31 January 2017

Alternatives - Expensive Buzzword?

Don't Get Sabotaged By 'Sophisticated' Investing

Passive Investing done the right way

Since the most recent Market Crash 2007-09 Passive Investing - mostly by using ETF's - has gained in popularity, and rightly so. But Investors should be careful not do add an additional layer of costs when they pay a commission or fee to a Financial Adviser or Fund Platform or Provider. The majority of liquid investments (i.e. listed shares in contrast to property or private equity investments) can and should be allocated to low-cost instruments. A good spread among different asset classes (bonds - high grade, high yield and emerging market bonds, government bonds, equities - large and small caps, emerging markets, international issues, currencies) is still a tricky decision to make but here the guideline should be the market cap as well as occasional rebalancing in a contra-cyclical fashion.

30 January 2017

Common Sense Rules - cheaper than Financial Planner

Financial Planning is marketed as giving investors a 'holistic' approach to financial well-being. But make no mistake, a lot of the advice is not more than applied common sense. A lot of weak-willed or financially uneducated people may well find it worthwhile to pay for advice on Financial Planning but they should be aware that this sort of advice should not be confused with actually achieving satisfactory investment returns on the money you have managed to save.  Tax accountants and lawyers are also able to cover significant areas included in financial planning such as tax and estate planning. Insurance for health and life would be another facet that needs coverage. While having all these aspects covered by one planner may sound attractive it is unlikely that the combined approach is really more effective than consulting individual experts. After all, how often do you really write a will or decide how much insurance cover you require? And putting all your eggs into one basket also can lead to conflicts of interest, especially as the 'planner' is connected with a 'full-service' firm that also tries to sell you investment funds or products or just offers to manage your portfolio.,

29 January 2017

A Fund that keeps 72% of your gains?

It may sound absurd, you have heard about the high burden that fund and management fees put on the performance your investments can achieve but it CAN happen. It needs an experienced analyst to monitor the level of fees you get charged by the various service providers (Banks, Private Banks, Fund Platforms etc) that you use. Investing is difficult enough but the one thing that is guaranteed to boost your eventual investment success is keeping a sharp eye on all the costs - including custody, account fees etc

27 January 2017

Top-rated Financial Adviser? Investigate before you invest!

Numerous publications try to give awards to Private Banking firms or individual Financial Advisers. But while all these awards may have some merit more often than not they are just a public relations exercise or at the very least can blind the gullible into taking the marketing patter for gospel truth. The key aspect, past performance, is usually not included in the presentation. However problematic past performance data may well be the key purpose of investing is to achieve a satisfactory return within the constraints of the risk preference the investor has. Giving data in private sales conversations is not good enough as the investor has no way to verify the claims. The problem of deficient disclosure is even more virulent if the investor is considering to invest with one of the huge Private Banking complexes such as UBS, Credit Suisse or JP Morgan. There simply is no way to easily obtain and verify performance data as the army of Financial Advisers may provide quite different performance and there is no simple option to go for the 'House view'. While an Adviser such as Andy Chase in this article may provide excellent service he is basically running the portfolios of his clients according to his own market outlook, possibly with some wide constraints imposed (or only suggested?) by Morgan Stanley. In effect he is running his own business in a sort of franchise and has to be treated as an independent business.


25 January 2017

Behavioural Finance Questionnaire

Here there is a head-scratcher for you, from one of the largest UK Fund Managers (Schroders): but when they asked me about soup or salad (yes, it is true) in their income questionnaire I gave up. Maybe some Private Banking firm will ask you to sit with a Psychotherapist to find your innermost feelings about money and risk. Good Luck with that!

9 January 2017

High Fees? Hedge Funds not the only suspects!

Many comments are made about high fees charged by Hedge Funds. But before you jump ship you should keep in mind that Private Equity or Traditional Funds are not necessarily cheaper. The Hedge Fund concept per se does not mean that the 2+20 fee structure is set in stone. It is a choice that the providers give the investor and you are free to shop around.
But Private Equity Funds are also charging a not inconsiderable management fee and take a cut from the fund's performance. And when you invest via a Private Bank or Financial Adviser you quite often are paying a fee to them as well as a fee for the underlying investment vehicles they allocate your investment monies to.
You need to take special care and advice when awarding a management mandate to any Wealth Manager and get a clear analysis of the impact of fees on future performance!

https://www.bloomberg.com/news/videos/2017-01-04/why-asia-s-richest-families-are-dumping-hedge-funds (Bloomberg)

Should you let Friends manage your Portfolio?

It may be tempting to let a friend manage your portfolio. He or She may be more familiar with the world of money, - or at least give that impression. You may save on fees and prefer to interact with someone you think you know well.
But watch out! Is your friend really running his own - let alone somone else's - money well? How is the track record, especially in turbulent markets, and when a stomach-churning downturn occurs, such as we have seen in 2008-09?
You have little protection if something goes wrong either due to mismanagement or even worse - fraud. It has happened before many times and given human nature it will happen again.

http://www.telegraph.co.uk/investing/funds/could-fund-manager-next-door/ (Daily Telegraph)

Is Stock Picking the right Strategy for You?

Everyone loves to be able to pick the next IBM, Apple or Facebook but it is difficult even for the Professionals to pick the right stock!

2016 was a terrible year for stock picking, and 2017 may not get much better (CNBC) 

7 January 2017

Index ETF: Time to say Good Bye?

More and more commentators suggest that investors should move out of passive investment vehicles, i.e. index funds, mostly packaged as ETF's. But you should resist the lure of active mnagement and instead review your asset Aalocation.

6 January 2017

Know your Fund Manager

An important - and often overlooked - aspect of selecting a fund manager or financial advisers: what is his PERSONAL track record? Who is actually managing the fund (is it a team or is one person responsible for the performance)? Is the fund manager focused on only one fund or does he have a number of funds to look after? Achieving good performance is difficult enough but the additional task of deciding which fund should benefit from the best ideas is nearly insurmountable. Naturally, fund managers and their employees are more interested in boosting the number of assets under management, and their profits/compensation, rather then just achieving best possible performance.