Active VS Passive

OK. Ta. I don't use the product or any other similar software.

Did a mental number crunch so VAS is c$52,000 of income (I think.)

 

According to Sharesight, if you include franking credits, VAS returned around $80k in income on $1.5M last year.

VGS around $37K.

 

Now I know a good deal when I see one, sign me up!

 

Thanks. My frame of mind is to exclude franking until tax time. It's a credit. The dividends/distributions which go into my account each payment is my focus but that's just me.

 

OK did some numbers.

Highest price VAS on 24 December 2018 was $70.08 according to Yahoo finance. Chosen as it means you would be eligible for the January 2019 distribution. $1.5m would have bought 21,404 units of VAS.

Total distributions from January 2018 to January 2020 - again from Yahoo finance - was $4.24.

Total income $90,753.

Franking not included.

Please correct those numbers as it is possible I have made an error. However, taken at face value would the majority of the plebs have trouble living off that and pay for their day to day expenses or would they need to live off Home Brand baked beans to make ends meet?

 

Make that January 2019. Me dumbo and careless.

 

I think it’s not that hard. Part of the problem is most people would do less than 20 hours of work for an entire year in their stock selection process, make sub par returns if not lose money, and then equate that to picking stocks is a mug’s game.

Re large funds, many are not to make money, they’re there to protect money. Most large funds would be happy making 7% pa if it meant they weren’t losing money, than try to make 50% pa if it meant there’s a chance their portfolio could close down 10% in one year.

 

I will have to respectfully disagree. While I agree that fund managers aim not to lose capital, I am sure if it was easy to achieve 50% p.a returns they would be achieving that for investors.

Just to be clear my argument is not that no one can achieve a 50% return in a year. My argument is it’s not easy, and it would be rare that anyone could achieve 50% returns year in year out. If you can then you should be setting up your own equities fund and you would have people throwing money at you to invest on your behalf. Charge the standard 1% fee and you will be a billionaire in no time.

 

Perhaps easy is not the right word, but at the small end it’s not as hard as it’s made out to be. As you grow bigger beyond $500m+ FUM, making 50% becomes a lot harder. Re fund that’s exactly what I’ve done - AFSL licensed et al although we’re more at 25% pa over 4 years.

 

I am just wondering whether any of you invest certain part of your funds directly, hence 'active' as opposed just 'passive' mutual funds, or index, or ETFs, or LICs, etc...?
Would your strategy differ if you were in the accumulation phase or in pension phase?
Did any of you make a killing (at least 30 x or possibly even 40 x in two or five years respectively) and if so did you continue investing in the same way?
Would you invest in the same way if your holdings suddenly did increase say 30 x ?

 

Ain't So Bad - The Irrelevant Investor

Conclusion:
"Don’t get me wrong, I still believe index funds make a lot of sense for most people, but let’s not lose sight of the big picture. How much you invest and where you allocate your investments will have a much larger impact upon your life than investing in a fund that might or might not beat its benchmark."

 

Great achievement but 4 years is a short time in whats been a great run up (especially if you had US exposure)

The Legg Mason Capital Management Value Trust's after-fee return beat the S&P 500 index for 15 consecutive years from 1991 through 2005

Fortune magazine called Mr. Miller in 2006 "the greatest money manager of our time". Bill Miller had a high IQ and access to research the average punter doesn't, beyond 2005 his fund lost dramatically to the U.S. index.

Legg Mason's Bill Miller leaves firm amid faded glory

 

Yes and no. 2016 was a tough year. Most funds were down in 2018. Only have to look at the LICs. Certainly 2019 was a rising tide, so it’s important to look at the amount of risk taken to achieve the returns. My portfolio is typically 20-30% shorts, plus another 20-30% in gold and cash.

Hard to compare with the big funds. Some of them are very macro driven; also with more FUM, it’s harder to do what I do as it doesn’t move the needle investing in a $50m company that goes to $700m.

 

I bet a $25 chip at the Sydney casino on red and won. Doubled my money in 5 seconds. I'm so good at gambling but I haven't had the chance to back up my semi-trailer of cash. I'm also waiting for the red/black algorithm to confirm when it will be 100% red.

 

Taken the ill-gotten gains off the table yet or still waiting for string theory to confirm convergence to unification?

 

Lol how is buying afterpay the same as gambling roulette

 

Was wondering how the active vs passive part of my portfolio performed during this downturn so far. Just did a quick comparison for the month of March. I am happy to say that every single one of my active funds outperformed the equivalent index in the month of March. Hyperion captured only 50% of the march downside of the Aus index. The next test will be to see how they go when the market starts recovering. Will they be able to get back in at the right time and capture enough of the upside to stay ahead of the index.

 

Well out of curiosity I had a look at this Vanguard stuff which people talked about. Basically apart from buying in the dips between Oct 15 and Feb 16, you’d be underwater now if you bought any time in last 6.5 years. Which is kind of like... might as well pick you’d own stocks.

 

In my SMSF I have Magellan Global Fund, Magellan High Conviction Fund and Hyperion Australia Growth Fund (and also VAS and VTS). The active funds have outperformed the relevant index - over a 3 and 5 year period, despite their fees. The downside protection of the Magellan Funds seems to have worked this quarter (only bought in SMSF in December but have in my own account for longer)

Even my direct holdings - running this over 10 years I would still be ahead of VAS. Not an expert or anything but buying index fund only guarantees market returns, nothing more. If I had a few millions I would be happy with the dividends of VAS though.

One thing I have also seen that can impact performance is FX - I have MSFT and V - both up YTD nominally in base currency but weaker AUD gives 10% more in outperformance (this could be the other way down the line).

 

And history repeats. Active loses less than the index during the drop (not surprising, it gets flogged in rising markets), allowing them to crow about performing better than the index and being a safe harbour. People then shift to hedge funds and active investing from the index thinking the active investors know what they are doing.

Whenever I think about active investing as an allocation I go back to the Buffet vs "best of the best" hedge funds year-to-year table. Wazza picked the WORST time to make the bet - immediately before a major drawdown and therefore facing huge headwinds, but still annihilated the hedge funds over the next decade.



For the average person a bet on active is a bet against human ingenuity and intelligence in my humble opinion. For active to work for me means that there are a few smart people in finance who are better than the rest over the long term, I can pick them, they want my money, and they will remain with the same fund for decades. I don't like my chances.