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  • FIRST POST
    • JustAnotherSaver
    • By JustAnotherSaver 11th Aug 19, 7:08 PM
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    JustAnotherSaver
    For those familiar with Lars Kroijer and his views
    • #1
    • 11th Aug 19, 7:08 PM
    For those familiar with Lars Kroijer and his views 11th Aug 19 at 7:08 PM
    I've been meaning to ask this on here for some time now but keep failing to get round to it. There was a bit in the book that if i remember right i wanted to refer to but it looks like i've left the book at work. There was also a thread on here i saw within the last month or so that made me think of this even moreso but i've ended up leaving it that long that i can't find it now. Typical


    Someone on here, i forget who, suggested i read the book, so i started & a lot of what he says seems to make sense to me. "Do you have an edge" gets repeated throughout. No i certainly do not is my answer.

    A couple years ago i had another book suggested to me on here & Lars Kroijer seems to be basically echoing that one, or at least so far as i've read he seems to be echoing it.


    The more i read it the more i agree that not only do i not have an edge but how do 99% of people have an edge? Likely they do not. They're either lucky or i don't know what.


    Which brings me here. From reading in these forums, i could be wrong but it appears that the majority and not the minority believe they have an edge, certainly amongst the regular posters and it makes me wonder - why is that.


    The other book i had (name of which i forget as i've loaned it out although i can try and get the title if it helps any) basically suggested cheap multi asset index trackers (i'm hoping i've got the correct term down there, i have a habit of not doing!) are the best way forward for the average Joe and that historically they outperform managed funds.

    I think this is the point someone on here steps in and says absolutely everything is managed anyway. I don't know enough to argue that point but clearly that person must know what these others are on about when they refer to managed vs otherwise?
    The Lars Kroijer Investing Demystified book i'm reading seems to be going down the same path, as far as i've read.



    The thread on here that i referred to which was posted recently, many spoke of actively managed funds in their portfolio and how it is either totally actively managed or mostly actively managed. So when i'm reading that most people don't have this 'edge' that Lars Kroijer mentions in his book, i'm wondering ... how come most of the regulars on MSE actually do??


    I understand that the responses to this are probably going to result in me questioning life itself and my mind will explode from the pushing and pulling - how people on both sides of the fence make sense and i don't know who's 'right' but what the hell. After reading the book i'm just curious on the stance from others.

Page 1
    • arwain
    • By arwain 11th Aug 19, 7:43 PM
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    arwain
    • #2
    • 11th Aug 19, 7:43 PM
    • #2
    • 11th Aug 19, 7:43 PM
    I think for the vast majority of people the advice Kroijer provides in his book is spot on. Most people do not have the time or the interest to gain the necessary knowledge required to gain an edge in the financial markets.

    Several of the regular posters on this forum work in the financial industry or have a real passion for it and enjoy the research and hard work required to do better than investing in a tracking index fund.

    Was this the thread you had been reading recently?
    https://forums.moneysavingexpert.com/showthread.php?t=6023217&highlight=active+vs+passi ve
    • Prism
    • By Prism 11th Aug 19, 7:58 PM
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    Prism
    • #3
    • 11th Aug 19, 7:58 PM
    • #3
    • 11th Aug 19, 7:58 PM
    I would say that most people would agree that most individuals do not have an edge. I don't see many people recommending investing directly in individual stocks on this forum, although some do.
    So what it boils down to is do any active fund managers have that edge, is the advantage still there after they deduct their fees and is it possible to select one of those fund managers ahead of time.
    I personally believe it is but the pool of funds and managers that fall into that category is pretty small.
    • Audaxer
    • By Audaxer 11th Aug 19, 8:10 PM
    • 1,883 Posts
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    Audaxer
    • #4
    • 11th Aug 19, 8:10 PM
    • #4
    • 11th Aug 19, 8:10 PM
    I don't think most people on here think they have an edge. It is just that a lot of investors think a portfolio of active funds, or a hybrid portfolio of active and passive funds, give them better diversification than just picking index funds or a multi asset fund. They may or may not produce better results long term.

    I'm more in the passive camp, although I think active funds are better if you are looking for an income portfolio of dividend generating funds. The other argument for actives is that they cover asset classes not adequately covered by index funds. However it is important getting the asset allocation correct and having a strategy that you can stick to with a disciplined approach.
    • bostonerimus
    • By bostonerimus 11th Aug 19, 9:10 PM
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    bostonerimus
    • #5
    • 11th Aug 19, 9:10 PM
    • #5
    • 11th Aug 19, 9:10 PM
    The mistake that people make is that they try to maximize the amount of money they might make rather than maximizing the probability that they will make enough to meet their financial goals. So the whole idea of “alpha” or getting on the positive side of the risk/return ratio can be dangerous to financial health
    Misanthrope in search of similar for mutual loathing
    • Thrugelmir
    • By Thrugelmir 11th Aug 19, 9:43 PM
    • 65,042 Posts
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    Thrugelmir
    • #6
    • 11th Aug 19, 9:43 PM
    • #6
    • 11th Aug 19, 9:43 PM
    As an investor you'll never stop learning. Keep an open mind. Read, research, attend and listen. Perhaps you'll have inside knowledge of the industry you work in.

    There's a place for passive and active funds within a diversified portfolio. As there's a universe of investment opportunities out there.

    Suggest you read "Harriman's New Book of Investing Rules: The Do's and Don'ts of the World's Best Investors". A well balanced book that will open up your horizons.

    If everyone trod same road there'd be no market so to speak. As a private investor there'll be opportunities to exploit. Unearthing them is the art. Time and patience is a neccessity. As not a question of simply taking wild punts on speculative price movements.
    Last edited by Thrugelmir; 11-08-2019 at 9:49 PM.
    “If the financial system has a defect, it is that it reflects and magnifies what we human beings are like. Money amplifies our tendency to overreact, to swing from exuberance when things are going well to deep depression when they go wrong. Booms and busts are products, at root, of our emotional volatility.”
    ― Niall Ferguson
    • firestone
    • By firestone 11th Aug 19, 9:43 PM
    • 421 Posts
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    firestone
    • #7
    • 11th Aug 19, 9:43 PM
    • #7
    • 11th Aug 19, 9:43 PM
    is it not just a case of free will? - as in do i have an edge in trying to pick the winner of the 2.30 at Ascot or the correct score of the next Man City game no but i will still try.Do people have an edge in picking certain numbers in a lottery no but they still try.People will either believe Kroijer or they won't but you could say his edge is getting people to pay £15 for a book only to tell them to invest passive when Bostonerimus tells people everyday for free
    Also think the edge was mentioned in the book How To Own the World by Andrew Craig which had a section called "why you will do better then many professionals" basically saying the same thing that people could do better investing their own money (and then i believe launched a managed multi asset fund so maybe he did not agree with his book)
    Last edited by firestone; 12-08-2019 at 6:56 AM.
    • jsinc
    • By jsinc 11th Aug 19, 9:47 PM
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    jsinc
    • #8
    • 11th Aug 19, 9:47 PM
    • #8
    • 11th Aug 19, 9:47 PM
    I agree with him, although don't entirely invest by it. Stolen from elsewhere but: "technically, alpha [excess return] is just an unexplained return in a regression". Unexplained means unattributable to one of skill or luck.
    • JustAnotherSaver
    • By JustAnotherSaver 11th Aug 19, 9:59 PM
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    JustAnotherSaver
    • #9
    • 11th Aug 19, 9:59 PM
    • #9
    • 11th Aug 19, 9:59 PM
    Originally posted by arwain
    The very one
    Suggest you read "Harriman's New Book of Investing Rules: The Do's and Don'ts of the World's Best Investors". A well balanced book that will open up your horizons.
    Originally posted by Thrugelmir
    Or fry my brain (if it goes against what i've read so far)
    Problem is, i don't know enough and therefore am not confident enough to challenge views which leads me to accepting views .... all of them because everyone knows more than me, right?



    If everyone trod same road there'd be no market so to speak.
    Exactly what i was thinking. Then i thought maybe everyone is chasing the unlikely, like playing the lottery. Summed up by....
    The mistake that people make is that they try to maximize the amount of money they might make rather than maximizing the probability that they will make enough to meet their financial goals.
    Originally posted by bostonerimus
    (and then i believe launched a managed multi asset fund so maybe he did not agree with his book)
    Originally posted by firestone
    Or saw a way to make money by milking people chasing a dream they're unlikely to get (such as in your lottery example - i also play it but i can afford to lose £1.50 per week).


    Note: I don't actually know who you're talking about.

    • Thrugelmir
    • By Thrugelmir 11th Aug 19, 10:11 PM
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    Thrugelmir
    The very one
    Or fry my brain (if it goes against what i've read so far)
    Problem is, i don't know enough and therefore am not confident enough to challenge views which leads me to accepting views .... all of them because everyone knows more than me, right?
    Originally posted by JustAnotherSaver
    The book is very readable. Short chapters that can be digested one by one. Not simply a debate between the merits of passive vs active either. Far far broader.

    Starting out keep it simple. As the amount invested grows to a sizable sum. Then start branching out.

    First rule of investing is don't lose capital.
    Second rule is don't forget rule no 1.
    “If the financial system has a defect, it is that it reflects and magnifies what we human beings are like. Money amplifies our tendency to overreact, to swing from exuberance when things are going well to deep depression when they go wrong. Booms and busts are products, at root, of our emotional volatility.”
    ― Niall Ferguson
    • firestone
    • By firestone 11th Aug 19, 10:34 PM
    • 421 Posts
    • 196 Thanks
    firestone
    The very one
    Or fry my brain (if it goes against what i've read so far)
    Problem is, i don't know enough and therefore am not confident enough to challenge views which leads me to accepting views .... all of them because everyone knows more than me, right?




    Exactly what i was thinking. Then i thought maybe everyone is chasing the unlikely, like playing the lottery. Summed up by....
    Or saw a way to make money by milking people chasing a dream they're unlikely to get (such as in your lottery example - i also play it but i can afford to lose £1.50 per week).


    Note: I don't actually know who you're talking about.
    Originally posted by JustAnotherSaver
    Andrew Craig the author of How To Own The World
    • WillGates
    • By WillGates 11th Aug 19, 11:08 PM
    • 39 Posts
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    WillGates
    A good easy read, I like it.

    Summary:
    https://www.samuelthomasdavies.com/book-summaries/business/how-to-own-the-world/
    • quirkydeptless
    • By quirkydeptless 12th Aug 19, 5:24 AM
    • 339 Posts
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    quirkydeptless
    I'm familiar with Lars Kroijer and his views (watched the vids, but not read the book) and I'm also a regular reader of Monevator and his championing of passive investing.

    I also accept I have no edge, don't work in the financial industry, and have never consulted a financial advisor about investing.

    I'm also one of those people that owned up to having 100% active investments in that thread



    Active or passive? Opinion is divided on the matter

    https://www.youtube.com/watch?v=bIXQFaEsvlQ

    I should really go passive I guess, but habit's hard to break and my 30 years of investing by handing money over to edgeless active managers hasn't been so bad, and still got me to a point of contemplating retirement.
    Last edited by quirkydeptless; 12-08-2019 at 5:47 AM.
    This is not investment advice.
    Your money may go "down and up and down and up and down and up and down ... down and up and down and up and down and up and down ... I got all tricked up and came up to this thing, lookin' so fire hot, a twenty out of ten..."
    • Malthusian
    • By Malthusian 12th Aug 19, 6:58 AM
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    Malthusian
    Which brings me here. From reading in these forums, i could be wrong but it appears that the majority and not the minority believe they have an edge, certainly amongst the regular posters and it makes me wonder - why is that.
    Originally posted by JustAnotherSaver
    What gives you that idea? Genuine question. Asked a generic "where should I invest" question, the majority of regular posters here will generally recommend index-tracking funds (Vanguard etc) which implies they don't think they have an edge.

    On a share trading forum you would get a different response, but this forum is called Money Saving Expert and most of us believe in rule no. 1 of investing, which is "Don't lose money".

    Outside of this forum, I don't think the majority of people think they have an edge either. Most people have never thought about it - they have no clue what an edge is and whether they have one or not.

    The biggest flow of money into actively managed funds (i.e. people who think they have an edge) is not from people who have researched the fund manager's track record and believe in their inherent stockpicking ability, but the low-knowledge DIY segment and the vertically integrated advice segment. I am talking about people who invest with St James Place, or, with Hargreaves Lansdown and end up with the default multi-manager solution or the Wealth 50.

    They are not being offered active management because they believe they have an edge, or because the fund manager / wealth manager has an edge, but because it is the most efficient means to extract their money.

    I think this is the point someone on here steps in and says absolutely everything is managed anyway.
    "There is no such thing as 100% passive" is an argument in the same grab bag as "What is reality?" Even they know there is such a thing as passive and what it means.

    I do hold some active funds where an index-tracking approach is either impractical or undesirable - e.g. commercial property and smaller companies. Passive fund management is not a dogma but a means to an end, and when it no longer makes sense you stop using it.
    • JustAnotherSaver
    • By JustAnotherSaver 12th Aug 19, 8:21 PM
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    JustAnotherSaver
    What gives you that idea? Genuine question. Asked a generic "where should I invest" question, the majority of regular posters here will generally recommend index-tracking funds (Vanguard etc) which implies they don't think they have an edge.
    Originally posted by Malthusian
    Just what i feel from reading other peoples posts.
    There'll be those who are quite cryptic in their answers, like they're being interrogated by the police & they don't want to rat on their buddy, but once you get past all that and actual answers start coming in (or at least the ones that i've seen) - they seem to be actively managed.



    I've not ran any tally and done proper research but that's just the feel i get from reading the posts. That thread that was linked to earlier in this thread, people were listing off actively managed more than not.


    Maybe the people on this board or at least this section of the board are smarter than your average Joe, especially when it comes to investment. I don't know. I'd say (the regulars at least) appear smarter than the circles i move in which is why i come here for info a lot. If i knew anyone in person where i could get this information/advice from then i'd do it.


    Outside of this forum, I don't think the majority of people think they have an edge either. Most people have never thought about it - they have no clue what an edge is and whether they have one or not.
    Agreed.

    I think we're all very 'aware' on this forum. Even people like myself and the very small percentage of people on here who know less than I do - they're still 'aware', but your average Joe on the street isn't so they just put their money where their mate said they put theirs because they got a good return last year kind of thing. They refer to buying a new car as an 'investment' when it's anything but. They know of ISAs but nothing of the varying types.



    Talking to people at my work it's incredible how little people know. Me to them is like the regulars on here to me. It's scary.



    "There is no such thing as 100% passive" is an argument in the same grab bag as "What is reality?" Even they know there is such a thing as passive and what it means.
    See, without naming names, there's a person or persons on here who appear to challenge such statements. They answer questions with questions. Forget trying to get a straight answer.

    I remember one time i did mention what i'd read - about the whole passive & active thing. They flipped it on me that basically nothing is passive because it's managed in some way, somethingorother.


    Me as a know-nothing started wondering what is this Matrix nonsense i've just gotten involved in. What is the meaning of life and is reality even real?
    That's when one or two others stepped in and pulled the poster on the awkwardness of their post and basically how they knew what was meant kind of thing.
    And that's the issue - i don't know enough to challenge these views so when they say nothing is passive and it's all managed i start thinking well this book just lied to me because this guy must be right, right?


    Now i'm not saying this person is unhelpful or helpful, that i agree or disagree with them. It is what it is at the end of the day. That sort of posting knocks any ounce of confidence a know-nothing thought they'd built but hey ho, that's life.

    • Alexland
    • By Alexland 12th Aug 19, 8:56 PM
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    Alexland
    I do sometimes wonder at how much time we spend on this forum talking about what is mostly an already solved problem. If someone considers their objectives, takes a sensible asset allocation, accepts some volatility, keeps their fees low and makes sufficient contributions then over the medium to long term they stand a very good chance of success.
    • Prism
    • By Prism 12th Aug 19, 9:02 PM
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    Prism
    And that's the issue - i don't know enough to challenge these views so when they say nothing is passive and it's all managed i start thinking well this book just lied to me because this guy must be right, right?.
    Originally posted by JustAnotherSaver
    A few years back my pension looked a bit like
    x% multi-asset fund
    x% tech index
    x% health index
    x% global bond index
    x% US index

    All of these were passive funds but I selected them (from many options) and also decided the % splits. I don't know the answer to this myself, but was I a passive or active investor back then? Thats why there is some debate about the term passive.
    • EdSwippet
    • By EdSwippet 12th Aug 19, 10:54 PM
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    EdSwippet
    I've not ran any tally and done proper research but that's just the feel i get from reading the posts. That thread that was linked to earlier in this thread, people were listing off actively managed more than not.
    Originally posted by JustAnotherSaver
    One possibility is sampling bias. Perhaps this site simply attracts people who use actively managed funds more than those that use passively managed ones. That doesn't mean they have any 'edge', just that they're drawn to sites that discuss investing, like moths to a flame.

    If you accept passive investing as your way forwards, there just isn't much to discuss after that. Whereas active investing adherents can (and do!) discuss endlessly the relative merits of this fund or that. Most of this is heat, not light, but in terms of volume and by its very nature it easily overshadows any discussion of passive approaches.

    Maybe the people on this board or at least this section of the board are smarter than your average Joe, especially when it comes to investment.
    Originally posted by JustAnotherSaver
    Mostly experience blended with showing off would be my guess. (Myself included -- see how I pompously referenced wikipedia on 'sampling bias' above? Google makes it very easy to appear smarter than you really are.)

    I remember one time i did mention what i'd read - about the whole passive & active thing. They flipped it on me that basically nothing is passive because it's managed in some way, somethingorother.
    Originally posted by JustAnotherSaver
    They were just splitting hairs. They know as well as the rest of us that passive investing means holding a portfolio of funds that are themselves passively managed. It does not mean that every single individual decision in the chain has to be passive. That's a ridiculous stance to take -- not to mention an impractical one -- and anyone who argues otherwise knows that and is just being unnecessarily obtuse. Showing off. Ignore it. I do.
    • jim1999
    • By jim1999 13th Aug 19, 9:46 AM
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    jim1999
    Tim Hale is the other obvious source.

    He makes the point, very convincingly, that in 99% of cases there is no "edge". What the newspapers attribute to great stockpicking is more than likely just luck. Whilst it is possible to find fund managers that have beaten the market, it is impossible to predict in advance who they will be. Look at Lindsell Train and Woodford for good examples of that. And of course everyone's a genius in hindsight.

    What I find amusing is that when active fund managers who have entire research teams working for them every day of the week, and direct access to board members and key City influencers cannot reliably beat the index, how on earth someone who spends an hour or two per evening reading financial pages and company accounts thinks they'll reliably beat the index.

    Obviously it isn't impossible. Buffett is one example of positive trends over a very long period of time. And I recall reading about a couple of quant-based hedge funds that were returning ridiculous amounts but effectively closed to new investment to avoid getting too big.

    What Hale advocates is spending your time thinking about what you're trying to achieve and matching your investments to that, which funnily enough is what introductory wealth management qualifications focus on. After all, it's all well and good buying a stock with a really great future, but if you're going to need to cash it in within 2 years then you are just gambling. Far too many people ignore the latter, hence the questions of "I have £30k, what should I invest in", when the amount you're investing is one of the least relevant bits of information.
    • bostonerimus
    • By bostonerimus 13th Aug 19, 1:01 PM
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    bostonerimus
    I do sometimes wonder at how much time we spend on this forum talking about what is mostly an already solved problem. If someone considers their objectives, takes a sensible asset allocation, accepts some volatility, keeps their fees low and makes sufficient contributions then over the medium to long term they stand a very good chance of success.
    Originally posted by Alexland
    I agree. The principles of a sound financial plan are not complicated at all. They easily fit on the back of a single index card. However those simple principles are not necessarily easy to implement. It might be difficult to save and invest enough and it”s not always easy to do the right thing when you see your investments losing value.
    Misanthrope in search of similar for mutual loathing
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