Buffett's advice on index funds

zac · 11 March 2012

Thanks Julia.
Yeah ive learned to act in my own interests. That was largely why I went about entering into a fund on my own.
Ive been talking to a mate who has the financial planner qualifications. He's shed some light on the inside workings of some of these funds.
At the end of the day theyre sales people pushing a product and have internal pressure to promote certain products and meet certain KPI's.

As for when theres confidence in the market, its time to be very alert when there's that euphoria.
Late last year was an excellent time in the market as a bull market is born at maximum pessimism. While the market is still pessismistic, it seems fear is slowly dying.

McLovin · 11 March 2012

Julia said:
The enquiry into the financial services industry last year recommended that in future advisers should be required to act in the best interests of their clients.
Now, wouldn't you think advisers would already have been doing this?
Isn't that what any client would imagine would happen when they sought advice?

How astonishing (and shocking, really) that the notion of an adviser acting in the best interests of a client should be some sort of revelation!

It's absurd, isn't it!

I think the whole industry needs to be treated more as a profession rather than a something for people with sales experience to fall into. Of course there are highly competent FA's who believe that there job is to look after the best interests of their clients but on the whole it's still far too easy to be a fly-by-nighter. Working on commission is sort of the same as my accounted being compensated based on how much tax I pay. I can't think of any other professionals who derive the majority of their income from commission.

village idiot · 12 March 2012

perhaps the real problem was that those who made their money from commission, especially where they were tied to a particular company's products, were ever allowed to represent themselves as an 'adviser' rather than a salesman. perhaps that title should have been reserved for those that were operating a different model such as 'fee for service' model, which would have at least let the public know what animal they were dealing with.

going forward it has changed anyway with the commission based model being pretty much outlawed for new business, which solves that problem.

Julia · 16 March 2012

This opinion piece goes to my earlier suggestion about loyalties of advisers/economists being more slanted toward self interest than that of the client.

Economic policy tends to run in a similar fashion, with a clique of leading economic thinkers chosen to reform policy in accordance with best practice – or so we are told. For those less burdened with such delusions, best practice means not what is in the best interests of the public, but rather what benefits the narrow sectors of concentrated private wealth and privilege that huddle behind the conservative nanny state, including the economists who are devising these policies.

Full article from Business Spectator here
http://www.businessspectator.com.au...tent=22724&utm_campaign=kgb&modapt=commentary

zac · 24 March 2012

Heres an article in relation to Index Funds and their Active counterparts
http://www.forbes.com/sites/investor/2012/03/23/indexing-mostly-beats-active-management/?partner=yahootix

Just on that, while the market was depressed, a good Index fund would have been to get into one of the American ones as they have had good movement.

The All Ordinaries hasnt been performing too well, most of it is Mining based and due to our high currency amount it doesnt make exporters too profitable.

Japan is having a similar problem and are at 30 year lows economically.
So if I had spare capital, id be investing in the Nikkei as theyre actively deflating their currency now and working on economic policy.

Mr McGee · 24 March 2012

zac said:
Just on that, while the market was depressed, a good Index fund would have been to get into one of the American ones as they have had good movement.

The All Ordinaries hasnt been performing too well, most of it is Mining based and due to our high currency amount it doesnt make exporters too profitable.

Japan is having a similar problem and are at 30 year lows economically.
So if I had spare capital, id be investing in the Nikkei as theyre actively deflating their currency now and working on economic policy.

Just a thought on that from the boffins in my head. How would you invest in the Nikkei? Buffett's advice on index funds stems from his age old stance that you can only control two things, the asset you invest in and the fees you pay! So with that in mind, do you think that investing in the Nikkei directly and losing the low MER of the Aus ETF's and the CGT discounts for long term investors, plus taking on currency risk is really the way to go? Or are you referencing something like the Street Tracks all world ex US index tracker? Just asking and trying to learn.

Thanks.

zac · 25 March 2012

Mr McGee said:
Just a thought on that from the boffins in my head. How would you invest in the Nikkei? Buffett's advice on index funds stems from his age old stance that you can only control two things, the asset you invest in and the fees you pay! So with that in mind, do you think that investing in the Nikkei directly and losing the low MER of the Aus ETF's and the CGT discounts for long term investors, plus taking on currency risk is really the way to go? Or are you referencing something like the Street Tracks all world ex US index tracker? Just asking and trying to learn.

Thanks.

Im not sure I follow exactly what you mean.
I havent invested in the Nikkei but I have a short position on the YEN which so far has generated around 700%.
The Nikkei is currently around 30 year lows and with the devaluation of the Yen its finally allowing companies to export with higher earnings hence a rise in the Nikkei.

Mr McGee · 25 March 2012

Yep. Get all that. What does it have to do with the topic of Buffett's advice on index funds? Trying with my last post to point out that perhaps this thread had come off topic.

Sorry if I missed the relevance of your point in the context of this post.

zac · 25 March 2012

Yeah my bad if I got off topic.
I was just trying to highlight how its possible to take advantage of certain markets by just investing in the Index at ideal times.
Ive an Aussie Index fund but realise now it wasnt the best move. Its no surprise that the All Ords is having trouble breaking 4400, our currency is just way too strong for the export market and we rely on China perhaps a little too much.

Sir Osisofliver · 26 March 2012

I think what Julia was getting at was the topic of this thread

Having been in the industry a while what a lot of FA's failed to do during the GFC was protect the assets under their control...and managed funds are incapable of doing so...it's simply not written into the charter of the product for them to be able to protect those assets. The only thing that an investor can do to mitigate systematic risk if holding a managed fund is to liquidate their position.

You also need to consider that FA's sit under the control and guidance of the AFSL licence holder. I know plenty of FA's that indeed were aware that we were approaching or in a mature market during the GFC, but were unable to act in the best interests of their clients because of the Licensee. One in particular sticks in my mind because the Licensee fired him because his revenue targets were unmet as he was converting his clients to cash products that didn't pay anywhere near the same commission.

@ Village Whilst the new legislation is designed to fix the problem, you're thinking that a bunch of politicians can outthink a bunch of sneaky bastards...I mean finance professionals. How successful do you think they will be?

Cheers

Sir O

village idiot · 26 March 2012

I doubt this bunch of politicians could out think a halfwits convention.

In general when pollies change laws they seem to assume that the behaviour of the population will not change in response to the changed rules, but it usually does.

odds-on · 27 March 2012

village idiot said:
I doubt this bunch of politicians could out think a halfwits convention.

In general when pollies change laws they seem to assume that the behaviour of the population will not change in response to the changed rules, but it usually does.

I once read a book on statistics written by a presenter of a statistics program on Radio 4 in the UK. One of the chapters contained the results from a survey of government and BBC journalists about average household income in the UK, it was outstanding the number of government members and BBC journalists who were way off the mark, in some cases 3 or so times the actual average. The complexity of an economic and social system means that nobody in government is ever really going to have a true handle on it and therefore provide appropriate government policy, but there is one fact that everybody can sleep easy with and that is - somebody somewhere will be trying to find an angle to make a buck. With investing I see it as a game to find who will be making the buck, not how to make a buck.

Buffett's advice on index funds

zac

McLovin

village idiot

Julia

In Memoriam

zac

Mr McGee

zac

Mr McGee

zac

Sir Osisofliver

village idiot

odds-on

Similar threads

Buffett's advice on index funds

In Memoriam

Similar threads

Privacy & Transparency

Privacy & Transparency