Can the average investor out perform the ‘professionals’?
Now this website doesn’t list every hedge fund, but it lists enough to show how many funds under perform (some significantly) compared to the overall market. I for one would not be happy with my investment being 20% down in one of the strongest bull markets I’ve ever seen - https://hedgefundtracker.com/
So why does this matter? Obviously, managing a multi billion dollar hedge fund is very different to managing a few thousand dollars in a personal account and entering a position of several hundred million isn’t as simple as pressing ‘buy’ on a $200 eToro position. Simply put, funds can’t deploy capital as quickly as a retail investor. However, what is the benefit of investing in a fund compared to self management?
The only benefit I can see is that you don’t have to learn. You don’t have to teach yourself how markets work, what ETF’s are and how to analyse companies. Is this laziness worth the difference between retiring at 50 or 70? (Use https://www.thecalculatorsite.com/finance/calculators/compoundinterestcalculator.php to see the power of investment over time) As a retail investor you don’t need to invest in individual companies, as I mentioned in a previous blog, ETF’s should be the staple of any investor. For example the QQQ tracks the Nasdaq 100 which consists of 100 of the largest market cap US companies excluding financials like banks. Over the last 10 years the QQQ has returned on average an astronomical 22% per annum. If you invested £10k in 2010 it would be worth £64k today. It’s not sensible to keep all your eggs in one basket but diversifying across ETF’s can yield soild returns year on year. Since 1926 the S&P 500 has returned, on average, 10-11% per year. Just think of all the world changing events we’ve had during that time!! Now compare this to to current saving rates of 0.01%. When you self-invest you also save money on fees. Some fund platforms charge a % of your account value which eats into profits, especially if you have a negative year. With a lot of platforms now such as eToro and Trading212 you don’t pay any platform fees. Self investing has become more mainstream and competitive with countless platforms now available for you to take advantage of. There really is no excuse! If you’re still not comfortable choosing your own investments you can follow me on eToro. This year alone I have returned just shy of 50% with a moderate risk level.
Follow me here: https://etoro.tw/2SOD8Wc Remember, time in the market is far more important than timing the market.