Merryn Somerset Webb, feisty and amazingly clever editor of Moneyweek tells it as it is
Study after study has shown that the average fund manager under-performs the stock market and that the fees he charges to do so pretty much guarantee the ongoing poverty of his clients.
That should make it clear that the average investor should bypass active funds and stick to tracker funds or a variety of cheap exchange traded funds.
But if this is all so obvious, why are there still well over 2,000 actively-managed unit trusts for sale in the UK? And why do we buy them?
It is partly about ignorance of course – marketing material for most funds tends not to mention the high odds of failure.
But it is also about hope: the returns from the main indices seem so paltry (let’s not forget that even after this summer’s mega rally, the average investor has only broken even over the last decade), that we can’t give up the idea that it is possible, with a little sense, to do better.
So, we keep buying the funds and we keep paying the fees.
The good news is that there is a cheaper way to keep the dream alive: the investment trust sector.
Recent research from Money Observer shows that, over the last 30 years, investment trusts have significantly outperformed unit trusts. For example, of the 51 investment trusts that have a track record going back 30 years, 68 per cent beat the index. Of the 82 unit trusts with similar records, a mere 28 per cent did the same.
Merryn will join us at the last Step-by-Step seminar before Christmas (Dec 23, 11am, Bonnie Prince Charlie function room, Tannochbrae Inn, Ullapool) where she will reveal the secrets behind the success of Investment Trusts.
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