Experiments

Beat The Fund Managers

Apparently professional fund managers possess the best knowledge and skills to allow them to outperform their relevant market indices or benchmarks.

Unfortunately the facts often discredit their claims, as discussed on benchmarkyourportfolio.com.au.

Academic studies have readily identified ‘luck’ or ‘random chance’ may also be a strong factor in a fund manager outperformance over an index – especially over shorter time frames.

To demonstrate this phenomenon, the following Your Fair Share ‘fund managers’ have chosen their portfolios using the following ‘skills’:

  • Both Harry and Jack plucked 25 stocks out of a hat containing the names of the largest 100 companies list on the ASX.
  • Both Chloe and Rachael plucked 50 stocks out of a hat containing the names of the largest 100 companies listed on the ASX.

NB. Their mothers watched the process to make sure the draw was as straight as a tattslotto draw.

At the end of each quarter, we’ll update the performance of their portfolios against the ASX 100 index, and some of Australia’s leading fund managers:

 

PERFORMANCE SINCE 1 JANUARY 2010

FUND MANAGERS

PERFORMANCE TO 31 MARCH

RANK

PERFORMANCE TO 30 JUNE

RANK

PERFORMANCE TO 30 SEPT

RANK

PERFORMANCE TO 31 DEC

RANK

ASX 100

+1.51%

3

-9.82%

4

       
Average Fund Manager

+0.90%

4

-10.68%

5

       
Chloe 50 Stocks

+1.89%

2

-6.94%

2

       
Harry 25 Stocks

+1.96%

1

-4.89%

1

       
Jack 25 Stocks

-0.93%

5

-8.33%

3

       
Rachael 50 Stocks

-1.23%

6

-11.76%

6

       

 

Your Fair Share Fund Managers 

 

 

Mitchell: Aged 4 months
Chloe: Aged 6
Harry: Aged 3
Jack: Aged 6
Rachael: Aged 4

 

If you have any budding fund managers, feel free to contact us on 03 9686 9686.

Predict The Future

Apparently economists possess the best knowledge and skills to allow them to predict the future.

Unfortunately history sometimes prove their predictions to be fanciful.

To demonstrate the perils of trying to predict the future, here’s a snapshot of some of our economists recent forecasts.

What If You Did This?

Time and compounding returns will prove to be your greatest friend or your biggest enemy.

If you invested in the Australian All Ordinaries Index from 1950 to 30 September 2009, you would have received 12.5% per year.

This is enough to turn an investment of $10,000 into $11,130,853 (Source: Andex).

Interestingly, the time frame for this example is shorter than the life expectancy of a 20 year old commencing their working life.