting and journalism...it's also useless.

You misspelled 'Grauniad' then....

JohnWinder

Can anyone see any justification for using.....15 to 20 actively managed funds, which will spread the risk across different fund managers...... for a £56k pot? 

Surely, that is the justification....it's theoretically safer than investing in just 2 or 3 because of the diversification across fund managers.

Aegis

JohnWinder said:

Can anyone see any justification for using.....15 to 20 actively managed funds, which will spread the risk across different fund managers...... for a £56k pot? 

Surely, that is the justification....it's theoretically safer than investing in just 2 or 3 because of the diversification across fund managers.

The counter argument is that the effects of diversification can be seen with about 20 assets, so 15-20 funds, each with 20-200 holdings, is likely to be overkill.

That said, if each of the funds offers decent value for money, then there's no reason not to hold that many other than the fact that it will be far more difficult to manage, and if you have too much correlation between the holdings you might as well just buy a tracker.

GeoffTF

JohnWinder said:

Can anyone see any justification for using.....15 to 20 actively managed funds, which will spread the risk across different fund managers...... for a £56k pot? 

Surely, that is the justification....it's theoretically safer than investing in just 2 or 3 because of the diversification across fund managers.

The global index is the capitalisation weighted average of all the active funds in the world. If you invest in enough active funds the expected return is the index minus the costs, which are larger than for a tracker. In other words, you get average performance with inflated costs.

RetSol

bostonerimus said:

talexuser said:

I read the Borisgraph and the Guardian to try and see a sensible middle ground in reporting, but would never use any of the Borisgraphs' fund recommendations. They are generally useless, as the end of the year portfolio updates show.

I'm very much a Guardian and Private Eye reader, but the Guardian has terrible personal finance reporting and journalism...it's also useless.

I agree completely, @bostonerimus.  The Guardian has been shocking on occasion, in recent years.

JohnWinder

The counter argument is that the effects of diversification can be seen with about 20 assets, so 15-20 funds, each with 20-200 holdings, is likely to be overkill.

It's not only the stocks that can benefit from some diversification, it's the managers, that's the point. Here's a star manager who's now in a crash and burn spiral: https://www.evidenceinvestor.com/hamish-douglass-the-aussie-fund-star-who-fell-to-earth/.  That's what they're trying to minimise the effects of. It's a risk one takes seeking above-market returns.

najan49

JohnWinder said:

The counter argument is that the effects of diversification can be seen with about 20 assets, so 15-20 funds, each with 20-200 holdings, is likely to be overkill.

It's not only the stocks that can benefit from some diversification, it's the managers, that's the point. Here's a star manager who's now in a crash and burn spiral: https://www.evidenceinvestor.com/hamish-douglass-the-aussie-fund-star-who-fell-to-earth/.  That's what they're trying to minimise the effects of. It's a risk one takes seeking above-market returns.

No, the point is that if you take this diversification to the extreme you end up with an expensive index tracker, so you might as well use a cheap index tracker instead.

bostonerimus

eskbanker said:

bostonerimus said:

I'm very much a Guardian and Private Eye reader, but the Guardian has terrible personal finance reporting and journalism...it's also useless.

You misspelled 'Grauniad' then....

Ncie one.

bostonerimus

Financial journalists will have a Rolodex of names good for a quote and they tend to get the financial industry party line which will push strategies, products and funds that are profitable for them. I don't necessarily think this is done with malice as many "experts" actually believe that 50 active funds is the best approach for a regular investor as shown by some of the professional recommendations shared on this forum.