Hello and welcome to this month's edition of Investment Insights.
As we come off the back of one of the best investment market years in recent memory, there has been a significant increase in the number of articles in the press looking at the active versus passive debate. According to Rice Warner, for the year to June 30, the median growth fund with a typical asset allocation of 61 to 80 per cent invested in growth assets, returned 15.6 per cent. So the question that many will be asking is "what did my fund do?", and if it did better or worse, why? In most cases the answer is that you were probably in an active fund and were either lucky (or unlucky) depending on the "call" that your active manager made. However as noted in this article from Mark Hubert at Marketwatch, in the long run the vast majority of professional advisers who try to get in and out of the stock market at the right time end up doing worse than those who simply buy and hold through bull and bear markets alike.
However taking a buy and hold approach is often easier said than done! In this piece from The Motley Fool website, Morgan House lists the four mistakes that many people make when managing their investments. The mistakes are a lack of diversification; trading too much; planning for the long run but reacting to the short run, and asking the wrong questions. Now if you are nodding your head because you make these mistakes, then reading this article might help set you straight on the things you should be doing. These include separating decisions from emotions, doing nothing - which is often the best choice - and understanding that investing and entertainment are two different things!
Our Director of Wealth Management, Daniel Minihan, regularly posts on these types of issues and recently put up a very interesting piece that looked beyond the legend of the most famous investor of them all: Warren Buffet. What he found was that despite the mythical stories of his investment omnipotence, the reality, at least in modern times, did not live up to the hype...
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