Passive Investing - The Evidence, Part 1: The Outperformance Myth

http://sensibleinvesting.tv -- the independent voice of passive investing The Outperformance Myth: How the £4 trillion invested by UK fund managers more often than not produces a below-average return and fails to match, never mind beat, the average market return over the long term. Are the fund managers as smart as they like to think they are? Financial gurus John Bogle, Charles Ellis and Ken French, amongst others, think not. Part 1 of an 8 part series - subscribe to www.youtube/.com/thesensibleinvestor for the full story Investing for the future... It's an issue none of can afford to ignore. No one's job is safe these days... How would you cope if you lost yours? We're all living longer too... So are you saving enough to fund 25 years or more of retirement? Can you really afford to pay for your children or grandchildren to go to university - or help them onto the property ladder? And what about all those holidays you promised yourself? We entrust the vast bulk of our investments to fund managers. Here in the UK, according to Her Majesty's Treasury, the industry has more than four TRILLION pounds of investors' money under management. Fund managers invest people's savings wherever they see fit - mainly in equities, or shares in listed companies. They claim to be experts at making our making grow, using their expert knowledge to pick the shares that will outperform the market. But all too often the returns they produce are considerably lower than the average return of a benchmark index like the FTSE 100 - or the S&P 500 in the States. For veteran investment guru John Bogle, the problem is simple. Fund managers just aren't as smart as they like to think they are. As it means trading against the view of numerous market participants with superior information, buying or selling a security is effectively just a bet. So, whilst your fund manager might lead you to believe it's his knowledge or intelligence that enables you to beat the market, he's really no better than a gambler. So, you might be lucky enough to choose the right fund manager. But you could just as easily pick the wrong one. According to the financial services company Bestinvest, there are currently nearly £10 billion of UK investors' money languishing in what it calls dog funds - in other words, funds which have underperperformed their benchmark index for at least three consecutive years. Ultimately, of course, fund managers are businesses. They exist to make money for themselves. They want our business - even if it means persuading us to invest in a fund which they themselves wouldn't want to put their own money in. So, to summarise... Regardless of the impression they like to give, fund managers regularly produce less than the average market return. Buying and selling shares is little more than a gamble, and strong returns are often down to luck. It's harder than ever before for a manager to outperform the market consistently. Commercial pressure means fund managers often advertise funds they wouldn't choose for themselves. And remember... Although there are good managers out there, picking the next star manager is almost impossible. For more videos like this one, visit http://sensibleinvesting.tv

Comments

1. Great stuff. Education, education, education!
2. This is so true. Holding gold or an index over 10 years is better than most fund managers can achieve. It's called over trading to justify your existence!
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4. Congratulations, great piece of important work. Will change investors lives.
5. Great series. Thanks
6. Great job!
7. Very well done. Thank you!