ETF The problem with Index Tracker ETFs

I haven't done a word count on it so I don't know. However, in an attempt to compress your rant down a little, I asked one of my kids who is in to this sort of stuff to do me a favour.

STW: Purchased in January 2003

From then to yesterday's close.

Capital Gain: 13.3% pa equivalent
Income: 6.7% pa equivalent
Total Return: 19.6% pa equivalent
Current Value: Six figure amount
Sales: Nil
Buys (including re-investment): Plenty

Cost of financial advice: $0 - unless I retrospectively charge for plonking the original stake into the product.

 

Many buys per annum??

 

Originally only DRP. After I relinquished control and handed the portfolio over I don't know but I'm sure there has been a few.

PS: Quick call and overall it's more than 40. And for the entire holdings:

Total return since January 2003 is 14.6%. I thinks it's pretty OK result for a 26 yo.

 

Nice stepping stone for them, imagine the chicken that could be bought with that solid return!

 

Does this mean you regret all those ARG buys & should have stuck with VAS?

 

It's totally up to them. While I have encouraged my children, whatever they do is their choice.

By the way, wouldn't it be better to buy a chicken farm - and in my case a coffee plantation?

Regrets should not be included as part of investing. Once it's done, it's too late.

 

Not likely, still getting vas arg and chicken and partner is getting vgs and vas too so quantities of shares and chicken increasing every quarter.

Bhp had a nice announcement yesterday had an old holding of them from old employee share plans where after 3 years they match your holdings and I did that for 6 years, so got 6 years of matched shares on top. Thinking of selling and topping up arg and vas and the freezer with chicken!

 

Well done. Now that's good value advice right there. 19.6% p.a total return for a financial advice fee of $0. Ill sign up to that service thank you.

 

Me too, even I can afford that.

 

All jokes aside, we have already received some of the best advice ( I know its not officially advice and we are not supposed to refer to it as advice ) for free just by being on this forum. Generally speaking I believe the knowledge gained from this forum and its members is more valuable then any other single available source.

 

I think it is a situation where people are, in the main, relating their experiences of what worked for them and what didn't. Then throw in various thoughts and details about different products, the investment value (or lack of) of those and examining the concepts of investing outside of a comfort zone. It's broad.

There have been very few exceptions where some posts have been of the "I did this and so should you" nature but I think the moderators do a good job of stomping on those very quickly. And with good reason (Hi there, ASIC).

 

You know I would love too but alas I'm a sick puppy and find reporting season exciting which sadly uses up most of my allotted time on the computer at the moment.

Maybe if he sticks around long enough, reckons he likes genuine debate so maybe he will. Then again he may just go the way of that other FP with all his magic numbers for timing the market.

Meantime its heartening to read others putting the logical case.

As a shortcut I'll reference this video that does a good job of the principals, everything in it can be verified with peer reviewed research and historical observation.



Exceptions to the general rule exist, some by chance some may even be by skill but the time frame to distinguish decisively is very long.

If somebody claims to be a worthy specific case ie the exception to the general rule and wants to charge you a fee to ride their coattails the obligation is on them to prove to an auditable standard their 'entire' results over a long enough time frame to eliminate chance, or at least offer a guarantee(never seen one of those). If they can't/wont run away and implement the proven general case for low cost broad based investing.

Besides @Nodrog you always reckon I shouldn't pick on the how do I say politely Elderly. Why somebody is still working for fee income at a well progressed age when they have a history(cough) of outperforming the market has my comprehension entirely stuffed.

ps Financial Planners with a proper understanding of financial markets, honesty, transparent fee for service, a simple set of product tools and an emphasis on helping with Behavioral issues could very well offer value. Sadly this does not describe 95% of the industry.

 

Invest in what makes you comfortable and in what suits your objective and nature. Investment wouldnt work if we all had the same idea. Personally I think STW is a terrible investment. Was invested in it for 3 years, was a massive opportunity cost especially when you compound those losses over decades a moderate loss is huge. If you consider inflation, oportunity cost which I dont, I just count it as the interest cost the annual dividends are negative. The risks for returns are unacceptable. It has taken 20 years for the share price to double and on my rough calculations . If you include compounding dividend and are generous you would have 200% return in dividends per share , but only a TSR of 300% which to my way of thinking is not a 19% return but more like 8%p/a which is inline with ASX 200 returns.

 

This is just more noise in the Echo chamber, and cherry picking. The best fund managers dont behave like this. they fly under the radar try to go unnoticed they buy companies the crowd arent following. They dont need to lure in ever increasing clients to with low fees than pay peanuts to some-one to manage them . You can count them on one hand. It is not hard to pick the best fund managers with a tiny bit of effort and research. For a start you should look at funds that are founder ran , who are heavily invested in there own Fund. Whose ideas and philosophy align with yours. Who are accessable and answer question, who commumicate there thesis on companies. They reduce weighting's and take profits if they think a company is getting overvalued/overweight and explain why they think the funds are better deployed elsewhere. Of course one of the important things to consider is keyman risk. As William suggested they will close funds to new investors at a relatively small size, $500 million as more than this they can move the market too much against themselves.

 

I guess that depends on how you define "the best fund managers". In the context of this thread, a good fund manager is one that can produce outperformace above the market average and after fees over the very long term.

I'm not sure a single data point you suggest looking for gives any meaningful indication that the fund manager under analysis is likely to be one of "the best" by that definition.

Plenty of founder run funds go bust. Do you have the numbers to suggest that a founder run fund is any more likely than a non-founder run fund to do well? What are those numbers based on? That the founder believes in their own ability and invests their own money in the fund is not evidence that they actually have any ability to begin with.

As above.

Confirmation bias. Are you suggesting your own philosophy is likely to produce outperformance in the future? What is that belief based on? What if your philosophy is wrong? If it is not wrong, why do you need a fund manager?

I suppose this can't hurt but what evidence is there that their thesis is correct and likely to lead to outperformance? What evidence is there that communicating that thesis to you is likely to produce outperformance? For a start, the ability to produce outperformance is independent to a willingness to communicate how that outperformance was/is going to be achieved. In fact, if anything, it seems outperformance could only be hurt by communicating the method of outperformance in a way that could lead to that information getting out to other market participants?

Plenty of research to indicate doing this leads to underperformance in the overwhelming majority of cases. Therefore, it would seem counterproductive to utilise this as a data point for determining the best fund managers.

As mentioned above, it might be nice to know why your fund manager did what they did but communicating the reasons is independent of the ability to produce outperformance. At best, this a feel good data point that has no correlation to whether the fund manager is "the best" or not.

Only relevant if that keyman has a proven track record of long term outperformance that can be proven to be due to personal skill rather than luck. I don't know of any such person but I do admit to not being interested enough to research every self proclaimed whiz kid stock picker that comes down the pipe.

So they are likely closed to new investors long before a member of the general retail investor public even knows they exist. And I would argue it would be extremely hard to verify long term outperformance of the manager before their fund has grown to $500 million FUM. So even if you could get in before they close to new investors, at that point you are taking a guess regarding their actual ability, which makes all the above mentioned points irrelevant anyway.

 

A case in point about fund managers albeit only one and only for 12 months. Credit though for admitting to errors but it'd be difficult to hide them.

‘Not perfect’: Magellan investor admits mistakes were made in FY21 | Business News World

 

I actually hold a mixture of individual stocks, Exchange Traded Funds and Listed Investment companies or Trusts. My expectations are based on performance and before I invest I must form the view that this manager or stock will increase in value within a 2 year year time frame. I review the sales history together with the underlying profits generated together with modest levels of dent (less than 50% of the shareholder equity) This is called homework.

 

Orders, revenue, earnings, cash and debt. Ok so basic accounting principles to evaluate the short term financial health of the business. Sounds like you're putting your skills and experience to use in a way that you feel comfortable with.

Would you be prepared to share how many individual.holdings you hold and what % of your total.equity exposure that represents?

Ookkaaaay

 

I have Amazon and Afterpay in my index portfolio. Tesla too.

If your fund has beaten SP500 over a 10 year period then you are doing well.

 

Nostradamus has returned to tell us that the market is going to go up or down.

The World Indices thread is the placr for bets on direction - they've been predicting corrections for years now.

This forum applies modern portfolio theory to discuss investment in market portfolios using index ETFs. To make us believe in active investing will require a change in mathematics.