Fundsmith again.

Bostonerimus1

https://forums.moneysavingexpert.com/discussion/comment/81955614#Comment_81955614

But surely Terry Smith has done well over the years so why not back him for the future. Has his philosophy changed enough to require dropping Fundsmith? and what are the criteria for identifying today's "better options"?

aroominyork

https://forums.moneysavingexpert.com/discussion/comment/81956767#Comment_81956767

Yup, you're right. If we are borne back ceaselessly into the past Terry will make us all rich. (You're the very 😈, Boston.)

thunderroad88

https://forums.moneysavingexpert.com/discussion/comment/81956767#Comment_81956767

I don’t choose who to invest with based on what they did 5-10 years ago…I’m more interested in their decisions and performance over the last 5 years when we’ve had Ukraine, the rise of AI, Trump The Sequel, Iran ….the macro environment is a different beast now and Smith &Co haven’t adapted well imo so I chose not to back their judgement. Other managers such as Artemis and Orbis who have backed quality/value (the line is blurred between those two I think) have judged the market better and trackers/ETFs such as Vanguard UK Equity Income or TDGB have also performed well. If I'd stuck with Fundsmith I’d be much less wealthy, that is my bottom line.

talexuser

The idea that an active manager can always beat the market is obviousy wrong, history tells us that. There are periods where economic trends and good judgement and luck pay off and you are ahead, and periods where you fall behind a bit. The crap shoot for us is knowing when to bail out. I give an active fund around 2/3 years of underperformance before deciding whether the judgement calls are bad.

I sold out of the ISA around 3 years ago when it was becoming obvious Fundsmith performance was not keeping up with his fees, and sold out of the GIA in stages since, I sold Smithson quite some time ago while in profit for the same reasons. If you do a bit of research and keep up with manager trends you can beat a tracker with active funds overall, if you don't want to do that just get a tracker. But you can't argue that a tracker will give you best performance. Woodford made really good money for me for 20 years in Perpetual, and around 30% in his own fund before I jumped when it was 10% down. The idea I should have stayed with him because of his good history has already been debunked.

thunderroad88

https://forums.moneysavingexpert.com/discussion/comment/81957150#Comment_81957150

The active vs passive debate has been done to death very recently so all I’ll say is that I don’t think it’s either/or…they’re both just tools to aid me in achieving my financial objectives and I have no loyalty to either. Even a fund’s underperformance is tolerable as long as it’s contributing to meeting those objectives, is within reasonable margins of tolerance, is fulfilling it’s role in my pf and I still believe in the manager’s strategy….although I may not be as patient as you and give it 2-3 years. Like you,Fundsmith and Woodford did that for me for years but luckily I bailed from both at the right time..and it taught me never to get too complacent with funds, their managers and even financial advisers. It’s easy of course to get comfortable when time is less available to worry about investments, so simplicity is the probably the right choice for many and it works, but I’d still suggest that active funds can be a valuable component in any pf.

talexuser

Yes, I've gone more and more passive as the years have gone by because just can't find as many long term outperformers that suit the whole as in years past. This could be because there are a lot more passives nowadays and they have shown up just how few actives are worth their fees. Even in the 90s and 2000s I could count my active choices on the fingers of one hand, compared to the nearest relevant index at the time. Compared to the thousands of funds available that is not a good rate.

But this is not really an active vs passive debate. It's whether a specific active has gone off the boil and whether it is worth staying.

aroominyork

I think that's a bit harsh, OP. The consensus seems to be that you should be prepared to take a CGT hit, but are you then going to choose another actively managed fund or a passive fund? You say "average performing index trackers" in what seems a pejorative tone, but average performing is their raison d'être. In line with what I said earlier, maybe this thread is less about Fundsmith performance and more about the psychological preparedness to pay CGT.

Bostonerimus1

https://forums.moneysavingexpert.com/discussion/comment/81957957#Comment_81957957

As I think I said further up the thread, Fundsmith is like many other active funds in that they are often cyclical. So my opinion is it did well in the past, has been poor for the last few years and I have no idea where it will go in the future. You have to decide whether the fundamental reasons you bought Fundsmith are enough for you to keep it or if you will sell it because of recent performance and end up with a CGT bill. I would sell because of my historical and continued skepticism about active funds. I can't offer any suggestions about what you should buy as a replacement for Fundsmith as my belief is that you can never have too much allocation to average index trackers.

Bostonerimus1

https://forums.moneysavingexpert.com/discussion/comment/81957985#Comment_81957985

I agree. The headline of this thread is "Fundsmith", but identical issues come up with any poorly performing investment. Investors should think about what they will do when something isn't working just as actively as when they will take profits. It all comes down to rebalancing and following some rules so you don't fall into errors with a psychological origin.

masonic

I would have thought the natural thing to do when you are unsatisfied with your ability to pick winning active funds is to hedge your bets and go passive. So index trackers would be very much on topic when answering "what next".