bg
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Jul 26, 2019 8:27:29 GMT
Post by bg on Jul 26, 2019 8:27:29 GMT
You can’t afford not to follow it! Passive almost always outperforms active over 10 years. Are you aware of the 10 year bet warren buffet won against a hedge fund manager? SP 500 outperformed hedge managers 5 hand selected top hedge funds. If hedge funds with all their experts can’t outperform what chance does an amateur have? i never argue passive V active (to much like religion or politics) but there is a certain irony in the fact that Buffet would have won the bet using his own active fund instead of the S&P 500(and beaten that as well i would guess) It's horses for courses..some people are massively pro passive and vice versa. I would prefer a passive tracker v 5 selected hedge funds. How do you define an expert? I know there are lots of people working for hedge funds who think they're world beaters when in reality they blagged it or had a lucky run. I don't spend a huge amount of time researching my selections but I do have my macro view so what I do is find people who have a view that is similar to mine and then let them do the heavy lifting, research etc and cherry pick their best ideas. For example I really like John Barron's investment trust portfolios (he has them on his website and two of them are reproduced in the Investors Chronicle every month). I also like Ian Cowie's selections (Sunday Times and Citywire). Likewise the guys that run Aurora investment trust, love their value approach and religiously read their monthly reports (and their trust is my biggest holding). I would advise people who aren't experienced investors but want to lean more towards active as opposed to buying a world tracker read as many articles on investing they can (Investors Chronicle and money sections in the Sunday papers are a good start) and look for people who leave you thinking 'yeah I really agree with what they're saying here' and then look at what they are invested in. Works for me but as I said its horses for courses.
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Jul 26, 2019 9:25:50 GMT
Post by Deleted on Jul 26, 2019 9:25:50 GMT
Interesting debate
I don't like to look at just 10 years, especially the last 10 years where nearly every boat has risen with the tide. As with P2P, I am more concerned by drops over the last 20 years, that is because I understand my relationship with money which is probably different to yours. (most people have different relationships with this subject and I suspect it one of the most critical things people should sort out before investing).
I don't know anything about hedge managers and their 5 hand-selected top hedge funds. My own selected funds have done better than any passive I've looked at so far, year on year since 2010 when I took on managing my money full time. Which passives do you recommend?
Much as I admire WB I don't see myself in his league, I see myself more as a sheep than a wolf.
But, given your clear confidence in passives, I will embark on a study of them.
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macq
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Jul 26, 2019 9:56:41 GMT
Post by macq on Jul 26, 2019 9:56:41 GMT
the other point being that even in America most people would not be using hedge funds but cheaper mutual funds if looking at an active investment
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macq
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Jul 26, 2019 14:57:55 GMT
Post by macq on Jul 26, 2019 14:57:55 GMT
the other point being that even in America most people would not be using hedge funds but cheaper mutual funds if looking at an active investment
This forum is weird.
We go from talking passive vs active to suddenly a tangent on hedge funds.
I'll make it simple to digest :
Your average retail investor should stay away from hedge funds. Full stop.
The above is even more so the case if you're the sort of investor who has a penchant for passives rather than active investing.
think not so much a tangent as a swerve as people were talking about Buffett's bet on trying to beat the index but hopefully you noticed the words "not using" in my post (before i get the blame for wiping out peoples life savings )
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Post by Deleted on Jul 27, 2019 8:51:50 GMT
For those who are still interested, I looked back to my core fund and trust selection tool in trustnet to when a "passive" first entered my selection group. Just to keep the numbers simple let's look at 5-year growth. I've not compensated for fees but generally, I assume I pay 1% for "active" (of course it varies). I've also added in those Funds I also selected or had selected at that time with latest 5yr numbers
Vanguard FTSE Developed World ex-UK Equity 95% Vanguard US Equity Index 120% Fundsmith Equity 178% Lindsell Train Global Equity 177% Liontrust UK Smaller Companies 95% Baillie Gifford Global Discovery 143% First State Global Listed Infrastructure 92% Fidelity Global Technology 213% Polar Capital Global Insurance 136% Man GLG Continental European Growth 118%
These figures suggest that during a generally benign bull market as we have had in the past 10 years a passive strategy would not have beaten my active-manager strategy. However, I am far more interested to see what would happen in a bear market. Since I find timing impossible to achieve would a good fund manager know when to sell better than I would? Right now I'm betting yes.
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bg
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Post by bg on Jul 27, 2019 9:25:04 GMT
These figures suggest that during a generally benign bull market as we have had in the past 10 years a passive strategy would not have beaten my active manager strategy. However, I far more interested to see what would happen in a bear market. Since I find timing impossible to achieve would a good fund manager know when to sell better than I would? Right now I'm betting yes.
But the vast majority of equity fund managers can't just sell even if they think there's a bear market imminent (which for the most part they never do). By definition they have to be invested in equities so its just a case of buying something they see as having a lower beta as opposed to a stock that's more highly correlated to the market itself. For a global technology fund that's pretty impossible, whatever they do they are likely to fall more than the index levels. You could look at multi asset funds (so they can switch from equities into bonds etc) but in the long term I think equities will outperform (albeit with higher volatility). For what its worth I think its impossible to predict a bear market. Yes some people do but some people also guess the lottery numbers.
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Jul 27, 2019 9:26:36 GMT
Post by Deleted on Jul 27, 2019 9:26:36 GMT
Good point, all I'm asking is will they (the selected managers not the majority of fund managers) do it better than me.
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littleoldlady
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Jul 27, 2019 10:23:24 GMT
bg likes this
Post by littleoldlady on Jul 27, 2019 10:23:24 GMT
Good point, all I'm asking is will they (the selected managers not the majority of fund managers) do it better than me. There's exactly a 50% chance that they will.
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hazellend
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Jul 27, 2019 10:28:41 GMT
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Post by hazellend on Jul 27, 2019 10:28:41 GMT
Good point, all I'm asking is will they (the selected managers not the majority of fund managers) do it better than me. There's exactly a 50% chance that they will. Actually over 10 years there’s only about 10% after costs that will beat their benchmark index . The evidence is there in black and white. And the outperformers of today are more likely to be the worse in future. If active managers could match the fees of passives I’m sure a lot more would beat the market, but the fees are the key. Also the churning of stocks rather than buy and hold creates an additional cost. Gotta pay for those poor managers Porsche’s/yachts and private school fees though!
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Jul 27, 2019 10:42:29 GMT
Post by Deleted on Jul 27, 2019 10:42:29 GMT
I have no real interest in benchmark indexes, they were only introduced in the 80s for fund managers and IFA to explain why they were doing so badly. "look I'd have made you more money if I had invested elsewhere" is frankly a silly argument and was offered to me by a major IFA just before I sacked him.
The numbers are all that matter.
Again I'm not really interested in "most", or the "average". Who wants to invest in the average? I want to invest in the best, consistent, low noise, non-stressful funds available.
I've thought about the haystack investment approach and like the "rising tide floats all boats" I'm still not buying it partially/mainly because the figures in my bank account don't buy it and partially, when I have followed that approach (for some shares in the early 2000s) it only gave me average performance.
Still, I might buy into one of the Vanguard passives but only because it might fit into a space in my second/third tier fund packages, it would need more careful monitoring than I normally do but the $ exposure maybe worth the extra work. Worth the chat and thank you Hazel.
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bg
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Post by bg on Jul 27, 2019 11:30:00 GMT
Actually over 10 years there’s only about 10% after costs that will beat their benchmark index . The evidence is there in black and white. And the outperformers of today are more likely to be the worse in future. If active managers could match the fees of passives I’m sure a lot more would beat the market, but the fees are the key. Also the churning of stocks rather than buy and hold creates an additional cost. Gotta pay for those poor managers Porsche’s/yachts and private school fees though! But there are active managers that charge zero management fees, just a performance fee if they outperform their index (Such as Aurora investment trust which is my largest holding). That's definitely putting their money where their mouth is. If what you saying about only 10% of active managers beat their index is true then they must be very confident of being in that 10% - otherwise their pay is zero. That gives me a lot of confidence.
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hazellend
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Jul 27, 2019 14:18:56 GMT
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Post by hazellend on Jul 27, 2019 14:18:56 GMT
Actually over 10 years there’s only about 10% after costs that will beat their benchmark index . The evidence is there in black and white. And the outperformers of today are more likely to be the worse in future. If active managers could match the fees of passives I’m sure a lot more would beat the market, but the fees are the key. Also the churning of stocks rather than buy and hold creates an additional cost. Gotta pay for those poor managers Porsche’s/yachts and private school fees though! But there are active managers that charge zero management fees, just a performance fee if they outperform their index (Such as Aurora investment trust which is my largest holding). That's definitely putting their money where their mouth is. If what you saying about only 10% of active managers beat their index is true then they must be very confident of being in that 10% - otherwise their pay is zero. That gives me a lot of confidence. Hadn’t heard of aurora. Have they outperformed their benchmark regularly? How much do they charge if they do beat the market?
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bg
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Jul 27, 2019 20:01:43 GMT
Post by bg on Jul 27, 2019 20:01:43 GMT
But there are active managers that charge zero management fees, just a performance fee if they outperform their index (Such as Aurora investment trust which is my largest holding). That's definitely putting their money where their mouth is. If what you saying about only 10% of active managers beat their index is true then they must be very confident of being in that 10% - otherwise their pay is zero. That gives me a lot of confidence. Hadn’t heard of aurora. Have they outperformed their benchmark regularly? How much do they charge if they do beat the market? It's the guys whorun Phoenix. They took over the UK's worst performing investment trust in 2016 and run it similar to the Phoenix fund. I think they have underperformed their index since they took over but it doesn't worry me. They have run Phoenix since 1998 and the returns have been brilliant. 887% return since inception v index return (FTSE all share + dividends) of 195%. More importantly of that, I just agree with their view of the world, their analysis and their investment criteria. Its deep value investing, over the long term I believe it will outperform significantly. Their charge is 1/3 of the outperformance - but its clawed back if they underperform in future years.
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hazellend
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Jul 27, 2019 20:59:33 GMT
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Post by hazellend on Jul 27, 2019 20:59:33 GMT
Hadn’t heard of aurora. Have they outperformed their benchmark regularly? How much do they charge if they do beat the market? It's the guys whorun Phoenix. They took over the UK's worst performing investment trust in 2016 and run it similar to the Phoenix fund. I think they have underperformed their index since they took over but it doesn't worry me. They have run Phoenix since 1998 and the returns have been brilliant. 887% return since inception v index return (FTSE all share + dividends) of 195%. More importantly of that, I just agree with their view of the world, their analysis and their investment criteria. Its deep value investing, over the long term I believe it will outperform significantly. Their charge is 1/3 of the outperformance - but its clawed back if they underperform in future years. Interesting, will look into this more. That is a great fee structure.
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macq
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Jul 29, 2019 6:49:05 GMT
Post by macq on Jul 29, 2019 6:49:05 GMT
hopefully you noticed the words "not using" in my post (before i get the blame for wiping out peoples life savings )
Was just checking you were awake in the back of the class. Like to think so - as i started saving with the PO One Shilling savings stamps back in the 60's when they used to come round the school every week and you got to fill your little book up (but now i'm on here so i'm not so sure!)
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