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Mum and Dad Investors vs. the Professionals

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The Owls

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6 June 2008
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This is what I think:

We are all 'Mum and Dad' investors

I have always found the term' Mum and Dad investors' irritating and condescending. It has connotations that all the financial gurus of the world make all the very wise financial decisions and allow the 'Mum and Dad Investors' to play around with the simple stuff in keeping with their lower levels of intelligence and expertise.

Well, it has now become very clear to us all that the self-inflated financial intelligentsia, ie, our economic advisors, lending authorities, funds managers and financial advisors, despite the ominous warning signs, really didn't have a clue what was happening. Got it all wrong and at the end of the day, in the final shake-up, demonstrated to us clearly that they too are really only 'Mum and Dad Investors' - albeit, very highly paid!
 
The truth is no-one knows where the market will go especially in the short terms of days, weeks and months. If anyone knew on Monday where the market would end the week, even with a 60% certainty they would not have to waste their time dressing up in a suit and sharing that knowledge.
 
The Owls said:
demonstrated to us clearly that they too are really only 'Mum and Dad Investors' - albeit, very highly paid!
Click to expand...

On ya Owls,

Hit the nail on the head, most managed funds can't even outperform the index so at the end of the day you're better off just running your own fund, it's not rocket science.
 
I agree totally that you cannot always trust someone else handling your financials. You need to be on top of the market and have a similar understanding on how thinks work as any professional.

On reading the week end financial lift out from Sunday Herald, some of the forecasts contridicted what was being said in their normal financial columns.

Not everyone is 100% right all the time.
 
Place someone in responsibility of large sums of money and their ego naturally inflates. Pompous, arrogant and untouchable is often corrected when back-slammed by the markets. Like some people don't respect others and become more `earthy` after a good gob-smack.
 
After reading a few of your deep and meaningfuls over my time here, i have come to the conclusion you are quite a wise sort of non gender specific poster Wysiwyg.

Have a great day.
 
Mum and Dad against the professionals?

Firstly identify the professionals, many of them are Mums and Dads, while many of the...

"
our economic advisors, lending authorities, funds managers and financial advisors
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most certainly are not professional traders.

The real professionals were probably making money on the decline as well as the recent rally, they were making it at the expense of the M&D's who used the lot quoted above, and did not think for themselves..

Taltan,

The truth is no-one knows where the market will go especially in the short terms of days, weeks and months.
Click to expand...

Does that mean a system that has a 80%+ accuracy is just pure blind luck, despite hundreds of successful trades??

brty
 
Its been a common theme since the onset of the GFC to blame 'professionals' for not being able to see what was coming. That's human nature.

What Mum and Dad investors should learn is to take control of their own finances through appropriate education and use professionals only when needed.
 
I've always thought there were 'Mum and Dad Professionals' dominating the financial services industry, and pretty much all the industry's out there.

People tend to think that Professionals paid lots of money are smart and good at what they do....Bollocks.

These people finished Uni or got what ever qualification they required and therefore obtained employment in whatever industry...Pilots, Lawyers, Doctors, Financial advisers...these people are qualified not Necessarily competent.
 
Financial advisers are nothing better then commission based salesmen.
They only thing they care about is how much commission they are going to get off you even though there office walls are full of family pictures.
I find it funny how they are moving to a fee for service model and now they are allot more likely to recommend a simple index fund.

FA's are going out the same way as scum travel agents and all other middle men who promise the world but when you need them......

Site's like this are great for opening peoples eyes!

G
 
The single biggest problem with lots of the professionals is they are bound by sheer volume to divest into crap companies they should never be involved in.

The second biggest problem is half of them dont know a good company from a bad company. Some of them did a 3 day course, got a job , worked there way up through an industry riddled with massive staff turnover and suddenly find themselves controlling a $0.5Bn portfolio of other peoples money....when they dont even know how to grow their own wealth...

As for managed funds, again the volumes and rules of the prospectus severely inhibit their ability to stay in good stocks and their ability to move as required....as they become bigger they diversify into crap......

Over the years you consistently see small upcoming boutique funds outperforming, and as soon as they become large, go through mergers and acquisitions they inevitably start to under perform......

Having said that they have there time and place......just not for me thanx

Go the mums and dads, with some experience your / we are doing far better then most the so called professionals....
 

Of many , this is so true......
 

Nonsense. Mum and dad investors are the classic buy and hold type. Little or no idea of what they're doing. Usually buy some shares of Telstra or Westpac after its in the news, near the market top.
 
kam75 said:
Nonsense. Mum and dad investors are the classic buy and hold type. Little or no idea of what they're doing. Usually buy some shares of Telstra or Westpac after its in the news, near the market top.
Click to expand...

Don't underestimate the classic mum and dad investor, many bought into government IPO's years ago and are now sitting on tidy profits, much better profits than many wannabe traders can ever achieve.

Nothing wrong with buy and hold ( within reason ).

Also, nothing wrong with short term trading, it's a great way to get some cream.
 
To my mind, 'Mum and Dad' investors are any investors that are takers of price and/or conditions, rather than makers. Institutional investors get priority access to management, negotiate the price and often have terms not accessible by 'Mum and Dad'.

Institutional investors set terms/price because they bring many things to the company - the ability to invest further capital to support growth, credibility/reputation, management, industry and capital markets expertise, connections etc etc. Mum and Dad's are just along for the ride and only there because the IPO was an attractive source of liquidity for the institutional investors to exit at placement or in the future.
 
This discussion goes on as if there is a market independent of the professionals (i.e. institutional holders).

How can all professionals be right when the market is the result of the professionals? Doesn't the share market fall because all professionals decided to sell? So were they right or wrong? I am confused.

And by definition the average professional will have to underperform the market, because market performance = professional performance minus fees and charges.
 
kam75 said:
Nonsense. Mum and dad investors are the classic buy and hold type. Little or no idea of what they're doing. Usually buy some shares of Telstra or Westpac after its in the news, near the market top.
Click to expand...
Yes, this has been my experience amongst a broad cross section of people I know. Along with the complete misconception that "Super" is a failure and a con. They do not understand that Super is simply a tax effective vehicle in which to hold various investments.

I'd say one of the reasons we agree that the 'professionals' have failed so badly in the last couple of years is that those frequently making market pronouncements are economists. A degree in economics doesn't necessarily qualify someone to be an expert in share markets. Ditto an accountancy degree.

Then when we come to the woeful performance of financial advisers, let's remember that most of these had their own interests in mind when they advised clients to 'just hold on: it will all be just fine'. Had their clients moved out of managed funds to cash, whacko, there would go their trail commissions. So let's not have that!
 

True.

But always worth remembering that not everyone can avoid the big crash. Once shares are overvalued, someone HAS to lose if they move to fair value. If the advisors all suddenly realised the crash to come and advised clients at the same time, there would not have been anyone to sell the shares to at then current prices, as they would all be sellers.

I guess they could have moved clients to cash management trusts and still got their fee. But in general, financial advisors are bought up on the "it's time in the market, not timing that is important". Suspect most advisors do not even see as their job to flag that markets are overvalued.

Many instos would not have been sellers in core funds, as mandates only allow a small amount of cash.
 
This may be a bit off topic, but I've realised there are so many people out there (mainly "mum and dad" investors) who invest in shares when they don't have a clue what they're getting into. It absolutely shocks me that people can plough their life savings into a company with out doing research. And when it all goes wrong, they dont grasp the knowledge that there isn't any money left for them! (e.g. ABC, Alco, B&B, etc etc)

It's really time to wake up.
 
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