Not to be a dick ...... but...... If your uncle knew what he was doing he wouldn't have played with money that he wasn't willing to lose.
Rule #1
Whenever my friends ask for advice on a stock or whatever first thing I ask is how much are you willing to lose.
Agree wit your posts. The problem is advisors trying to sell you funds with massive management fees like chuck couples was advocating. It should be a crime to sell such expensive products.
but don't agree with having to know companies. That's what index funds are for, you don't need to know anything. You buy, keep buying, and hold for long term. If you're picking companies you're not passively investing
I'm a wholesaler so I'm biased, but there's something to be said for active management. I'd say less than 5% of ETF's are actively managed and that can leave you wide open to bigger losses. Some of the great mutual fund companies like Mawer and MFS have incredible downside protection due to active management and tactical asset allocations, so when an ETF loses 10% in a down market, those funds are only capturing about 40% of those losses. Similarly you'll see they have all the same up capture if not better. So doesn't that justify that extra 50 basis points?
You'll also see with the CRM2 changes coming, advisors are trying to be as transparent as possible and keep fees as low as they possibly can in fear of losing all of their clients.
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Incredibly mature of you to throw out the entire rest of my post in a reasonable discussion to focus on this little point. You should be proud of yourself.
Easy now. I never discredited any of the rest of your post. I was just pointing out that your uncle screwing up doesn't change my opinion that not all people should have financial advisors. I bet there are also a lot of uncles out there who are in worse positions than they ought to be due to a shitty advisor.
And a lot of contractors build shitty homes, doesn't mean they all do. So do your research and find a good financial advisor, don't jump head first into the ocean and think you're going to be able to swim.
That, or make sure you know the companies you invest in inside and out. I've talked to people who say, "Oh I just put $1000 into Enabalence Technology" and I say "oh, how do they make money?" and the person can't event explain it, but because they heard a talking head on BNN say it's a good company, they decide to invest.
Evidently you're a brick wall on this so I won't try to convince you otherwise, but remember: Advisors have access to portfolio managers; portfolio managers have access to company executives. You have access to internet and TV. Good luck outperforming while taking on identical risk, even net of fees.
No, that isn't true. And the people that say that don't understand what active management is.
On one hand, active management could be the buying and selling of stocks on a daily basis, i.e. day trading. You're actively managing your portfolio.
On the other hand, and what is truly active management from a portfolio manager perspective, is changing asset allocations. Be it moving money from equity to bonds, or one equity to another, or lowering your ACB on a particular equity, using cash reserves to buy in low on companies you believe in.
For example, one of the funds I sell, like any US Growth Fund, holds Apple. At the end of Q2 this year, Apple made up about 3.4% of the portfolio. By the end of Q3, that was up to 4.1%. The reason, in the span of a month from mid-July to mid-August, Apple went from 132 down to under 100, and as soon as it went under 110 this PM was buying it up. Passive managers were sitting on their hands.
Don't get me wrong, both examples are "active management" but it's about having the proper mandates in place. Research.
EDIT: I'll add, there's also a huge difference between passive investing and value investing. An active manager can be a value investor, capable of holding companies for a long time. Look at MFS International Value - their average holding period of a company is over 6 years, but they're constantly monitoring those companies and tinkering with the allocation in the portfolio.
First we should make sure our definitions are locked down... Passive funds are index funds that mirror, for example, the S&P500. Nothing more, nothing less.
For active management, it's about putting your money with the right companies and the right managers.
So when I talk about MFS IV, thats a top decile fund in the international space that has a 5-year annualized return of 14.5%, relative to the MSCI EAFE Index which as returned about 2.9% annualized.
But let's think about it like hockey. Just cause Dallas has the best offence, doesn't mean they have the best defencemen or the best goalie.
Similarly, just because MFS is the dominant fund internationally doesn't mean they're the best for a Canadian fund or a US Fund - that may be fidelity or manulife (definitely not manulife but whatever).
So can I say that over the long term active management is right more often than they're wrong? In a general capacity, no, cause theres a lot of shitty funds floating around still. But if you put your money with smart people that know their space, then yeah, you'll kill the index, and those opportunities are what your advisor should know.
You honestly sound more knowledgeable than most (myself included), so don't take my line of questioning the wrong way.
5 years isn't what I consider long term. I bet there is a monkey somewhere who could throw darts at a board for 5 years and beat the MSCI EAFE Index. What happens when you look at a 20-30 year horizon? Or do you need to be smart enough/flexible enough to know when a run is over and switch managers? How is picking a good manager any different than picking a good ETF/stock/etc??