Donate to Remove ads

Got a credit card? use our Credit Card & Finance Calculators

Thanks to johnstevens77,Bhoddhisatva,scotia,Anonymous,Cornytiv34, for Donating to support the site

Index Trackers usually beat ITs

Closed-end funds and OEICs
absolutezero
Lemon Quarter
Posts: 1505
Joined: November 17th, 2016, 8:17 pm
Has thanked: 542 times
Been thanked: 653 times

Re: Index Trackers usually beat ITs

#451364

Postby absolutezero » October 19th, 2021, 5:20 pm

Arborbridge wrote:
absolutezero wrote:
Arborbridge wrote:
This seems to suggest that if I had listened to the fees argument to make a choice ten years ago, I would have lost out. Charts with income reinvested.


Arb.

What happens on a different time scale and with different comparator indices?
Interestingly, Finsbury 'lost out' (total return around 50%) to both a passive all world tracker (VWRL 70% total return) and an S&P 500 tracker (VUSA 100% total return) over the last 5 years.

Putting pictures on here is a faff, but use this: https://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/j/janus-henderson-asian-dividend-income-income-inclusive/charts to get the graph


Is see what you did there: changed the goal posts :lol:

But that wasn't the comparison mooted: it was FGT to FTSE all share. No one is disputing one could find something better than that!

Arb.

So if you *could* find something better, why put your money in (by implication) something worse?

UncleEbenezer
The full Lemon
Posts: 10692
Joined: November 4th, 2016, 8:17 pm
Has thanked: 1459 times
Been thanked: 2965 times

Re: Index Trackers usually beat ITs

#451375

Postby UncleEbenezer » October 19th, 2021, 6:12 pm

JohnB wrote:Research shows that funds performing in the top quartiles in one period often perform in the bottom quartiles in the next. This shows the impact of luck and reversion to the mean as much as changing manager skill. And no-one ever talks ruefully how they invested in a fund that underperformed the index so much it was merged into another fund and disappeared.


What kind of research? I could reach that conclusion or the opposite by sampling differently. And it seems almost all studies to hit the headlines cherry-pick their reference points (today's example in CO2 emissions with that cherry-picked (albeit longstanding) 1995 baseline to pretend we're doing great)!

And "no-one ever ..."? Advocates of trackers who had experienced underperformance in active funds should be huge fans of such anecdotes.

There is a lot of survivor bias and boasting in fund discussions.


That at least is entirely true.

JohnB
Lemon Quarter
Posts: 2497
Joined: January 15th, 2017, 9:20 am
Has thanked: 677 times
Been thanked: 997 times

Re: Index Trackers usually beat ITs

#451381

Postby JohnB » October 19th, 2021, 6:35 pm


scotia
Lemon Quarter
Posts: 3561
Joined: November 4th, 2016, 8:43 pm
Has thanked: 2371 times
Been thanked: 1943 times

Re: Index Trackers usually beat ITs

#451426

Postby scotia » October 19th, 2021, 8:47 pm

JohnB wrote:https://mathinvestor.org/2018/08/mutual-fund-performance-and-survivorship-bias/

Interesting - which is why it is often reported that the US market is so well researched that it is unlikely that a stock picker will out-perform an index.
But - what about the rest of the world, and particularly in niche markets - e.g. small caps. Can a stock picker with expertise in a particular area out-perform the index? And can the stock picker consistently do this in changing circumstances? I think a number of us are hopeful that this is true :)

Arborbridge
The full Lemon
Posts: 10373
Joined: November 4th, 2016, 9:33 am
Has thanked: 3603 times
Been thanked: 5231 times

Re: Index Trackers usually beat ITs

#451432

Postby Arborbridge » October 19th, 2021, 8:54 pm

absolutezero wrote:
But that wasn't the comparison mooted: it was FGT to FTSE all share. No one is disputing one could find something better than that!

Arb.

So if you *could* find something better, why put your money in (by implication) something worse?[/quote]

Quite right, quite logical. The difficulty in the past is that if one finds something better, someone else will find some other fund which has go-faster stripes. If you are saying that this one world girdling fund is the be all and end all, then we may as well pack up and just invest in that.

Is that what you are doing?

As I remember it, some of these world trackers are almost closet US funds, because that is such a huge fraction of the world market. Some may not be too happy with that.


PS as you know, I do not invest in that way because I'm one of these oddball folk who like to see income rolling in which gives me a living:)

JohnW
Lemon Slice
Posts: 506
Joined: June 1st, 2019, 7:00 am
Has thanked: 5 times
Been thanked: 176 times

Re: Index Trackers usually beat ITs

#451480

Postby JohnW » October 20th, 2021, 12:48 am

scotia wrote:But - what about the rest of the world, and particularly in niche markets - e.g. small caps. Can a stock picker with expertise in a particular area out-perform the index? And can the stock picker consistently do this in changing circumstances? I think a number of us are hopeful that this is true :)

Yes, it appears they can. Yes, they have in changing circumstances. A majority of them did outperform over the past five years; but a minority did over the last 10 years. How long are we investing for? How do we pick the time the outperformers are going to turn into the underperformers?
https://www.spglobal.com/spdji/en/spiva ... iva-europe

GeoffF100
Lemon Quarter
Posts: 4724
Joined: November 14th, 2016, 7:33 pm
Has thanked: 178 times
Been thanked: 1363 times

Re: Index Trackers usually beat ITs

#451708

Postby GeoffF100 » October 20th, 2021, 4:02 pm

There is a lot of research showing the futility of investing high performance funds in the hope that performance will be repeated. You will find ongoing statistics here:

https://www.spglobal.com/spdji/en/spiva ... -scorecard

Of course you can be lucky. The performance of some funds does persist for many years, but no more often than we would expect by chance.

stacker512
2 Lemon pips
Posts: 173
Joined: July 16th, 2020, 1:34 pm
Has thanked: 181 times
Been thanked: 51 times

Re: Index Trackers usually beat ITs

#451741

Postby stacker512 » October 20th, 2021, 5:55 pm

TopOfDaMornin wrote:For example, a World Tracker will usually beat ‘the average’ Growth ITs.


Is there an OEIC that can beat an IT for income yield? (yes I know you can go TR and sell as you need, but what if you just wanted something simple with no selling?)

I'm not aware of one. Perhaps that's why some people go for ITs, and that's their right.

SalvorHardin
Lemon Quarter
Posts: 2049
Joined: November 4th, 2016, 10:32 am
Has thanked: 5300 times
Been thanked: 2465 times

Re: Index Trackers usually beat ITs

#451756

Postby SalvorHardin » October 20th, 2021, 7:23 pm

Back in April 2015, a friend pointed out to me that the Nasdaq had just hit an all time high, having previously hit an all time high over 15 years earlier. That's a 0% return (plus dividends) for tracker funds (minus fees) in the supposed super stock index.

I checked what Foreign & Colonial and Finsbury Growth and Income had done over the same period. F&C was something like +90% whilst FGT was up by over 200% (both excluding dividends)

Granted, it's extreme cherry picking to take two peaks on the Nasdaq, and it's not what I'd choose as an appropriate benchmark, but even so..

"Nasdaq reaches new record high, 15 years after dotcom tech surge"

https://amp.theguardian.com/business/2015/apr/23/nasdaq-new-record-high-dotcom-bubble

GeoffF100
Lemon Quarter
Posts: 4724
Joined: November 14th, 2016, 7:33 pm
Has thanked: 178 times
Been thanked: 1363 times

Re: Index Trackers usually beat ITs

#451800

Postby GeoffF100 » October 20th, 2021, 9:33 pm

SalvorHardin wrote:Back in April 2015, a friend pointed out to me that the Nasdaq had just hit an all time high, having previously hit an all time high over 15 years earlier. That's a 0% return (plus dividends) for tracker funds (minus fees) in the supposed super stock index.

I checked what Foreign & Colonial and Finsbury Growth and Income had done over the same period. F&C was something like +90% whilst FGT was up by over 200% (both excluding dividends)

Granted, it's extreme cherry picking to take two peaks on the Nasdaq, and it's not what I'd choose as an appropriate benchmark, but even so..

"Nasdaq reaches new record high, 15 years after dotcom tech surge"

https://amp.theguardian.com/business/2015/apr/23/nasdaq-new-record-high-dotcom-bubble

Investing in just the Nasdaq was not a wise thing to do, whatever the subsequent performance. With a number of simplifying assumptions, theory recommends investing in a market weighted global tracker for the equity part of the portfolio. That gives clearly gives a good spread of risk. Nowadays, we have cheap trackers in the UK. In the past we did not. I was thinking about buying Foreign & Colonial after the 1987 crash. I wish I had, but I would not buy it now.

JohnW
Lemon Slice
Posts: 506
Joined: June 1st, 2019, 7:00 am
Has thanked: 5 times
Been thanked: 176 times

Re: Index Trackers usually beat ITs

#451877

Postby JohnW » October 21st, 2021, 8:24 am

SalvorHardin wrote:I checked what Foreign & Colonial and Finsbury Growth and Income had done over the same period. F&C was something like +90% whilst FGT was up by over 200% (both excluding dividends)

Granted, it's extreme cherry picking to take two peaks on the Nasdaq, and it's not what I'd choose as an appropriate benchmark, but even so..

Yes, it's nice to see such stunning returns. Global stocks returned about 75% during that period (not April-April, but it probably doesn't matter much).
But let's not overlook the cherry picking with FC, FGT. Was there something reliable in 2000 to tell us these were the investments we should have, and for how long we should hold them? Something that would be applicable today, even better? If not, it's interesting to look back, but it doesn't get us anywhere that I can see.

JohnB
Lemon Quarter
Posts: 2497
Joined: January 15th, 2017, 9:20 am
Has thanked: 677 times
Been thanked: 997 times

Re: Index Trackers usually beat ITs

#451903

Postby JohnB » October 21st, 2021, 9:43 am

My dad invested his pension lump sum in 5 different funds. 30 years later the best was worth 10 times the worst. I suspect some would have crowed about the best performer, he just said it shows you just don't know.

richfool
Lemon Quarter
Posts: 3492
Joined: November 19th, 2016, 2:02 pm
Has thanked: 1195 times
Been thanked: 1280 times

Re: Index Trackers usually beat ITs

#451908

Postby richfool » October 21st, 2021, 9:58 am

Peter Lynch's fund did very well against the S&P 500 stock market index, more than doubling the index, (about 45 seconds in, in the YouTube video below):

https://youtu.be/qSQLD6--3Ug

absolutezero
Lemon Quarter
Posts: 1505
Joined: November 17th, 2016, 8:17 pm
Has thanked: 542 times
Been thanked: 653 times

Re: Index Trackers usually beat ITs

#451948

Postby absolutezero » October 21st, 2021, 11:55 am

SalvorHardin wrote:Back in April 2015, a friend pointed out to me that the Nasdaq had just hit an all time high, having previously hit an all time high over 15 years earlier. That's a 0% return (plus dividends) for tracker funds (minus fees) in the supposed super stock index.

I checked what Foreign & Colonial and Finsbury Growth and Income had done over the same period. F&C was something like +90% whilst FGT was up by over 200% (both excluding dividends)

Granted, it's extreme cherry picking to take two peaks on the Nasdaq, and it's not what I'd choose as an appropriate benchmark, but even so..

"Nasdaq reaches new record high, 15 years after dotcom tech surge"

https://amp.theguardian.com/business/2015/apr/23/nasdaq-new-record-high-dotcom-bubble

So perhaps a way forward is to have a portfolio split into trackers (that evidence shows beat most active funds) and some of the better ITs.
But how to identify those ITs that will perform in the future?

I do own Scottish Mortgage (among others) but I'm not sure their recent success (which seems mostly down to being overweight in Tesla) is
a - down to luck or skill
b - repeatable consistently

absolutezero
Lemon Quarter
Posts: 1505
Joined: November 17th, 2016, 8:17 pm
Has thanked: 542 times
Been thanked: 653 times

Re: Index Trackers usually beat ITs

#451954

Postby absolutezero » October 21st, 2021, 12:07 pm

Arborbridge wrote:
So if you *could* find something better, why put your money in (by implication) something worse?


Quite right, quite logical. The difficulty in the past is that if one finds something better, someone else will find some other fund which has go-faster stripes. If you are saying that this one world girdling fund is the be all and end all, then we may as well pack up and just invest in that.

Is that what you are doing?


Moving in that general direction, but excluding China for example.

UncleEbenezer
The full Lemon
Posts: 10692
Joined: November 4th, 2016, 8:17 pm
Has thanked: 1459 times
Been thanked: 2965 times

Re: Index Trackers usually beat ITs

#451965

Postby UncleEbenezer » October 21st, 2021, 12:24 pm

Sorry, posted quip in poor taste, thought better of it.


Return to “Investment Trusts and Unit Trusts”

Who is online

Users browsing this forum: ekipazh and 17 guests