In my time, I met a lot of fund managers. Some were smart, some were not. Some were nice, some were assholes. Some were honest, some were crooks (one of the reasons why your unit trusts or funds were not performing was because the cheap stock I bought for them when into their personal account rather than the funds that they managed, i.e. your money).
But regardless of who or what they are, they have one thing in common. They need to perform better than the market. All fund managers need to find money to manage. They charge a fee on the amount of your money that they manage for you. So the logic is if they are not good at managing your money, why the hell should you pay them a fee to do so?
But can stock picker actually perform better than the market? Well, yes, sometimes but not year in year out.
Because these guys charge you so much money, they have the money to hire there best ad and PR agencies to help them give excuses on why they fucked up with your money.
That would have been fine if this guy didn't come along.
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| John Clifton "Jack" Bogle |
"An index fund (also index tracker) is a mutual fund or exchange-traded fund (ETF) designed to follow certain preset rules so that the fund can track specified basket of underlying investments.[1] Those rules may include tracking prominent indexes like the S&P 500 or the Dow Jones Industrial Average.." - Wikipedia.
So, basically an index fund buys a basket of stock with your money that resembles the market such as S&P 500. But with a difference, lower annual fees charged to your fund. Sometimes they are as low as 0.3%. They have a fancy name for this kind of things: "expense ratios".
Let me give you an example. A local mutual fund click here for factsheet charges you 6.5% just to let them manage your money. Then they charge you another 1.85% annual fee to help find stocks to buy so that you will make some money. If you keep your money in the fund for 5 years, you will end up paying these assholes 3.15% per year to manager your money. And if your fund made 9.45% gain this year, they will take one third of your profit!!! And they tell you that's reasonable? Fuck them!
By comparison, Vanguard or other ETFs tell you, I will only charge you 0.3% per year (not all ETFs are low fee, ok? Do your research) just to put your money to track the market. That is one tenth of what these genius fund managers charge. Who will you give your money to?
You might say, how can Vanguard charge such a low fee? You know what? All the stocks that they are holding in the funds are just sitting right there for the long term. They would be stupid not to lend them out for a fee. Let's say you think Apple (AAPL) is trading too high at $118 and you want to short it for a profit, where will you borrow stock to short it? Answer: Index Funds.
So, back to the fund manager. They have this trouble where they perform in some years better than the market and others not. Guess what? Some smart asses started buying stocks that are largely representative of the market so that their funds performs "closer" to the market. It makes it easier for them to show that they are more clever than you in their marketing brochures.
These fuckers are called "Closet Indexers". Read this. This article basically says all over the world investors are moving from "active management" of their funds by to "passive" like ETFs that just tracks the performance of the market. They realised that the high fees they pay to these funds managers are basically dogshit.
It's true what!! If you are a closet indexer, why the hell should I pay you a fee 10 times more than Jack Bogle?? Am I right or am I right??
So the next time some slick unit trust salesman who calls himself "Financial Adviser" tells you to buy unit trust. Tell him to fuck off!! Or send him to me and I will tell him to fuck off on your behalf.
Don't even get me started on those idiot Relationship Managers at Priority Banking services. I reserve that for another blog entries.
Adios!
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