lets say your fund has 1 share each in the best 50 companies in the ftse 100,

I think you are wrong on at least 2 fronts.

Firstly not all companies are traded on the FTSE 100 and many are not traded on the FTSE at all. A fund could be made up of a number of shares across a range of markets. On top of that you haven’t considered the size of the holding which may skew the return.
Considering these 2 things how can it be a zero sum game?

1/2% instead of 3% on a managed fund

Funds dont all charge the same fee.

if the index isn’t rising over a period of a year, the average fund/share won’t rise either.

Wrong again, what is the “average”share? I could make a killing by picking one rising share in the FTSE whilst others are falling. The index could fall through the floor but I could still be up. The only time the “average” is an issue for me is if either I hold a tracker or my fund happens to own that share.

but it appears that this is mostly luck

Then I have been lucky every year of the last 6! I think there are good funds and bad ones, just as charges vary.

and therefore you’re not better off picking a fund instead of picking an index tracker – however you’re worse off as the trading costs are higher.

You are basing your “therefore” on straw men! I have outperformed the FTSE over the last 6 years as a lot of fund owners have. Therefore you are better choosing a low cost high performing fund over a tracker.

back to the reason why i posted…..
any adivce on…
I’m looking at the shares ISA scheme, does that allow for buying foreign shares?

anyone got any recommendation for stock brokers? or share tips 😀

There was an ft podcast a few weeks ago on which platforms allowed foreign shares, as the currency transfers can be expensive.

Re share picking do your own research, i like the wake up to money podcast they go through the markets every day.

There will be a correction at some point which could be triggered by a random event. I wouldnt lump a pot of new money into the mkts at this level.

There will be a correction at some point

You said this 3 months ago 🙂 What are you basing this on?

I’m looking at the shares ISA scheme, does that allow for buying foreign shares?

Step in my office … 🙂

Actually you can’t deal with me directly… but chances are, if you end up dealing Intl shares (specifically US/CAD) via a UK retail broker Hargreaves/stocktrade(alliance trust)/Redmayne .. others are available … your order will end up coming through my desk as a Market Maker.

If it were possible to highlight your order from the rest (sadly it’s not) I put your first purchase down at the bid.

Good luck

I think you are wrong on at least 2 fronts.

Firstly not all companies are traded on the FTSE 100 and many are not traded on the FTSE at all.

ok, don’t use a ftse100 tracker for comparison. If you’re looking at a fund in the US, use a DAX tracker – etc. If you want to compare to a fund across 2 markets, 2 trackers. The point still stands..

Funds dont all charge the same fee.

true, but I can’t think of any managed fund that gets anywhere near the 0.18% that a typical FTSE tracker has – they’re normally in the region of 10x that

Wrong again, what is the “average”share? I could make a killing by picking one rising share in the FTSE whilst others are falling. The index could fall through the floor but I could still be up. The only time the “average” is an issue for me is if either I hold a tracker or my fund happens to own that share.

the average share is just that, a share that provides the average return. Its probably theoretical. And yes, whilst you maybe picked a share that beat the index by 10%, for every 1 share which did that which was purchased, another share, owned by someone underperformed the index by 10% as well.

Then I have been lucky every year of the last 6! I think there are good funds and bad ones, just as charges vary.

congratulations. But it is (to a point) luck.

You are basing your “therefore” on straw men! I have outperformed the FTSE over the last 6 years as a lot of fund owners have. Therefore you are better choosing a low cost high performing fund over a tracker.

yes you are, if you pick one. But picking one is (as above) a lot about luck. for everyone who picks a winner, someone picks a loser. Hence ‘zero sum game’ compared to the index. If you want to take the risk, good luck – you might (as you have), win, but on average you would (marginally) lose due to the higher management fees. I wouldn’t want to have had large sums of money in any of the below over the last 5 years

http://www.hl.co.uk/funds/fund-discounts,-prices–and–factsheets/search-results/j/junior-oils-trust-accumulation-inclusive/charts

http://www.morningstar.co.uk/uk/funds/snapshot/snapshot.aspx?id=F0GBR04RQG

http://www.lse.co.uk/ShareChat.asp?ShareTicker=LMI

I know i ve been on correction alert since the market hit its hi point again. Trees dont grow to the sky…

with no knowledge at all, i do wonder if the market can keep climbing, and if i should wait for a potential fall, before investing….

If you’re looking at a fund in the US

My funds are spread amongst a number of markets.

but I can’t think of any managed fund that gets anywhere near the 0.18% that a typical FTSE tracker has

Just because trackers have cheaper running costs dosnt make them good value!

the average share is just that, a share that provides the average return. Its probably theoretical. And yes, whilst you maybe picked a share that beat the index by 10%, for every 1 share which did that which was purchased, another share, owned by someone underperformed the index by 10% as well.

But that would only be significant if I owned all of them in a Tracker… I dont have a Tracker so their is not necessarily any downside to me at all..

congratulations. But it is (to a point) luck.

Any rise in a Tracker is also luck therefore. Or are you saying Tracker rises are guaranteed but chosen stocks are luck? You seem to want it both ways.

for everyone who picks a winner, someone picks a loser. Hence ‘zero sum game’ compared to the index

I think i have explained why that is not the case when picking a fund and is not even the case when picking a Tracker.

you might (as you have), win, but on average you would (marginally) lose due to the higher management fees

You are making a statement about something you cant possibly know and claiming it as fact. what is this “average” to which you refer and how do you know how every fund compares including its management fees?

I’m not sure whether you’re struggling with the idea that share investing is a zero sum game, or whether you accept that and struggle with the idea that in that world, minimising fees is a critical way of making money. If you don’t agree, that’s fine. there’s further reading here

https://www.vanguard.co.uk/documents/adv/literature/zero-sum-game-2013.pdf

you’re struggling with the idea that share investing is a zero sum game

Yes I am, can you explain it to me?

Edit: just read your attachment. I dont think it says/means what you think it means. Even if it does it doesnt change my assertion that potentially I can continue to make profits in a falling market. Even if it was zero sum (which I dispute) what difference does that make to me if my shares are rising?

and struggle with the idea that in that world, minimising fees is a critical way of making money

Nope, minimising fees is like the opposite to compound interest or the drag on growth through frequent trading. I have no difficulty with this concept however when people make generalisations about fees that simply suit their argument then that should be challenged.

If you don’t agree, that’s fine. there’s further reading here

That has quite a narrow definition of zero sum. The whole market can rise and with productivity improvements it should do so, so their ‘Zero sum’ can still increase year on year.

Even if it does it doesnt change my assertion that potentially I can continue to make profits in a falling market

…

what difference does that make to me if my shares are rising?

of course you can. just as you can make losses in a rising market. It doesn’t make a difference if your shares are rising, as long as your comfortable with the idea that selection of those shares (either by yourself or a fund manager) is partially based on luck, and the overall average of all those selections, with the impact of fees, is generally worse than a low rate tracker. If you think you’re smarter than the average punter, then you’re in luck 🙂

That has quite a narrow definition of zero sum. The whole market can rise and with productivity improvements it should do so, so their ‘Zero sum’ can still increase year on year.

very much so – I was not suggesting that you shouldn’t invest in shares, just that a cheap, low maintenance way to do that is to invest in a low-cost tracker which follows the market (thus benefiting from the year on year increases) – but doesn’t strim much profit off the top, which is exactly what the doc recommends

Index funds typically carry lower charges than
their active counterparts. At the same time, the
distribution of returns from index funds tends to
be narrower, with fewer instances of significant
out- or underperformance. Considering all of these
factors, we believe that setting a long-term asset
allocation based on pre-agreed investment goals,
and achieving this allocation through low-cost
funds, is likely to be the most successful approach
for the vast majority of investors.

Investors chronicle had a feature recently about market timing for new purchases, basically came down to time in the market not market timing. If iam buying a new share i look at the past 12 months hi and lo, and aim to buy at the midpoint. Doubt it woul work for tech stocks in the current environment.

and therefore you’re not better off picking a fund instead of picking an index tracker – however you’re worse off as the trading costs are higher.

Trading costs on most funds are practically zer0; there is no stamp duty, many platforms charge no dealing costs, and the spread is often zero. Initial charges (up to 5% or more!) are often negotiated to zero by the platforms.
You do have the ongoing charges( about 1.5%) to pay but the returns on a well managed fund will usually exceed those of a tracker. To prefer a tracker to a managed fund purely on the basis of fees is being penny wise and pound foolish.
If you want to know which funds are performing well, and should continue to do so, check here: https://www2.trustnet.com/Investments/SectorPerf.aspx?univ=O&SP_sortedColumn=PerformanceCurPerf.P1m&SP_sortedDirection=DESC

You do have the ongoing charges( about 1.5%) to pay but the returns on a well managed fund will usually exceed those of a tracker.

Every analysis I’ve seen has shown the opposite over any reasonable period of time.

Every analysis I’ve seen has shown the opposite over any reasonable period of time.

Your analaseses probably use a random basket of funds, or averages, completely ignoring that investors aren’t tied to a fund that starts to underperform. you do need to keep an eye on your investments, but a couple of hours every few months shouldn’t be too onerous…

Your analaseses

You what¿!?!??¿

as long as your comfortable with the idea that selection of those shares (either by yourself or a fund manager) is partially based on luck, and the overall average of all those selections, with the impact of fees, is generally worse than a low rate tracker. If you think you’re smarter than the average punter, then you’re in luck

You can keep saying it but it doesnt make it so. There is just as much luck involved in your rising Tracker if you assume the picking of any rising share is based partly on luck. Anyone with even a passing understanding of investing in funds can outperform a tracker.

Your tracker investments are just as likely to under-perform as a fund unless you assume past performance guarantees future? You seem to assume trackers guarantee future growth whereas funds dont. You are wrong on both counts.

You lot should have a read of this:

https://resoluteoptimism.bailliegifford.com/are-the-principles-of-modern-finance-redundant/

Then do a search for the work of the quoted Hendrik Bessembinder. You’ll never buy a tracker again (that’s assuming that you understand and are prepared to accept the concept on which he speaks).

I use the This Is Money portfolio to track my funds and also include a tracker fund. This allows me to simply compare performance over various time scales of my funds against the tracker so I can quickly identify what’s underperforming and potentially worth selling.

Overall I outperform FTSE by a worthwhile margin.

Overall I outperform FTSE by a worthwhile margin.

Over how many decades?

Over how many decades?

For me its only 1 decade or so which is when I started investing proper. Remember what Keynes said. in the “long run” we are all dead!

For me its only 1 decade or so which is when I started investing proper.

Of that 10 we’ve had a bull market for 8 years straight, and a ‘free’ 15% boost from the £ devaluation, so just about everybody is showing impressive paper gains…..

Repeating the same over the next couple of decades would be a neat trick..

Over how many decades?

I started investing properly in 1996 when I started working but had bought a few things before than. I was fortunate to have been studying investment in 1987 so was interesting to see what was happening with the markets then. So I’ve been following the markets to some degree for 30 years.

so just about everybody is showing impressive paper gains

Except Woodford.

Fundsmiths still going well but Woodford hovering around the zero point.

A query for those who sell ‘underperforming’ funds. How do you judge underperformance? Funds are subject to the same cyclic effects as the rest of the market, even if the peaks and troughs can be damped somewhat by the fund managers, and selling on a fall is generally unwise unless there are other reasons to sell.

Except Woodford.

He is playing a long game though, and had a bit of bad luck recently (as can any fund manager).

I’ve still got a big chunk in his funds and don’t intend to move it. Although I do keep mulling dumping his Patient Capital fund, but only got £10k invested, so it’s in the noise.

A query for those who sell ‘underperforming’ funds. How do you judge underperformance? Funds are subject to the same cyclic effects as the rest of the market, even if the peaks and troughs can be damped somewhat by the fund managers, and selling on a fall is generally unwise unless there are other reasons to sell.

I keep an eye on the Trustnet ratings posted above, and generally those funds performing well today are the same ones that have performed well for the last 6 months, year , 3 years etc. They may also have performed well for ten or twenty years but to me that is of less relevance.
I tend to stick with the same funds in each class – Japan, tech, EM atc, but do increase or decrease the weighting of each region/class depending on their performance and prospects.

I do tend to agree with you footflaps.

I’ve actually dumped more in there in the name of diversity and I think it’s undervalued currently. asempting as it is to keep throwing it at the quickly growing fundsmith like you say Woodford does seem better placed to weather storms. With big growth generally comes big losses.

Except Woodford.

He is playing a long game though, and had a bit of bad luck recently (as can any fund manager).[/quote]

Bad luck? That’s very generous. I call it a series of horrendous, entirely forseeable mistakes. The writing has been on the wall there for some time, just look at the content his funds: how many of those companies would you actually want to own? I can count them on the fingers of one hand.

I was copying the woodford income fund but hes had some howlers in there…provident financial the worst, then some the mkt has turned against..imperial brands, astra zenica, gsk i think.

Just shows even the experts can get it wrong, i fess up i sold out of centrica thank god, and sainsburys, they are now so cheap i m sure they ll be taken over.

so just about everybody is showing impressive paper gains…..

Except Woodford.

So it seems one of the most respected fund managers of his generation cant turn a profit in that period.

He is playing a long game though, and had a bit of bad luck recently (as can any fund manager)

Is there nothing you wont spin? If he cant perform when (as you say) everyone else is making gains, why are you still holding on?

Hes not making losses.

It’s just not performing as well as many other funds.

Oh yes he is. There’s a whacking great opportunity cost to owning any of his funds at the moment, because while they tread water – or go under in the case of WPCT – the rest of the market is on the up and up. In real terms he’s losing a fortune. And given the execrable state of that Patient Capital fund there’s a lot more to lose yet.

You can say that again… The Woodford equity fund made circa 2% over the last 12 months against Fundsmiths 24%

Woodford around 30% over the last 5yrs as oppose to Fundsmith 180%.

2% is bad as inflation is 3, i ve banked 10% but i think the ftses up 9%. Tbh i m happy at 5%, but i m greedy and preparing for a downturn.

This is what I don’t get about the Woodford apologists, especially those in WPCT. They say “ah, but it’s only 10% down [over 3yrs], it’ll pay back in the years to come”. But they never factor in the 75% gains that they have forgone in the mean time had they invested almost anywhere else.

Its classic human behaviour go be in denial about your losses, hence we tend to retain our losses and sell short our profits. Those woody numbers are poor though, i beat myself up over my cna and sbry losses, but then reinvested in a couple of winners.

I understand why people hold on though,its a tough call to crystalise losses.

A query for those who sell ‘underperforming’ funds. How do you judge underperformance?

Against similar funds. No point watching one continuously under perform against funds in similar markets wondering if you should sell. I do have a lot of funds so look for excuses to sell smaller holdings to concentrate on a smaller number.