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Brett Investment Newsletter - November 2011
Passive Investing goes ballistic
A quick look at recent IMA statistics for the first quarter of this year show that index tracker (passive) funds had their best-ever quarter ever; up 19 per cent on the previous year.
Already hugely popular in the States, UK investors, mainly via fee-based IFAs, are wakening up to the increased supply of factual data and logical reasoning that favours passive over active fund management.
That data is compelling, showing that over extended periods, such as five or 10 years, for bonds and equities, the majority of managers fail to beat the index.
Research has also identified the culprit, and it is not necessarily because active managers are "bad". The data shows that cost is the cause of many managers' failure to beat the index return. Not all managers are bad, indeed there are some very good managers, but their need to overhaul the drag as high total expense ratios create an often impossible hurdle to overcome. Low TERs mean more of the return achieved goes in to the client's pocket rather than the fund manager's, increasing the potential after-costs return to clients.
More advisers are questioning the TERs being paid for mediocre net-of-costs performance and deciding that index investing is the better route. The true long-term impact of cost is also becoming clearer. Assuming the same return, a fund with a TER of 1.6 per cent will erode 33 per cent of the client's portfolio over 25 years. An index fund with, say, 0.2 per cent charge will erode less than 5 per cent of the portfolio.
Source: FTadviser ‘New Star rising’ 28.07.11
Nucleus recently came out tops in the ‘Platform of the Year’ awards.
This award is for the Wrap platform that the judges deem to have made the greatest advance or been the most innovative in 2011. The judges felt that Nucleus has a unique proposition which is highly regarded by its users, is innovative, and has secured itself a strong financial position.
Our other platform offering – the Standard Life Wrap – won this award in 2010!
NEW – Inspiring Life!
As film quotes go, there can’t be many better than Forrest Gump’s, "Life is like a box of chocolates ………….you never know what you're gonna get”.
I think it sums up life and its uncertainty rather beautifully. Like all of you I have both good and bad days but remembering to appreciate all that life throws at me is not always easy. The older I get the more determined I am to be conscious of the preciousness of it all.
I am often struck that many people in life have so much money but little time or energy left in life. Time is strange – it is three-dimensional – the past, present and future. Instead of enjoying the moment I often catch myself looking to the future for myself, my family and my clients OR I sometimes reminisce and look back at the past in a sort of nostalgic (or even regretful) way. But the present is where I want to be, experiencing the now and immersing myself fully in life’s precious little ebbs and flows.
Someone recently reminded me that life is like a ‘three-legged stool’. I am sure that I don’t need to point out that you need all three legs when you sit down on a three-legged stool or you are going to just fall over. As time passes by the legs on your stool grow as you grow as a person. It they don’t grow in unison you are going to fall over. For me those stool legs are health, family and my business. Personally I need all three to thrive.
So just like investing money, in life we need to be disciplined too. If like me you listen to Simon Mayo’s fabulous evening show on BBC Radio 2 you’ll be familiar with his them tune, “…..enjoy yourself, it’s later than you think”.
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