Comparing Index Trackers to Managed Funds

'IFA', you say. Thanks, but I'm sure he's dying to tell us himself, and tell us details of the string of postnominals he has on LinkedIn too (got to impress the prospects, you know).
I dont use any of my post nominal on LinkedIn; happy tell you what I have, though.
You'll be delighted to hear I was quoted in FT Adviser this week.

Again.

I have asked before, hows your portfolio doing? You back in the markets yet?
 
I am indeed delighted at your apparent, claimed, successes. May your life be long and fruitful.
Yes, I know that you wish to study my personal financial status, but, as I've told you, it's none of your business; taking your advice would surely plunge me into deep and sad impoverishment.

I returned my enormous fortune (I can bullshit too) from cash and commodities to paper (and some more nice commodities) many months ago; thanks for your concern.

Have you visited the 'poo-poo-head' thread yet? You should; it's your natural home on this site.
 
I am indeed delighted at your apparent, claimed, successes. May your life be long and fruitful.
Yes, I know that you wish to study my personal financial status, but, as I've told you, it's none of your business; taking your advice would surely plunge me into deep and sad impoverishment.

I returned my enormous fortune (I can bullshit too) from cash and commodities to paper (and some more nice commodities) many months ago; thanks for your concern.

Have you visited the 'poo-poo-head' thread yet? You should; it's your natural home on this site.
I dont really care about your personal financial status, I was just wondering how your portfolio performed given you crystallised your losses at the back end of last year.

I'm sure we can guess why you dont want to detail your performance. ..
 

Sarastro

LE
Kit Reviewer
Book Reviewer
My understanding is that trading algorithms now recognise they can generate a downward spiral for no real reason at all, and limits are now in place to prevent this kind of self generating slide.
None of it would have happened if the City had stuck to the principles of WD Gann...<wink smiley>

@Sarastro ...

Do you adhere to efficient frontier theory? Looking at your comments and rationanal, I suspect not...
So from my understanding of it...

I think like a lot of Chicago school thinking it might be theoretically true in under very controlled set of conditions, but since those conditions never exist in practice, it's functionally useless.

(I'm talking about the original theory here, it's possible that MPT has updated a lot of the criticisms below, correct me if so)

I think it was conceived before the major advances in understanding uncertainty and Pareto distributions in the past 60 years, so its idea of risk is out of date. Standard deviation isn't a great measure of risk, because it excludes outliers: that means it assumes risk outcomes form a normal, binomial or Poisson distribution, where actually risk often forms a Pareto distribution (when it goes right / wrong, it goes very, very right / wrong). So the basic measure of quantifying risk is suspect. Note that this is also reflected in actual market behaviour: there is a small but consistent subset of stocks (multibaggers) that either increase or decrease much more rapidly than their fundementals suggest. Those are the outliers. These are the ones that everyone wants, or wants to avoid. But they tend to have the same risk profile (very high) as stocks that don't behave that way. This is because group calculated probability doesn't determine outcome for individual datum, and the eventual distribution is exponential / Pareto. This has probably always been the case for stocks, but only very recently (20 years) has a lot of research been done into it.

Therefore, that approach to risk is a good way to balance groups, but a bad way to pick individual datum. One conclusion is that you can't, in practice, plot individual datum based on risk, you can only plot ranges. But within portfolios you eventually have to make decisions based on individual datum, unless the entire thing is comprised of index markers: even then you need to pick specific points in time and price to trade.

This approach isn't practically easy or financially sensible to do, since returns from indexes compound all risk decisions (negating your decision), and otherwise picking ranges in practice means preferring many small investments over your range, rather than single large investments. Transaction fees substantially increase the external cost of picking many small investments, reducing profitability.

That is why the best theoretical approach you can develop for this would be spread betting, or options. But that is also why the cost of options substantially reduces your income from success: otherwise there would be no value in options as an instrument, much like there would be no value to betting providers if customers consistently won.

In essence: my suspicion is that, since all of this is reasonably old and well understood, the price of provision for the strategies (many small investments; options) has risen to make the strategies unprofitable. So theoretically it might work, but that's not necessarily any use in practice.

I think the insight of the theory (diversification is good, but some diversification choices are better than others) is better explained by the advances (or ability to test at scale after the advent of computing) in probability and uncertainty that have happened since the 60s.
 
For a 'professional adviser', you seem to struggle with the concept of 'crystallising' a loss at 10% rather than at 100%.
Who mentioned 100%?
I pointed out that switching out of a market once it drops will crystallised that loss, and I questioned your "rationale" for doing so.

You now admit I was right: the dip in October was just a blip, as I told you.

Still, you would continue to happily get paid for being brave with your clientele's money, so it's all one to you. I expect your PI cover to be very costly in premiums.
No need for a PI claim when I'm right.

Timing the markets' - Nobody does that, as well you know, but studying trends is another matter which seems to have escaped you.
You thought you could time the markets I told you you couldn't.
Your comment about trends is fiction.

'Advice'. I advise nobody. I comment on my own circumstances and show why I make decisions - if I feel like it. I would not dream of offering the sort of catastrophic advice you clearly give.
You've not shown why you make "decisions" and you will have now realised the advice I give to my clients is actually very good.

I'll post the recent returns of the portfolio I showed above a little later.

No doubt you'll continue whining.
 
Do, please, take this conversation to the 'poo-poo' thread if you want another Internet Scrap. I have not the slightest interest in your financial affairs, although you seem to be inordinately interested in mine. I'm fairly sure that I told you that I bought gold and some gemstone at the backend of last year, on the sale of the falling fund holdings in my book. Do you understand that, and the implications, particularly with some 'gem' and all 'gold'?

Again, take it to 'poo-poo'; it's your natural home, and you can complain to a moderator about my disrespect of your emotional state at will there.
 
<<sobbing>>
You whining bore.

By "internet scrap" do you mean, "demonstrate a level of knowledge and experience that is far, far beyond yours?"

You slagged me off, continually; I've proven you wrong.

Ha ha.
 
Dear gods, is this 'Twitter' or 'KiddyChat' or someplace that I've inadvertently wandered into? Get help; urgently.
 
Dear gods, is this 'Twitter' or 'KiddyChat' or someplace that I've inadvertently wandered into? Get help; urgently.
Try the Poo head thread; it will sit far easier with the level of intellect you display.

Told you you'd keep whining.
 
Since you ask, I've just had the first anniversary review of a pension transfer I recommended last year.
£277,765 transferred in; value last night £302,216.

Which is nice.
 

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