Is it arrogant to think that a lone individual can outsmart and outperform an active fund management firm that has many times the resources and capital?
It would certainly appear so.
Your fund manager is probably smarter than you, has more money than you, and has a team of analysts and PhD’s working for him/her.
Do you really think you have a chance?
The Active Fund Managers Secret
There is an embarrassing little statistic that most active fund managers (active means the managers who aim to beat the market) would rather the public not know about.
Historically, the majority of active managed funds have failed to even equal, let alone “beat” their benchmark indices.
Standard & Poor’s Index Versus Active Funds Scorecard (SPIVA) released in Mid-Year 2009 again shows that The S&P/ASX 200 index has outperformed two-thirds of active Australian general equity funds over the last 5 years.
Here’s the Bad News…
So we have a problem. If these very clever and hugely resourced people can’t beat the market, what chance do you and I have?
This tells us that either fund managers are not as clever as we think, or outperforming the Index is harder than we think? I would go with the latter, as on the whole, the fund management game attracts significant talent.
Size Does Matter (the Smaller the Better!)
The good news is that HomeTrader believe that as individuals we have some distinct advantages over large funds which make it significantly easier for us to produce outperformance.
The problem is that the more money you have to invest the harder it becomes to produce outperformance. Think about it, if a strategy can be used with tens or hundreds of millions of dollars then funds will use the strategy and the ‘edge’ will disappear. All that competition at the big end of town makes it very tough for the large capital pools.
To produce outperformance with big money requires exponentially more cleverness. This is not to say you don’t need to be clever even to produce outperformance with smaller amounts of money, you do, but not to the same extent.
Real Strategies with Real Pedigree
It is all too common in the “wealth education” industry to come across seminar spruikers teaching strategies that can be found in your average $30 book about investing. No matter how impressive these simple strategies might sound, if it’s common knowledge, it probably doesn’t work.
HomeTrader is one of the few educators who have truly clever people researching and developing unique strategies that have real pedigree and rigor behind them. You certainly won’t find them in a book.
Here’s just a few of the techniques taught to HomeTrader members of late;
Rotational Investing – This active investing technique taught in their advanced course involves using proprietary models for constructing equity portfolios with a goal of significant outperformance.
Mean Reversion – The trend is your friend right? – Wrong! This approach trades against the punters and looks to capitalise on their irrational, impulsive decisions.
Where to From Here?
So what should you do with your money? You can:
Recruit active managers. Entrust your money to a fund manager and cross your fingers that you picked the right one. Don’t forget that past results have no significant bearing on future results, so don’t look to track record for help.
Give up on outperformance. Invest in index funds and get market returns. Australian equities produced an average return of about 11.6% over the past 20 years.
Get clever. Provided you have less than $3 million to invest, you might not have to be as clever as you think. HomeTrader has done the hard work and can serve up thoroughly researched, practical strategies to you on a silver platter. That’s what they do.