I'm not surprised, Nick

Linton

aroominyork said:

Linton said:

aroominyork said:

Linton said:

Lindsell Train funds have their own strategy.  Their performance against the market varies greatly over time. 5 years is too short a period  to come to any conclusion.

6

Active fund managers often describe an objective of outperforming the benchmark over rolling five year periods. That seems a sensible timeframe. LT tend to hide behind "over the long term". You shouldn't have to hang around for ten years trusting a fund will eventually come good.

Funds come good when  global economic circumstances match  their strategy.  It is very little to do with the skills or otherwise of the fund manager.  If you want to learn something you need to look at performance across one or more economic cycles which typically last a decade. 

However that does not help you very much since you cannot predict the future. So choose a strategy and keep to it through thick and thin. In the very long term it does not make much difference which strategy you adopt. The worst thing you can do is to keep on changing your strategy to one which would have performed well in the recent past.

Your premise is that fund managers add little value and all that affects fund performance is whether a fund's strategy is aligned with a point in the economic cycle. If that is the case your advice to "choose a strategy and keep to it through thick and thin" is not sensible; the only logical advice would be to hold a cap weighted index fund. Anything else, based on your view, would mean paying active management fees to revert to the norm over time.

There is no method of keeping your strategy aligned with the economic cycle. By the time you understand where you are it is too late to do anything about it. The worst policy is to continually change your strategy to align with where you thought you were. So better to adopt a steady strategy you can easily follow regardless of what happens.

Holding a cap weighted fund is a strategy you can keep to regardless of what happens.  But it is not the only one. Your comments seem to be based on the assumption that the cap weighted index provides the key gold standard benchmark against which your portfolio performance should be compared. I would contend that the cap weighted index is pretty irrelevant to real investing, the only thing of importance is the return you need to achieve to meet your objective.

Cus

Hoenir said:

"Bull markets are born on pessimism, grow on scepticism, mature on optimism and die on euphoria". - Sir John Templeton

Timing matters. There are many experienced investors that have been bearish for years. At some point the tide turns and 'told you so' comes out, however those who say that after the crash may still be worse off.

Hoenir

Cus said:

Hoenir said:

"Bull markets are born on pessimism, grow on scepticism, mature on optimism and die on euphoria". - Sir John Templeton

Timing matters. There are many experienced investors that have been bearish for years. At some point the tide turns and 'told you so' comes out, however those who say that after the crash may still be worse off.

Many investors overlook the fact that minimising losses is more important than maximising gains over their personal investment journey. Following the momentum of fads takes no effort at all.  Understanding what is fundamentally financially sound is another matter all together. Corrections in one form or another happen as a consequence with regularity. Not neccessarily the crash that is ultimately painful but the subsequent slow grinding recovery. 

Worth remembering that we are returning to a pre 2007 trading environment. Having enjoyed an era of free money that elevated asset values of all kinds. 

Cus

Hoenir said:

Cus said:

Hoenir said:

"Bull markets are born on pessimism, grow on scepticism, mature on optimism and die on euphoria". - Sir John Templeton

Timing matters. There are many experienced investors that have been bearish for years. At some point the tide turns and 'told you so' comes out, however those who say that after the crash may still be worse off.

Many investors overlook the fact that minimising losses is more important than maximising gains over their personal investment journey.

Is that strictly true now? Surely the end result (however far in the future) is more relevant? I think that some experienced traditional investors are overlooking the vast amounts of the more recent passive 'invest and forget' strategy that funnels huge amounts of money without analysis or value appreciation. Understanding that and timing the dips that inevitably must come should now be part of the experienced investor's toolbox.

Hoenir

Cus said:

Hoenir said:

Cus said:

Hoenir said:

"Bull markets are born on pessimism, grow on scepticism, mature on optimism and die on euphoria". - Sir John Templeton

Timing matters. There are many experienced investors that have been bearish for years. At some point the tide turns and 'told you so' comes out, however those who say that after the crash may still be worse off.

Many investors overlook the fact that minimising losses is more important than maximising gains over their personal investment journey.

Is that strictly true now? 

Markets have a nasty habit of ripping the shirt off your back when you least expect them to. The fundamentals of investing will never change. 

aroominyork

Linton said:

aroominyork said:

Linton said:

aroominyork said:

Linton said:

Lindsell Train funds have their own strategy.  Their performance against the market varies greatly over time. 5 years is too short a period  to come to any conclusion.

6

Active fund managers often describe an objective of outperforming the benchmark over rolling five year periods. That seems a sensible timeframe. LT tend to hide behind "over the long term". You shouldn't have to hang around for ten years trusting a fund will eventually come good.

Funds come good when  global economic circumstances match  their strategy.  It is very little to do with the skills or otherwise of the fund manager.  If you want to learn something you need to look at performance across one or more economic cycles which typically last a decade. 

However that does not help you very much since you cannot predict the future. So choose a strategy and keep to it through thick and thin. In the very long term it does not make much difference which strategy you adopt. The worst thing you can do is to keep on changing your strategy to one which would have performed well in the recent past.

Your premise is that fund managers add little value and all that affects fund performance is whether a fund's strategy is aligned with a point in the economic cycle. If that is the case your advice to "choose a strategy and keep to it through thick and thin" is not sensible; the only logical advice would be to hold a cap weighted index fund. Anything else, based on your view, would mean paying active management fees to revert to the norm over time.

Following cap weighting is a strategy like any other. Sometimes it can perform well such as in a boom other times badly such as in the following bust. Examine the first decade in this century.

But it is a fair question as to why one would want to choose some strategy other than simple cap weighting if they all end up in much the same place inI the long term.  The answer is in situations where long term return does not overwhelm all other considerations. I am not sure but think that LT global equity has been less volatile than a global index. Another axample is Woodford’s income funds which avoided the 2000 tech boom/ crash almost entirely.

More generally a reasonable objective, particularly for people depending on their investments to meet ongoing expenses, is to reduce short/medium term risk without sacrificing long term returns. 

I agree, if I understand you correctly, that your benchmark should be the index which matches your objectives. For me, that means the index fund/s you would use if taking a 100% passive approach. But LT and Woodford's low volatility/tech miss (if you are correct about those - I haven't checked) can only be seen with hindsight. Right now the correct index fund for LT Global Equity would surely be a developed world index fund. 

My own benchmark, for calculating +/- on a running spreadsheet, is 50/50 HSBC FTSE All World Index and VLS100 for the equities (on the basis that if I was 100% equities I would underweight the UK) and Vanguard Global Bond Index for my fixed interest.

Linton

aroominyork said:

Linton said:

aroominyork said:

Linton said:

aroominyork said:

Linton said:

Lindsell Train funds have their own strategy.  Their performance against the market varies greatly over time. 5 years is too short a period  to come to any conclusion.

6

Active fund managers often describe an objective of outperforming the benchmark over rolling five year periods. That seems a sensible timeframe. LT tend to hide behind "over the long term". You shouldn't have to hang around for ten years trusting a fund will eventually come good.

Funds come good when  global economic circumstances match  their strategy.  It is very little to do with the skills or otherwise of the fund manager.  If you want to learn something you need to look at performance across one or more economic cycles which typically last a decade. 

However that does not help you very much since you cannot predict the future. So choose a strategy and keep to it through thick and thin. In the very long term it does not make much difference which strategy you adopt. The worst thing you can do is to keep on changing your strategy to one which would have performed well in the recent past.

Your premise is that fund managers add little value and all that affects fund performance is whether a fund's strategy is aligned with a point in the economic cycle. If that is the case your advice to "choose a strategy and keep to it through thick and thin" is not sensible; the only logical advice would be to hold a cap weighted index fund. Anything else, based on your view, would mean paying active management fees to revert to the norm over time.

Following cap weighting is a strategy like any other. Sometimes it can perform well such as in a boom other times badly such as in the following bust. Examine the first decade in this century.

But it is a fair question as to why one would want to choose some strategy other than simple cap weighting if they all end up in much the same place inI the long term.  The answer is in situations where long term return does not overwhelm all other considerations. I am not sure but think that LT global equity has been less volatile than a global index. Another axample is Woodford’s income funds which avoided the 2000 tech boom/ crash almost entirely.

More generally a reasonable objective, particularly for people depending on their investments to meet ongoing expenses, is to reduce short/medium term risk without sacrificing long term returns. 

I agree, if I understand you correctly, that your benchmark should be the index which matches your objectives. For me, that means the index fund/s you would use if taking a 100% passive approach. But LT and Woodford's low volatility/tech miss (if you are correct about those - I haven't checked) can only be seen with hindsight. Right now the correct index fund for LT Global Equity would surely be a developed world index fund. 

My own benchmark, for calculating +/- on a running spreadsheet, is 50/50 HSBC FTSE All World Index and VLS100 for the equities (on the basis that if I was 100% equities I would underweight the UK) and Vanguard Global Bond Index for my fixed interest.

You dont understand me correctly.  Why bring in an index?  What is important is that the long term return you are getting in £ is in line with the one you need to meet your objective in £ (adjusted for inflation if that is what you want) at acceptable risk. What some index would have done had you invested in it but didn't, seems very irrelevent. After all you aren't trying to beat the index are you?

As regards the complaint that Woodford's income strategy can only be seen with hindsight is that not also true with the last few years' boom in the US Mega-techs causing a rather uneven increase in world market prices? Under the unpredictable varying conditions of the economic cycle every rational approach will have its day which will only be seen in hindsight.

Hoenir

Linton said:

As regards the complaint that Woodford's income strategy can only be seen with hindsight is that not also true with the last few years' boom in the US Mega-techs causing a rather uneven increase in world market prices? Under the unpredictable varying conditions of the economic cycle every rational approach will have its day which will only be seen in hindsight.

There were a considerable number of people who couldn't make the "numbers" stack up and followed the Woodford (Graham/Buffett)  line of thinking.  Let's take LastMinute.Com as an example.  Reached a market capitalisation in excess of £500 million. Turnover £29 million. Never made a profit.  You don't need to have any number crunching skills to at least question whether this is a good business to buy into or not in the longer term. That's what sadly lacking these days again. Anybody that doesn't match/outperform a handfull of mega cap companies over a short time window is deemed to be deficient in someway.