HYP investing as a yield trap

[Backache]

Indeed.

If you think about it an active fund manager works full time for 8 hours a day, 200 days a year. Over 3 years that is almost 5,000 man hours of work and since in the UK All Companies Sector alone there are 200 active funds that is the best part of one million man hours. Yet over that period passive funds have beaten 80% of the competition and the time needed to run a passive fund can be as a little as a few hours a month.

Most of the man hours spent in managing active funds is in activity that essentially cancels out on a net basis so is absolutely valueless, even worse it destroys value for the investor.

It is has taken a long time for the industrial financial equivalent of the spinning jenny to challenge the labour intensive cottage industry of fund management but the economics are undeniable.

I think it is true to say that most cap weighted funds Index beat the average active fund.
I have not seen much evidence to suggest that algorithmic funds that are not cap weighted do so.

Whether or not you consider active management valueless depends on the importance you place on price discovery and the allocation of capital in the capitalist system.

[OhNoNotimAgain]

Whether or not you consider active management valueless depends on the importance you place on price discovery and the allocation of capital in the capitalist system.

So do you think it works at the moment because of all these active funds or despite them?

[Backache]

Whether or not you consider active management valueless depends on the importance you place on price discovery and the allocation of capital in the capitalist system.

So do you think it works at the moment because of all these active funds or despite them?

I think that there is a need for some active process in stock selection by some people to aid price discovery .
I would not disagree that many active funds are far too expensive and short term to benefit either the companies they engage with or the holders of their funds.

[OhNoNotimAgain]

Whether or not you consider active management valueless depends on the importance you place on price discovery and the allocation of capital in the capitalist system.

So do you think it works at the moment because of all these active funds or despite them?

I think that there is a need for some active process in stock selection by some people to aid price discovery .
I would not disagree that many active funds are far too expensive and short term to benefit either the companies they engage with or the holders of their funds.

In fact, as pyad has always said, who needs prices discovery because capital is relatively unimportant in the long term? All you need is a steady stream of dividends.
Sure you need to have a rough idea of prices when you invest and when you disinvest. But, as many people have discovered, their idea of the right price can be very different from the market's idea of the right price for a very long time.

[ADrunkenMarcus]

This, by the way, should really be my last post, I increasingly feel that posting is a waste of time. Ozyu

I hope it isn't your last post.

Best wishes

Mark.

[Backache]

because capital is relatively unimportant in the long term?

What was it Goebbels said about repeating a lie often enough?

[OhNoNotimAgain]

because capital is relatively unimportant in the long term?

What was it Goebbels said about repeating a lie often enough?

Different response on this thread

viewtopic.php?f=8&t=16819

[Backache]

because capital is relatively unimportant in the long term?

What was it Goebbels said about repeating a lie often enough?

Different response on this thread

viewtopic.php?f=8&t=16819

I can assure you having read David Stevenson's Adventurous Investor column for quite a few years I am just as sceptical of his pronouncements.