Active VS Passive

Thank you Dunno. Appreciate you flagging this. Looks unlikely I'll be able to jump through IBKR's hoops to open up that side of the account in time. Also, sounds like I may fail the vetting process at the moment anyway

We'll go with a GGUS/GEAR strategy unless there's something else worth considering from available shares on the ASX that gets suggested.

 

A long time ago I was right into trading SPI and commodity futures. That explained the reason for my premature grey hair. If someone thinks the more leverage the better then futures trading will soon help them discover their true risk appetite.

 

OwenAnalytics

Over the year to June 2023, active managed funds in Australia destroyed $4.5 billion in wealth from retail investors. Half of this was a straight transfer of wealth from the pockets of innocent investors to the pockets of fund managers. The other half was genuine wealth destruction through incompetence.

Every year it is the same story - why does it continue?

 

Stock Faithful Ride $7 Trillion Rally as Market Timing Backfires
Bloomberg, 9 December 2023

• Buy-and-hold beats all technical tools tracked by Bloomberg
• Market timers tempted to call top as index hovers near 4,600

For all the bad things supposedly raining down on Wall Street, it’s shaping up to be a big year for stock bulls who simply sat tight and refused the temptation to outsmart the market.

In fact, buying and holding equities has trounced 22 technical strategies used by traders to navigate their ups and downs. The sit-still plan has paid off handsomely after the S&P 500 touched its 2023 low on Jan. 5 only to climb steadily to its highest point on Friday.

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Reviving old thread. Loved reading your journey @big.

I'm paying FP ongoing fee each year ~3k to manage portfolio ~120k of two passive and two active funds. Contemplating biting bullet and switching to VAS/VGS split. I feel the ongoing fees are killing my returns and likely only justified if much larger amount invested.

You still happy with your passive decision? Any urges to head back to the dark side (active funds)?

 

Glad you have enjoyed the thread.

$3k to manage $120k portfolio. Add to that the active funds fees and you are giving a good chunk of your return away in fees.

Very happy with my decision to go passive and have not looked back once. No longer need to check how each of my at one point almost 15 active funds are performing or underperforming compared to an index approach.

As I was wrapping up that experiment I recall that nearly every single active fund that I had held had turned into under performers even though when I entered them every single one had been over performing across the measured time frames.

I think regardless how big or small your portfolio is a market index based portfolio is all that most people should be investing in.

I look at my portfolio with a very long time frame in mind. Like multi generation time frame. Unless someone can give me some solid guarantees that a particular active fund can outperform with that sort of time frame in mind then no interest in active funds moving forward.

I’m not much of a gambler, and the odds show the majority of actives underperform and even more so the longer the time frame. So if someone asked you to place a bet on a horse that has odds of winning ( outperforming ) that are under 20% which is what I think the Spiva report shows as the number of active funds that can outperform the index over a 5 year period. Would you place that bet? I know I wouldn’t. Hence why I won’t be betting on active ever again.

 

2.5% (3/120) is a big hurdle to overcome

 

Read, read, read and continue educating yourself. Passive investing is very much a KISS approach, and the more you learn, the comfortable you'll feel making the switch and never looking back.

I was in your position a few years ago, made the switch and not a single regret. My only regret is not having more $ sooner to dump into VAS/VGS.

 

Are you getting anything besides the "portfolio management"? Seems like a very expensive setup but if the FP is doing plenty of other things for you the fee may be justified.

 

Active vs Passive

 

@AndrewM Portfolio management and setup insurances. FP has been ditched, next step redeploy cash into VGS/VAS.

 

And important to note is that those who do outperform the index rarely stay in that 20% of winners for very long. So the odds are actually a lot worse they would seem!

An anomaly with the Australian market given the heap of rubbish mining stocks at the lower end of the market means that the odds may be in favour of “active” small cap managers outperforming the market but “fees still matter”.

 

Even ASX small and mid caps dropped away in the latest SPIVA report with 77% underperforming over 10 years

https://www.spglobal.com/spdji/en/spiva/article/spiva-australia/