The last 5 years is not a reasonable period to judge a fund.Quiet the opposite I should thought
The last 5 years is not a reasonable period to judge a fund.Quiet the opposite I should thought
OK, I will just take my gains and leave the "judging" to others.
As I said earlier timing is everything. You could track the ftse over a 10 year period and lose money if you invested in 99 and sold in 2009. Over the 2 decades from 96 to 2016 you would have averaged around 70% per decade by reinvesting gains. I have made 100% in 5 yrs if I cash in now. Well run funds outperform a passive tracker.
Your confusing luck with skill surfer
I am sure Terry Smith appreciates your expertise Monkey. He has been extremely "lucky" but hey, what does he know!
That five years is a short and unrepresentative period for stock markets.Especially the last five years.If there's a 50% correction will you stick or twist surfer.Waves go up as well as down you know.
That five years is a short and unrepresentative period for stock markets
Good advice. Thats why I invested in a fund whose average company was established in 1901, and has survived two world wars and the Great Depression. Or is that still not a good enough pedigree for you Monkey?
With Fundsmith your chasing heat following the herd.Herds can and do change direction.Usually in a violent manner
With Fundsmith your chasing heat following the herd.Herds can and do change direction.Usually in a violent manner
Now your just incoherent, Is this the kind of bluster that justifies the big bucks?.
the way I look at the funds vs individual shares vs trackers is that the average fund\individual investor does (assuming they are trading in publicly held shares) as well as a tracker, minus the costs, which are typically higher (they seem to average around 1% pa, whether you select yourself and actively trade (obviously that depends how much etc) or choose an active fund).
So - if you picked 1000 funds or shares (assuming they're into publicly traded stock), and split your money between them evenly, you'd end up with slightly (1%) less cash than if you'd bunged it all into a tracker.
The trouble with funds doing really well (like FS is for now), is that some other fund is doing equally badly on the other side. I'm not great at [s]predicting the future[/s] picking a fund, and for a fairly substancial chunk of my money, I don't really want to gamble on that decision, so I prefer trackers
Where this gets wooly is if the fund is trading in currency markets, non-public stocks (ie private equity) etc, then they might have access to increases that the average joe can't get in a tracker.
it's also worth noting that whilst the FTSE is at an all time nominal high, it is around 40% lower than it's inflation adjusted-all time high (and, if measured in dollars, a whole load lower than that again). It could collapse tomorrow, but I'd argue it could just as equally keep rising for another 10 years
With Fundsmith your chasing heat following the herd.Herds can and do change direction.Usually in a violent manner
Anyone who knows anything about Terry Smith, who afterall wrote the seminal work "Accounting for Growth", knows the one thing he is not, is part of the herd, always has been an independent thinker.
Mudshark-Just because the the FTSE had a bad patch you sold three funds.This makes no sense to me at all.The FTSE is always rising and falling.If your picks were good to start with why sell?How are you going to deal with the extreme volatility of emerging market investments?Sell every time there's a few difficult periods?Your going to be paying alot in charges.
It's worth pointing out, if the OP is still reading, that funds, generally, don't incurr dealing costs; no stamp duty, no spread (unless you're into weird shit), No platform dealing fees (with HL and CS, maybe others)and no fund entry and exit fees if bought through online platforms. iWeb will charge you a fiver to buy or sell but won't levy a holding charge. Active funds have never been cheaper, and apparently they're now taking business back from the passives...
https://www.ft.com/content/7f9b5cd6-7d00-11e7-ab01-a13271d1ee9c
monkeyc: if these funds are such deathtraps, what [i]would[/i] you recommend someone in my position does then? (financially naive, looking to put away ~£100 a month for the next ~14 years to build up a little trust fund for my daughter)
The trouble with funds doing really well (like FS is for now), is that some other fund is doing equally badly on the other side.
What! Its not a zero sum game you know!
monkeyc: if these funds are such deathtraps, what would you recommend someone in my position does then? (financially naive, looking to put away ~£100 a month for the next ~14 years to build up a little trust fund for my daughter)
Well I know what I have been doing for the last 5 years and in spite of making satisfactory (if unspectacular) gains over that period it would appear I am doing it wrong!
There are a number of things that have opened up this type of trading, 1 is the Internet which allows investors to exit the market "quite" quickly if they want to and 2 is availability of dealing platforms which allow easy access to these type of funds and share dealing.
Just looking at my stocks now and some days some win, some lose. Next week sentiment changes and last weeks losers are todays winners.
Staying diversified averages out all this, the bottom line seems to be fairly static.
Q tempted to go the tracker route pot correction.
What! Its not a zero sum game you know!
compared to a tracker, surely it is? Care to explain why otherwise?
To simplify things : If I have a tracker tracking the ftse 100, with an equal share on each company (ie 1% of the company's value), which rises by 5% a year and you have invested in a fund which is only invested in 2% of each of the 'good' 50 companies in the ftse 100, so it rises by 15% a year, someone else, somewhere has shares in the 'bad' 50 companies, so will be losing 5% a year. You can't have a company, or a share in a company with no owner
With Fundsmith your chasing heat following the herd.Herds can and do change direction.Usually in a violent manner
The corollary is Neil Woodford who refused to follow the heat and invest in tech stocks, and thus weathered the 2001 tech crash better than most funds....
Dont mean to be rude 5lab but either you dont understand how a fund works or I am misunderstanding you.
The trouble with funds doing really well (like FS is for now), is that some other fund is doing equally badly on the other side.
A fund is a basket of shares, say 20 shares. Every one of those share could rise or consequently every one could fall. Typically some rise/fall more than others etc based on a million criteria. Hopefully the net effect is that "my" fund rises consistently and I make a profit. That doesnt mean any other funds or shares have fallen to provide my gain.
Yep, with a 10 year bull run virtually every fund is showing a gain.....
I've been running a app, that lets me "play" with a virtual £25,000. and since August, i've increased this to £29,000. I virtually bought shares in companies all over the globe, Hong Kong and america mainly. Could someone tell me if that £4000 profit would actually get eaten up by lots of charges and commissions if i were to do this in real life?
I'm looking at the shares ISA scheme, does that allow for buying foreign shares?
It depends where the 4k came from, it could be say 1k in dividends in which case it would simply ne credited to your account with no deductions for buying or selling.
If you had actually bought 25k worth of stock, say 10 x 2.5k trades and held for 3 months, you would have paid for 10 buys at say 100 gbp, stamp duty at 0.5%, so afurther 125 gbp, so c 250 in initial charges.
Not a bad return, smart money is on the timing of banking your returns, they can disappear as soon as they appear.
[i]If you had actually bought 25k worth of stock, say 10 x 2.5k trades and held for 3 months, you would have paid for 10 buys at say 100 gbp, stamp duty at 0.5%, so afurther 125 gbp, so c 250 in initial charges."[/i]
not sure i follow, if stamp duty is 0.5% then 0.5% of 25,000 would be £125? where does the other 125 come from?
the 4k is purely from stock price increases, no dividends.. presuming i get the price its says, am i right there is a sell and buy price?
10 buys will cost you c 100 to 125gbp, plus the stamp duty at 125, so 250 is your total set up cost.
So no divis, shame i like divis, your 4k is also tax free, or up to 11.5k as thats your cgt allowance. Divis are only taxed at 7% though, over your 2k allowance.
A fund is a basket of shares, say 20 shares. Every one of those share could rise or consequently every one could fall. Typically some rise/fall more than others etc based on a million criteria. Hopefully the net effect is that "my" fund rises consistently and I make a profit. That doesnt mean any other funds or shares have fallen to provide my gain.
missed this first time round
lets say your fund has 1 share each in the best 50 companies in the ftse 100, and over a 1 year period they rise in value by 100%. You're nice and happy. all good.
If, over the same period in time, the ftse 100 rises by 50%, you've beaten the index soundly.
but for that to happen, the 50 companies that you didn't have a share in rose by an average of 0% - nothing at all. Someone has to own these shares - its not possible that all the 'good' shares are owned and all the 'bad' ones aren't - so for every fund/investment that is in the 50 'good' companies, there's a fund/investment in the 50 'bad' companies making no money at all.
at the same time, a tracker has a share in every company - the good ones and the bad ones. The rate of return is half as good as the 'good' fund, but only half as bad as the 'bad' fund. At the same time, the management costs are way less - 1/2% instead of 3% on a managed fund.
this is why there is a zero sum game, compared to the average index. if the index isn't rising over a period of a year, the average fund/share won't rise either. If the index does rise over a period, the average fund/share will rise by the same amount. If you happen to pick a good fund/share, that's great, you're ahead of the game, but it appears that this is mostly luck - 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.
Thats a fair point, 1 other thing to bear in mimd is volatility. I bought a share in feb 17 for 1.40, its now 1.40, so no capital gain if i had held it.
However, it has cycled between 1.4 and 1.52 3x since feb so i have turned it over 3 times, 3 x say 6p each cycle as you never pick out the his and los, is 18p, so a banked gain of 18p.
There are a few similar shares.
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]I'm looking at the shares ISA scheme, does that allow for buying foreign shares?[/i]
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, [i]owned by someone[/i] 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, [b]if[/b] 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.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
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 [i]should[/i] 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).
