Welcome from Chris Cuffe
On the surface, when you read Burton Malkiel’s views on investing, and mine on how I manage money for the Third Link Growth Fund, you’d think we are poles apart. Malkiel recommends index funds because the average active manager underperforms the market after fees, while I like to allocate money to particular active managers.
In fact, we have some common ground. I understand Malkiel’s point, that the sum of all active managers is the index less fees, and most professional managers do not consistently outperform. But even Malkiel admits he is not willing “to damn the entire field” of professional investors. He goes on to say in his book, “ … if there are exceptional financial managers, they are very rare.” It’s not that they don’t exist, they’re just not easy to identify. Malkiel also says that if he knew 40 years ago what he now knows about Warren Buffett, then of course he would have allocated some money to the man from Omaha. But who is the next Warren Buffett?
This is closer to my position. My time building Colonial First State supported by the exceptional investment skills of Greg Perry shows what is possible. In choosing Australian equity managers, I believe I can identify certain fund managers who will deliver out performance over time. This comes with risks and short-term stutters, which have to be accepted as part of the investing game, which is why I try to be patient with Third Link. But it’s not for everyone.
Continuing this theme, Towers Watson has provided an article with some amazing statistics on past performance. Mutual fund investors are so poor at ‘buy and hold’ that few people achieve close to the index as they chase higher yields. Be sure to take their quick quiz, which has some surprising answers. They conclude past performance is not even a reliable guide to the past.
The founder and Chairman of IBISWorld, Phil Ruthven, is widely considered Australia’s top strategist and futurist on business and social matters, and we’re delighted he is writing for us, this week about retiring with dignity.
Chris
Latest posts from Cuffelinks, 24 May 2013, Edition 16
- Introduction to best-selling author, Burton Malkiel Graham Hand
- The Burton Malkiel Interview Graham Hand
- How I manage the Third Link money Chris Cuffe
- Retiring with dignity Phil Ruthven
- Past returns are not even a reliable guide to the past Towers Watson
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