Why managers not manias should be your focus
Back in the 1630s, a single tulip bulb could be worth as much as a mansion on the Amsterdam Grand Canal1. Such was the demand for this beautiful ‘must-have’ flower that bulb prices rocketed, and buyers took on more and more debt to pay for them. But by 1637, the tulipmania bubble had burst and the price of bulbs dropped dramatically leaving many investors bankrupt.
It’s very tempting to try and make a quick profit from buying and selling the latest ‘must-have’ stocks. More recently we’ve seen the dot-com bubble in the late 1990s and it’s possible we’re seeing cryptocurrency going the same way now.
But the really smart money doesn’t get swayed by trends. Trying to predict which stocks will soar and timing the purchasing and disposing of them, is notoriously difficult. Let’s take a look at the figures. If you’d invested £10,000 in the best performing mid cap exchange traded fund ten years ago, your money would be worth £22,538 today. However, if you’d missed the top ten performing days, it would be worth just £13,9332. A diversified portfolio of funds that reflects your needs and appetite for investment risk is usually a much surer way to look after your savings and income in the long term.
Years of research at Murdoch Asset Management have shown us that it’s the fund manager who dictates the success of a fund. Therefore, we concentrate our energies on scrutinising the integrity of each fund manager we invest with. An analysis of past performance is one assessment criterion, but qualifications, sound investment approach and rational stock selection processes are just as important.
Only when a manager has been approved by our investment committee is their fund made available to our clients. Fund managers are constantly monitored to make sure they adhere to the objective of each fund, its risk rating and performance criteria.
The people who invest your money aren’t nameless figures with no accountability. We make it our business to get to know these individuals on your behalf and have built relationships with some of them that go back over many years.
That’s also why there’s a regular Fund Manager Focus article in our newsletters. It’s your chance to get to know a bit more about the people investing your money. In our February edition, we take a look at Anthony Cross who runs the Liontrust Smaller Companies Fund. Read the newsletter here.
2Source: Invesco FTSE 250 ETF