Just select companies “that have already won” the gains are smaller but you are buying into established brands who have proved their ability to ride out turbulent times. They have solid management teams in place etc and they are largely based around repeat purchase items. Once you have bought dont sell! Funds haemorrhage money through buying and selling stocks and fund fees. The latter is lowish with Fundsmith when done through a platform (III) and Smith buys and holds rather than trying to latch onto the next big thing.

Lots of funds outperform Fundsmith (and its not for me to convince anyone) but my investments are for 10-15 years plus so I am happy to make steady gains without the heart attack ups and downs that can go with trying to make quick gains.

That’s really interesting surfer, given our earlier discussions. You could change the word ‘Fundsmith’ in that quote for ‘FTSE100 Tracker’ and the same principles would pretty much apply.

You could change the word ‘Fundsmith’ in that quote for ‘FTSE100 Tracker’ and the same principles would pretty much apply.

I didnt say they didnt I questioned your comments about managed funds. I dont have time to reread the thread but you infered Trackers provided better long term returns than managed funds. I argued that is not true of all funds and your remarks were too sweeping. I also asked what tracker funds had returned the same as Fundsmith over the last 5 years? You also hinted that the FTSE will certainly grow which I challenged. It may not, it may fall but like all of these things it depends on your timeframe, its almost all “timing” in the end.

Trackers generally provided better long term returns than most managed funds.

Important caveats (which I think I made, and if I didn’t I should have), as it’s all gambling… It’s just a bigger gamble picking a managed fund that will out-perform the market.

I also asked what tracker funds had returned the same as Fundsmith over the last 5 years?

I can’t find one. However, 5 years is not long term, 15-20 years is long term.

Fundsmith has only been around for 5 years. 5 years is a reasonable timeframe. The scope of your argument is meaningless, “generally”, “most”….

I’ve been investing in active funds since starting work 20 years ago and generally buy and hold however I do identify poor performing ones from time to time to sell then to invest elsewhere. A tip here is to sell in the morning as you should get the current price rather than tomorrow’s price – do when the market has fallen that morning and can be worth a few quid – I just sold 3 UK ones a few days ago as I saw the FTSE starting to fall. I am now buying in emerging markets to spread my risk away from the UK/EU/US where most my investments are.

BTW, I use Interactive Investor as a low cost platform for larger portfolios and also use the this is money portfolio tracker as easy to see performance over time of all funds in one quick hit so identify the bad ones. I also have a tracker in there so I can see how I’m doing compared to that.

Oh and Woodford’s Equity Income fund performance is dire over the last 12 months!

https://www.trustnet.com/Factsheets/Factsheet.aspx?fundCode=KEFAZ

The scope of your argument is meaningless, “generally”, “most”….

It’s really not, but I may be expressing it poorly.

We have to talk in terms of ‘generally’ and ‘most’, because none of this is a certainty. However, most managed funds do not beat the index:

That’s taken from this article, where Jack Bogle, founder of Vanguard, explains it better than I do:

http://time.com/money/3956351/jack-bogle-index-fund/

I think a key point of this though, as in GrahamS’s example above, is the to differentiate the type of investor. Active investors, who enjoy and have the time to read around the financial press, investigate market trends, reassess investment strategies etc. can, sure, select managed funds that they think will do well and move in and out of them if they start to go stale. There are obviously a few of those on this thread, and I’m not going to tell them what they should and shouldn’t do.

However, there are many more investors who are passive; they’ll pick some funds and forget about them. These people are better off (generally) in a low-cost tracker and gaining the index increase over time.

That’s, no doubt,what people with trackers in the Japanese markets thought in 1989.Look what happened next.

Like I said:

We have to talk in terms of ‘generally’ and ‘most’, because none of this is a certainty.

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.

IHN,the large influx of rookie investors into ETFs,how do you think they’ll react when prices fall by 40/50%?

Mudshark-Just because the the FTSE had a bad patch you sold three funds.This makes no sense to me at all.

I had already identified them as poor performers, just like to time my selling.

It is stealing and investors are entitled to an appropriate level of return for taking on risk. This has been artificially taken away/stolen from them. More stupidly, this is also forcing them to taken in mis-priced risk. That is ultimate folly that always ends in tears.

CB pretend that they found a golden bullet, They didn’t. They found smokes and mirrors. The eventual tapering will expose juts how naked they are/are not. We shall see. As I said – caveat emptor

IHN, the large influx of rookie investors into ETFs,how do you think they’ll react when prices fall by 40/50%?

Some will panic and take their money out, which is generally (that word again) the wrong thing to do. However, the people that do this would very likely have done the same if they were in a managed fund and the market was falling.

Some, the savvier ones, will ride it out if they can, knowing that markets fluctuate.

The remainder, the truly passive investors that I think are the majority, will do nothing, the same as they would do if they were in an under-performing managed fund, because they won’t even know about it. This defacto inaction is actually the right thing to be doing.

gillain tett in today’s FT is worth a read

As is Miles Johnson in last weekends FT money, on the subject of fiddling…

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 predicting the future 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

Take a look at Bitocoin up 5% Today and about 95% this month.

https://www.bitstamp.net/

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 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)

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.

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 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.