The Lemon Fool

dealtn wrote:
No. But that's irrelevant. You are claiming to be only beta exposed, which simply isn't true. You are (deliberately) choosing an alpha exposure also.

How can you have alpha exposure when you own everything?

OhNoNotimAgain wrote:

dealtn wrote:
No. But that's irrelevant. You are claiming to be only beta exposed, which simply isn't true. You are (deliberately) choosing an alpha exposure also.

How can you have alpha exposure when you own everything?

So a portfolio that owns everything can't have alpha?

What about 99% invested in Apple and the other 1% spread evenly across every single other investment? That's a non alpha investment strategy as it owns everything so must be pure beta?

dealtn wrote:
No. But that's irrelevant. You are claiming to be only beta exposed, which simply isn't true. You are (deliberately) choosing an alpha exposure also.

The problem is few people understand weighted averages.

OhNoNotimAgain wrote:

dealtn wrote:
No. But that's irrelevant. You are claiming to be only beta exposed, which simply isn't true. You are (deliberately) choosing an alpha exposure also.

The problem is few people understand weighted averages.

The problem is few people understand the terms Alpha and Beta.

dealtn wrote:

OhNoNotimAgain wrote:

dealtn wrote:
No. But that's irrelevant. You are claiming to be only beta exposed, which simply isn't true. You are (deliberately) choosing an alpha exposure also.

The problem is few people understand weighted averages.

The problem is few people understand the terms Alpha and Beta.

Nor care very much in most cases I'd say.

Dod

Dod101 wrote:
Nor care very much in most cases I'd say.

Dod

Which is the real tragedy.

TMF was set up explicitly to explain that investment is about being content with beta rather than trying to chase alpha.

Stephen corrupted that message with the HYP which was a brave and valiant attempt to make things simple for the average punter but tracker funds did that much more effectively.

Alternative beta strategies attempted to meld the two approaches.

OhNoNotimAgain wrote:
TMF was set up explicitly to explain that investment is about being content with beta rather than trying to chase alpha.

Well, that didn't last long once they found out it didn't make them any money, did it.

Adrian

AJC5001 wrote:

OhNoNotimAgain wrote:TMF was set up explicitly to explain that investment is about being content with beta rather than trying to chase alpha.

Well, that didn't last long once they found out it didn't make them any money, did it.

Exactly, there is no money in recommending cap-weighted index funds, even though no less than Warren Buffett has said that is the best choice for most investors.

TMF started out with the noblest of intentions - to disrupt places like The City and Wall Street, that make their money from selling the illusion that you should pay extra for (possible) alpha, even though beta is virtually free.

And so TMF pivots to tip-sheets, advisory services and the rest. PYAD stuck investors in UK largecaps - a sector that has done nothing in 23 years. Ohno/Munro wants you pay over 1% a year for a "smart beta" fund that is 4th quartile over the last decade.

TMF lost its way and its soul, but you don't have to.

Lootman wrote:

AJC5001 wrote:

OhNoNotimAgain wrote:TMF was set up explicitly to explain that investment is about being content with beta rather than trying to chase alpha.

Well, that didn't last long once they found out it didn't make them any money, did it.

Exactly, there is no money in recommending cap-weighted index funds, even though no less than Warren Buffett has said that is the best choice for most investors.

TMF started out with the noblest of intentions - to disrupt places like The City and Wall Street, that make their money from selling the illusion that you should pay extra for (possible) alpha, even though beta is virtually free.

And so TMF pivots to tip-sheets, advisory services and the rest. PYAD stuck investors in UK largecaps - a sector that has done nothing in 23 years. Ohno/Munro wants you pay over 1% a year for a "smart beta" fund that is 4th quartile over the last decade.

TMF lost its way and its soul, but you don't have to.

I think you're being a little unfair. One role of TMF was to educate. I'd just returned to the UK, aware that I had approx 10 years shortfall in pension contributions and discovered TMF during an attempt to learn about how pensions work.

To say that I knew nothing would be an understatement. I was a Biologist/Biochemist. A portfolio was a folder full of documents. I was able to talk for ages about the 3-d structure of proteins but didn't know the difference between a bond and a share. Fast forward 30 years and I have a peace of mind that I wouldn't have had if I hadn't found TMF - and later TLF. My portfolio may be more diversified than a farmhouse fruitcake but it seems to do the trick.

Steve

PS I do tend to agree about PYAD. He could be terribly arrogant at times.

Lootman wrote:
And so TMF pivots to tip-sheets, advisory services and the rest. PYAD stuck investors in UK largecaps - a sector that has done nothing in 23 years.

That is wrong and you know it.

Look at TR not change in capital values.

OhNoNotimAgain wrote:

Lootman wrote:And so TMF pivots to tip-sheets, advisory services and the rest. PYAD stuck investors in UK largecaps - a sector that has done nothing in 23 years.

That is wrong and you know it. Look at TR not change in capital values.

The FTSE-100 index hasn't moved in 23 years. Sure there were dividends but that is basically all you got in that time period, no growth of the underlying assets. UK largecaps have performed like bonds.

Compare that situation with the S&P 500 which has tripled in the same time period, again before dividends. (Nasdaq has quadrupled in that time).

If your fund allocates only to the UK then you have massively under-performed.

Lootman wrote:

OhNoNotimAgain wrote:

Lootman wrote:And so TMF pivots to tip-sheets, advisory services and the rest. PYAD stuck investors in UK largecaps - a sector that has done nothing in 23 years.

That is wrong and you know it. Look at TR not change in capital values.

The FTSE-100 index hasn't moved in 23 years. Sure there were dividends but that is basically all you got in that time period, no growth of the underlying assets. UK largecaps have performed like bonds.

Compare that situation with the S&P 500 which has tripled in the same time period, again before dividends. (Nasdaq has quadrupled in that time).

If your fund allocates only to the UK then you have massively under-performed.

Yes, but the FTSE100 of 1999 was totally different from what we have today. If you kept away from the dot-com mania, you have probably done quite well. My particular bete-noir was Marconi but it did shed BAE Systems, which has been a survivor and a success.

For me the message is to stay away from trackers, choose shares that pay dividends and take some profit from those whose SP runs away by top slicing.

TJH

Lootman wrote:
Compare that situation with the S&P 500 which has tripled in the same time period, again before dividends. (Nasdaq has quadrupled in that time).

If your fund allocates only to the UK then you have massively under-performed.

Captain Hindsight.

Valuations may have tripled but earnings haven't. And if you are going to play that game, how about cryptos, Theranos, Tesla etc.
ZIRP, QE and fraud explain the bulk of the US market returns.

OhNoNotimAgain wrote:

Lootman wrote:
Compare that situation with the S&P 500 which has tripled in the same time period, again before dividends. (Nasdaq has quadrupled in that time).

If your fund allocates only to the UK then you have massively under-performed.

Captain Hindsight.

Valuations may have tripled but earnings haven't. And if you are going to play that game, how about cryptos, Theranos, Tesla etc.
ZIRP, QE and fraud explain the bulk of the US market returns.

Choosing 23 years was also a quite interesting pin to stick in. Choosing 20 years or 10 years makes the FTSE look reasonable - so much depends on one's starting point.

However, I do agree with Lootman's basic point that the American market has been better for share price growth than the FTSE.

Arb.

Arborbridge wrote:Choosing 23 years was also a quite interesting pin to stick in. Choosing 20 years or 10 years makes the FTSE look reasonable - so much depends on one's starting point.

However, I do agree with Lootman's basic point that the American market has been better for share price growth than the FTSE.

Arb.

Well, 31 Dec 1999 was for a long time the high point of the FTSE100 at 6,930.20. My income unit value was £3.74. It took until February 2015 for it to regain that level, at which time my income unit value was £5.97. On Friday night it was 7,445.97 and my income unit was £6.13, so my unit value has lagged the FTSE100 over the latter period.

The peak was reached at 7,877.45 on 22 May 2018, and my unit value was £6.65 about then.

As Arb says, choosing the starting point can affect the comparison quite strikingly.

TJH

Arborbridge wrote:
Choosing 23 years was also a quite interesting pin to stick in. Choosing 20 years or 10 years makes the FTSE look reasonable - so much depends on one's starting point.

However, I do agree with Lootman's basic point that the American market has been better for share price growth than the FTSE.

Arb.

In the fifties the US market had an average PE of about 10.

In the noughties it was about 20.

In September 2020 it was 34.


FOMO is not an investment strategy.

OhNoNotimAgain wrote:

Arborbridge wrote:
Choosing 23 years was also a quite interesting pin to stick in. Choosing 20 years or 10 years makes the FTSE look reasonable - so much depends on one's starting point.

However, I do agree with Lootman's basic point that the American market has been better for share price growth than the FTSE.

Arb.

In the fifties the US market had an average PE of about 10.

In the noughties it was about 20.

In September 2020 it was 34.


FOMO is not an investment strategy.

Well, yes, that does call it into question - it can't continue increasing like that, so either the P collapses or the E increases. I've often wondered what the "tolerance" is on people's patience around PEs - at some epochs we would consider below 15 to be reasonable, but what's to say there couldn't be a paradigm shift in perception so that investors think that is far too high? I was "brought up" thinking that 10 was the maximum one should look for!

Srb.

Arborbridge wrote:

OhNoNotimAgain wrote:In the fifties the US market had an average PE of about 10.
In the noughties it was about 20.
In September 2020 it was 34.

Well, yes, that does call it into question - it can't continue increasing like that, so either the P collapses or the E increases. I've often wondered what the "tolerance" is on people's patience around PEs - at some epochs we would consider below 15 to be reasonable, but what's to say there couldn't be a paradigm shift in perception so that investors think that is far too high? I was "brought up" thinking that 10 was the maximum one should look for!

Srb.

Surely a lot depends on IRs, or 'risk-free' rates. If you can get 5% by sticking cash in bank, then a PE of 20 does not look very attractive. However, if bank is giving you effectively zero, then you'd be more inclined to take some risk at PE of 20?

NotSure wrote:

Surely a lot depends on IRs, or 'risk-free' rates. If you can get 5% by sticking cash in bank, then a PE of 20 does not look very attractive. However, if bank is giving you effectively zero, then you'd be more inclined to take some risk at PE of 20?

Which is precisely what QE and ZIRP did.