ETF The problem with Index Tracker ETFs

The problem with Index Tracker ETF's is you are investing in the Good, the Bad and the Ugly. Active ETF's may get it wrong from time to time, however their growth is superior over most years. You need to understand the strategy of the manager before you invest and research is what good investing is all about.

 

The SPIVA report begs to differ.

We have 60 years evidence to the contrary that active management does not beat passive management after fees over the long term.

There will always be active funds that outperform. The probability of identifying them ahead of time is very low.

As a matter of interest, what is your connection to the active management industry?

 

Market timer

Our Story & Passion

 

And wrap fan I see from their site.

Wraps and why advisors love them — Passive Investing Australia

 

Yes I noticed that too.

Also noticed the pitch for SMSFs proposes that most industry/retail super fund fees range from 1% to 2%, and then proceeds to make a case based on fees of 1.5% and a $200,000 member balance, ie about $3,000 per annum.

Hmmm where I'm looking they aren't anything like that!

 

Site could use an update

New Client Offer

Why are you looking for a change? It is common for clients to tell us they are concerned about the losses suffered from the Global Financial Crisis and with negative or low returns since the GFC, they feel that their previous planner has lost touch with their needs.

 

It's funny that one comment has made multiple members go to the website and each take away little bits and pieces - I like the following comment the most:

You should determine this amount from your existing fund, if costs are an important consideration for you.

Nah costs aren't important...

 

We are financial advisers and we use active funds in preference to index funds due to performance. You only need to look at Hyperion to understand the difference. We talk to these managers on a regular basis, so we understand why they purchased Amazon when it was in its early days and more recently Afterpay. They hold both Afterpay which was bought @ $12.00 and they also hold Square. Quality managers are good at selecting disrupters as they understand what works and what fails.

 

I'm not sure how providing an example of a single Growth fund manager in a decade where Growth has shot the lights out tells us anything about the future.

Maybe we should all be investing in ARK.

 

Woohoo, my fund is still in the top 10!

I went through a long and thorough screening process in 2011 when I left the SA public service (as an employee you can only use their super fund), to find one that wasn't just the default of my new employer. I ended up with First State Super (now Aware Super after a recent merger).

I track relative performance each year, happy if it's at the pointy end.

 

The point I am making is you need to put in the hard yards and that means taking time in understanding why a particular manager is successful whilst others are dismal failures.
There is not a day passing that we do not have a discussion with a fund manager, however I agree with you, we would all like to know where the next great move will come from from, Tomorrow we are having a webinar with 3 CEO's from various small caps and we research these companies in advance to formulate our questions including reviewing every announcement made by these companies over the last 3 months.
I hold in my portfolio many small caps and my strategy is to sell 50% of my holdings when they double in price and we do this on a regular basis. You will never find these opportunities by investing in an indexed fund.

 

Stock picking financial advisor. Appreciate your transparency.

 

All well and good and I wish you the best.

However......

For your average joe who does not have the time to do that, I assume you believe they would be best served by paying your fees for your advice. Add those fees to the active managers fees charged for providing the actual investment vehicle.

What's the likelihood the average joe is going to be able to buy the same yacht as you and the active manager?

But hey, if you can convince someone you have the secret sauce, contrary to the overwhelming historical evidence showing how truly unlikely that is, I say go for it. A fool and his money are easily parted and I don't waste time trying to save all the fools.

 

All active options which explains the high fees. HostPlus for example has a number of much lower fee index options.

 

What I do in my own portfolio is very different from what I do for clients, however everything we do is based on research.

 

No-one has a secret sauce as you put it, however we have a group that exchange ideas and we do achieve reasonably good results. The point I am making is nothing comes easily and you need to put in some effort and have a plan to take profits while you still have them. I personally invest in my SMSF and the proceeds are tax free, because we are in pension phase.

Why Property Chat interests me is many members are independently minded and there is an opportunity to exchange ideas that come from a different prospective.

 

I am really more interested in an exchange of ideas and if you want to talk about something more interesting than just banter. Tell me about what you are currently thinking about this market as I believe we are sitting on a knifes edge and it could go either way.

From a business prospective, we help many people achieve outcomes, but we prefer partnerships where we undertake the tasks where clients that don't have the time, but still want to select their investments based on research and how much risk we are comfortable in taking. We have a recipe which we follow and we somethings make mistakes, however we get more selections right. Anyone that tells you that they succeed 100% of the time is a liar.

 

I’ll bite.

I think everything is looking extra frothy at the moment. Equities , property and any thing else you can think of investing in. It sure could go either way. But that is always the case.

As a long term buy and hold investor it doesn’t really matter which way it goes in the short term as long as the long term trend of going up continues. In saying that any time we have a large drop it’s hard to stomach regardless of your long / short term view.

The problem I have with the current overvalued market is that it was overvalued when it was sitting at 6000 last year. The when it broke 7000 earlier this year it was overvalued. Now at 7400 it’s overvalued. Later this year when it hits 8000 it will be overvalued. Then I look back and go maybe last year at 6000 is was undervalued. Next year when it hits 8000 plus I might be looking back and think maybe 7400 wasn’t so over valued after all.

I have no idea what to think anymore. I have been playing this game with equities for 5 years now and every time I think I have some idea what’s going on or going to happen next at some point in the future my prediction is right and then the next it’s wrong.

So I can acknowledge that I have no idea what will happen next week, next month or in 6 months time. But I will keep investing as from what I understand the long term market trend is up.