For those familiar with Lars Kroijer and his views
Comments
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Thrugelmir wrote: »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.Thrugelmir wrote: »Amazon, Netflix etc are todays darlings. How long for who knows.
Seems like a contradiction. You're intelligent, read, research, attend and listen but you don't know any more than a dullard like me as to when (or if) Amazon & Netflix will fall from grace. I may as well buy a tracker, attend a few less events (which are nothing but sales pitches anyway) and use the spare time to invest in exercise or relationships.
Also, it's to be expected that if we work in an industry that we will have higher than average knowledge of that industry compared to the average punter but it's not that helpful. If I work for a telecomms company and earn £100,000/ year, have a company pension and save in the sharesave then don't I already have enough exposure to telecomms?0 -
Thrugelmir wrote: »The MSCI has 1651 constituents. The top ten are currently all US companies accounting for around 13% of the index. If they lost 60% of their value permanently what's the potential impact on your long term return? Crashes aren't always just numerical events.
You're hinting that the MSCI is overweighted in its top ten constituents. Asking a question where the answer is 7.8% doesn't actually add any value in terms of knowing what to do about it.
To add value I need to know (or know someone who knows) that (a) this weighting is going to be a drag on returns and (b) what I should buy and sell to correct it.0 -
Sailtheworld wrote: »Seems like a contradiction. You're intelligent, read, research, attend and listen but you don't know any more than a dullard like me as to when (or if) Amazon & Netflix will fall from grace. I may as well buy a tracker, attend a few less events (which are nothing but sales pitches anyway) and use the spare time to invest in exercise or relationships.
Also, it's to be expected that if we work in an industry that we will have higher than average knowledge of that industry compared to the average punter but it's not that helpful. If I work for a telecomms company and earn £100,000/ year, have a company pension and save in the sharesave then don't I already have enough exposure to telecomms?
I agree with your analysis but not your conclusion on using a tracker. Despite your lack of knowledge as to the future by using a market capitalisation weighted tracker you are putting a higher % of your money into Netflix and Amazon (and Facebook and Google) than into all their possible competitors combined. How does this make sense?
On investing in your own industry you must be right that this an extra risk were that to mean investing in your employer. However you may have a greater insight as to which companies are worth investing for the future than the average investor. Unless you believe Telecomms as an industry could have a doubtful future investing in competitors could diversify away some of your employment risk.0 -
I agree with your analysis but not your conclusion on using a tracker. Despite your lack of knowledge as to the future by using a market capitalisation weighted tracker you are putting a higher % of your money into Netflix and Amazon (and Facebook and Google) than into all their possible competitors combined. How does this make sense?
This is what active fund mangers say too. They have an edge and they can see which companies are over-valued in relation to their share of market cap. They also know which of the smaller competitors will thrive in the future. The trouble is that only a small proportion of fund managers really have an edge and outperform a tracker and it's just as difficult to choose a winning fund manager as it is a winning share.
For me, unhappy not to have an investment edge but not bothered about admitting it, what should I do?On investing in your own industry you must be right that this an extra risk were that to mean investing in your employer. However you may have a greater insight as to which companies are worth investing for the future than the average investor. Unless you believe Telecomms as an industry could have a doubtful future investing in competitors could diversify away some of your employment risk.
It's still extra risk even if I invest or short my competitors. Let's say I earn that £100,000 year, my company pension is worth well over what the PPF will cover, and I've got the maximum in sharesaves. Maybe I should have the self-awareness to realise that my edge has served me well but has led to a concentration of risk?
Also I don't think that it necessarily follows that being good and successful in a job means you gain an investment edge either. They're two different skill-sets.0 -
Sailtheworld wrote: »You're hinting that the MSCI is overweighted in its top ten constituents.
Nothing to do with being overweight. Share prices are determined by what investors are prepared to pay for future growth and earnings. Euphoria can die at the flick of a switch. In the main stock markets historically have been driven by a very small % of companies. The vast majority actually underperform.0 -
I agree with your analysis but not your conclusion on using a tracker. Despite your lack of knowledge as to the future by using a market capitalisation weighted tracker you are putting a higher % of your money into Netflix and Amazon (and Facebook and Google) than into all their possible competitors combined. How does this make sense?
It makes sense because that weighting exists because in aggregate all the professional investors think those companies are the way to go.
To do anything else is to make a bet against all other investors. What do you (where "you" is any retail client) know that they don't?
The answer is almost certainly nothing, even if you work in the industry of the top companies.
Of course investment professionals have proven in the past they're actually pretty stupid, and it will be proven again in the future, and top US stocks could see a correction in the coming decade. But betting against current market cap still seems like an unnecessarily risky move.0 -
Thrugelmir wrote: »Nothing to do with being overweight. Share prices are determined by what investors are prepared to pay for future growth and earnings. Euphoria can die at the flick of a switch. In the main stock markets historically have been driven by a very small % of companies. The vast majority actually underperform.
OK. So the answer is 7.8%. I just need to work out what the question is.
If the vast majority of companies under perform shouldn't it be a doddle for everyone to beat the main stock markets? All you need to do is buy the index and pick one of the components to short. Sounds easy.0 -
It makes sense because that weighting exists because in aggregate all the professional investors think those companies are the way to go.
To do anything else is to make a bet against all other investors. What do you (where "you" is any retail client) know that they don't?
The answer is almost certainly nothing, even if you work in the industry of the top companies.
Of course investment professionals have proven in the past they're actually pretty stupid, and it will be proven again in the future, and top US stocks could see a correction in the coming decade. But betting against current market cap still seems like an unnecessarily risky move.
The problem is that the investors who set the market price and thus the market cap are largely market traders. They will buy today and sell tomorrow if there is a quick buck to be made. The effect of market trading is to focus attention on a few well known shares giving rise to short term positive feedback - those shares which are traded requently are of special interest to people who trade frequently. Positive feedback represents a risk. By definition people who hold for the long term dont trade often and so are not greatly involved in the price setting mechanism.
I as a small buy and hold investor believing that in the long term fundamentals will be the main price driver am not interested in betting against or with the market traders. Them meeting or failing to meet their objectives is of little relevence to me. They merely provide an environment in which one has to operate. One cannot predict the future and so it makes sense to spread one's net as broadly as possible which means investing outside the market cap.0 -
They merely provide an environment in which one has to operate. One cannot predict the future and so it makes sense to spread one's net as broadly as possible which means investing outside the market cap.
I'm not sure that this makes sense, given that the stock market is a zero sum game.
If you're able to buy in to companies with good fundamentals at good prices and never sell, and manage to remain diversified, then great.
But if most of your gains are actually going to come from selling shares, then the price set by the traders matters. Which means your investments are bets with or against them.0 -
it makes sense to spread one's net as broadly as possible which means investing outside the market cap.
I agree with your statement that it makes sense to spread one's net as broadly as possible, but you then make the assertion that the statement means "investing outside the market cap" which it does not. That is a conclusion which you have jumped to and a choice you have made, not the automatic sequitur to the statement you made.
I would suggest that spreading one's net as broadly as possible means choosing the broadest possible global tracker in the particular asset class you have selected.
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