‘Tis the season…
I don’t know about you but normally when I get this close to Christmas the stress of finding that right present (in my case for Shona) can really get to me. Even with the advent of the internet, Christmas shopping must be close to the top of my list of pressure points. I need to buy that certain thing, for that certain someone (Shona), by that certain time (Christmas eve); but I don’t quite know how. As a consequence I end up throwing money at the problem and paying over the odds.
Investing for some can be a bit like that, only that the same pressure to buy a certain stock by a certain time is always on, not just in December. In any transaction, there are three variables you may be willing to compromise; price, time and quantity. As the buyer of the last-minute Christmas gift, you are pushed for time so you may pay more. If you are determined to get that tablet/bear/hare/designer handbag (delete as applicable) you may pay more. The same is true of stock market trading. If your investment style requires you to buy a particular stock at a particular time, you will generally pay more for it (i.e. active fund managers).
This is one of the key reasons why we have selected Dimensional* to be one of our fund managers. They are patient and flexible in their trading and can wait for the market to come to them; so only trade when the price is right, like waiting until January to buy Christmas cards in the sale.
In the real world that is pretty dull….in the fund management world I’d say it couldn’t be any more worthwhile…now if only I could apply that same patience and flexibility to my Christmas shopping!
*Recent analysis by ITG (source Dimensional) ranks Dimensional as No 1 in terms of trading costs across all stock markets (other than the UK where it is better than 96% of all peers and in Emerging markets where it is better than 98%).
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