If you would like to contact me
Email: thejollyprophet at gmail dot com
June 11, 2012 at 6:18 pm
I came across your blog today, very impressed with what you have achieved to date and hope you continue to achieve greater things. Your endeavour to allow retail investors access to large profitable funds is noble and I wish you success.
I particularly enjoyed reading your commentary on the Spanish Bank bailout and the likely impact on the EU and the markets in general.
June 11, 2012 at 7:25 pm
Thanks Kash for your kind comments.
Being 18 it is a bit hard to know where to start with achieving that. But I’m sure in a few years time I could be managing a fund, or investment company – making sure that retail investors get a healthy return on their investment.
Keep reading, as I’ll be writing a lot about how this European malarkey unfurls.
August 14, 2012 at 12:49 pm
What exactly would you do differently compared to all the other fund managers to get an absolute return? This is not a new idea and it is a flawed one especially in the financial crisis to try and time the market when all of the markets ended up becoming correlated.
Also are you FSA regulated? If not, then you are not allowed to post recommendations of stocks to buy and sell. You should also write a disclaimer to prevent any lawsuits.
August 14, 2012 at 10:02 pm
Hi Alex – you raise some very good points there. If I were a fund manager – I would select my shares on a buy low, sell high basis. For example someone following the ‘sell a FTSE tracker fund at roughly 6,000 and buy at roughly 4,000′ over the past decade would have seen some very handsome returns. The other option I would use, is being in cash, which is the only asset which isn’t correlated. What never ceases to amaze me is that most fund managers plonk investors’ money into shares regardless of how overpriced they are. They do this because they are wedded to the belief that “Equities always produce higher returns over the long run.” – well if you’d bought shares in the dot-com boom, I’m sure you would think that the long-run is very long. If they had sold at the first signs of trouble – then they would have kept their gains.
Yes you’re right, I’m aware that many people timing the market have failed – but something which you cannot ignore is how cyclical the markets are. Buy low, sell high – could it be more difficult? Many fund managers have failed because they used the strategy of BTFD – or buy the F*ing dip – in other words, buying every time the market decreases. That’s great until you have a financial crisis like that of 2007/8 and everything collapses and they are holding portfolios of shrinking assets
I am not FSA regulated. On this blog I am writing merely an individual. What is the difference between – myself expressing my opinions on what shares I buy and sell – on a bulletin board or on a blog like this? If people want to copy what I do – it’s their decision. It’s their due diligence. I merely perform some research and post an informed opinion on what shares, or indices I am buying and selling. You’re right though, that a disclaimer wouldn’t go amiss – given how litigious our society has become.
August 15, 2012 at 8:10 am
Having your money in cash would just produce negative real returns, which is against your mandate to produce “consistent positive returns of 8%”. Also dividends from companies can produce more than half the total return of a stock in a bear market and most fund managers are plowing into dividend stocks, because of the low cash and bond yields offered.
It is also about buying when the price is low, but everyone has their own way of figuring out when the price actually is low. For example in the book “What Works on Wall Street”, James O’Shaughnessy found using the S&P share price database that the best strategy was to combine value, growth and technical filters, which from 1951 to 1994, rebalancing annually, would have turned $10,000 into $8,000,000.
He also found that anyone with any sensible, consistent strategy would actually win in the long term. The problem with fund managers, as you suggest, is that they are continuously changing their strategies in face of client demands, when bear markets hit. Even in a bear market you should continue using the strategy.
August 17, 2012 at 11:39 am
You are right about cash and negative returns – but as it would only be for temporary periods of time, it wouldn’t make a big difference, would it? Surely it’s better to lose maybe 1 or 2% after inflation for a year or two, than be in the stock market that loses 20% (after dividend payouts)?
When I talked about “consistent positive returns of 8%” I was talking with regards to my employer, IFA International’s track record. Due to the relationships that we’ve negotiated with investment providers – we can offer low-risk investments which have generated approximately 8% returns for the past several years.
Lastly, that is a very astute last comment that O’Shaughnessy made and you shared with me. You are entirely correct that fund managers say “we’re in it for the long haul” – but when their fund value tanks by 40%, they are very swayed to sell to meet client withdrawals.
In conclusion then – all people really need is a consistent, coherent, strategy. With IFA International – our strategy is that we talk to a wide-range of fund managers, see how they expect the market to move and find the best place for people’s money. Every month we review how that fund is performing and if it doesn’t reach expectations – we will speak to the fund manager and move the money if necessary. Yes, I’ll accept that it may have its flaws – but surely by trying to protect your wealth, you can get a better return than fund managers who are excitable (and over-buy) at the peak and distraught (and over-sell) at the troughs.
August 18, 2012 at 9:13 am
I agree about using cash in hindsight, but who knows when the stockmarket falls that you should have been in cash? By then its too late, you would have sold at a 20% loss (expecting it to drop even further) and then the market rebounds again.
The point is that its very easy to sit here and say that you would just go into cash, but the problem is when! Most fund managers and investors are so bad at timing the market they buy high and sell low. Then say you had 100 stocks, which you had to liquidate to go into cash, the commissions would be huge, eroding away AuM.
I am not a huge fan of funds, because of the costs and the average track record of a fund manager’s alpha is poor at best. I think despite the argument that you should never be your own surgeon, people can learn how to invest on their own, because it is very simple and the only thing one needs to master is not letting emotions get involved, because this will lead to inconsistency. They will also generally do better than a fund if they do the hard work required to pick stocks, despite the fact we are continuously told by the ‘professionals’ that we need to excessively diversify, excessively rebalance portfolios and outperform a certain bench mark year after year.
August 19, 2012 at 12:56 pm
You are correct there. It is very easy with hindsight to do well in the markets! If only we had all known that the big 2007/8 crisis was coming, for example.
I agree that most funds are poor prospects – but there are a small portion of managers who are good and consistently produce alpha. These are the only kinds of active managers who should still be in the fund management business – they are the future. Anyone who has their wits about them in the investment management business is fully aware that a lot of funds are expensive dogs – but there are some good ones.
If you are not attracted to funds could also invest in a low-cost tracker, or alternatively you could do what you do with dividend-income-investor.com – select yourself a few shares carefully. You don’t need 100 stocks in your portfolio – just something like 10 or 15 different shares and you will have enough diversification benefits.
People can learn how to invest on their own, and I think there probably is a future for education of how to pick shares well. Even if that’s only retraining the awful former-fund-managers. Maybe you could launch some kind of education business? Or maybe you could launch your own fund some point in the future – should you accumulate a good track record with your algorithms, and do well in your current job? Either way – I think you’ve got a very interesting future ahead of you, Alex. 🙂
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