ITs vs Passives

[nmdhqbc]

Thanks, I value the thoughts. My interest is that I have always been on the "active" side of the fence but always borne in mind the possibility of using a tracker at some stage for some purpose. I have to say I am totally disinterested in "segments" or such like, for example, a number of excellent income unit trust /OEICs are no longer "categorised" as income funds. My response is "so what?" They're still great funds. So, I simply can't buy into the thinking that I'm comparing oranges and lemons at all. What I AM doing is comparing putting GBP into two alternatives, both very mainstream and one of them "actively" managed by a renowned star manager. And the alternative one of putting the same GBP into a passive investment. Result is that over a ten year period has the same returns. It is a real comparison for me. I am this close (imagine finger and thumb 2mm apart) to putting a significant (for me) six figure sum into a pretty boring year in year out investment and just leaving it there, occasionally, perhaps taking some "income" from it. It seems to me, am I am surprised by this. It seems that by investing in either City or the FTSE 250 index, the outcome would have been virtually identical. Even the worst draw down on the graphs is similar, if quite alarming in the short term. Thanks for the input.

This is exactly how I feel about sectors and active vs passive. I do however try to diversify a bit. I would imagine that the FTSE 250 and CTY will have moments in time where one outperforms the other and vice versa. Hence I'd suggest you buy both. I have. Then you could also re-balance between the 2 yearly perhaps - or just do it via re-investing divis into the current loser. If relative performance does end up swinging one way then the other over the years that re-balance will boost returns. Of course there's the risk of not fully running the winner if there is one consistently for decades.

[OZYU]

In any case the FTSE 250 is not a suitable index to compare with CTY if you look at its constituents, which are dominated by the FTSE 100.

FTSE100 and FTSE250 don't overlap. It's the 350 and All Share which are dominated by the 100.

What I wrote was correct, if maybe badly phrased since I was in a hurry, after decades in investing I ought to know and would certainly know what overlaps or not with what. The constituents of CTY are dominated by FTSE100 holdings. There are other holdings in there and the AiC data just compares it with FTAS, which is fine. Comparing CTY performance with the 250 is interesting of course, but not a suitable comparison imho, which is the point I was making.

Ozyu

[hiriskpaul]

Thanks, I value the thoughts. My interest is that I have always been on the "active" side of the fence but always borne in mind the possibility of using a tracker at some stage for some purpose. I have to say I am totally disinterested in "segments" or such like, for example, a number of excellent income unit trust /OEICs are no longer "categorised" as income funds. My response is "so what?" They're still great funds. So, I simply can't buy into the thinking that I'm comparing oranges and lemons at all. What I AM doing is comparing putting GBP into two alternatives, both very mainstream and one of them "actively" managed by a renowned star manager. And the alternative one of putting the same GBP into a passive investment. Result is that over a ten year period has the same returns. It is a real comparison for me. I am this close (imagine finger and thumb 2mm apart) to putting a significant (for me) six figure sum into a pretty boring year in year out investment and just leaving it there, occasionally, perhaps taking some "income" from it. It seems to me, am I am surprised by this. It seems that by investing in either City or the FTSE 250 index, the outcome would have been virtually identical. Even the worst draw down on the graphs is similar, if quite alarming in the short term. Thanks for the input.

Fred.

If you want a single passive equity investment of the sort you describe, I would recommend a global cap weighted tracker. It can never be the best performer as it will give you the weighted average return of all the stock markets around the world, so by definition some markets, be that FTSE 250 or Japanese equities, etc. will definitely outperform, but you are going to have a tough time working out which markets will outperform in advance. If you look at past returns of global funds and compare against the FTSE World Index (and ignore propaganda like this article) you will see that most experts cannot predict which markets will outperform, so what chance do you have?

[Hariseldon58]

If one refers to the AIC's own stats publications http://www.theaic.co.uk/aic/statistics/aic-stats they include a set of performance stats for various indices which are a reasonable proxy for the best low charging ETFs that follow the same indices.

I would suggest the figures do not provide convincing evidence that the investment trusts provide superior performance on the whole.

The better investment trusts can provide excellent results particularly when purchased at a good discount.