Who are Australia’s Best Fund Managers?

Today your editor is preparing for the ‘Australia in the Red‘ debt summit. If you haven’t reserved a ticket and paid your dues, don’t worry, I’ll give you a brief summary of the action on Monday.

Panel members include our slipstreaming, swarm trading technical analyst Gabriel Andre, Associate Professor Steve Keen from the University of Western Sydney, and Phillip Anderson – managing director of Economic Indicator Services.

I’m expecting it to be a lively debate. Maybe all the panelists will agree with each other – maybe they won’t. Who knows? But that’s all part of it.

We don’t even know how the audience will react. We haven’t stacked the crowd politician style, with a bunch of cheer leaders. Nope, the only screening we’ve done on the audience is based on their ability to pay the entry fee.

Following the panel discussion we’ll move on to the first public screening of I.O.U.S.A, a film which Reuters says “… may be to the US economy what ‘An Inconvenient Truth’ was to the environment.”

Of course, I.O.U.S.A is based on fact whereas…

Hang on, that’s not fair, we haven’t seen Al Gore’s magnum opus so we really should reserve comment on it.

But back to the panel discussion.

Obviously the major talking points will be around debt. That’s a given. But it isn’t as simple as just ‘debt.’ What kind of debt? Personal, business, credit card, government, housing…

And we’re also sure the Great Depression will get a run and the latest essay from frustrated academic and egomaniac, the Fairy Ruddfather. [You can read his rant against freedom and free markets here]

Just as important as flagging all the negatives in the economy is having an idea how to play it for profits. We’ve got our own ideas – it’s something we’re expanding on in our new income newsletter, Australian Wealth Gameplan.

We may get the chance to cover off some of our thoughts on investing through the new depression.

As we’ve mentioned previously, we can’t claim to be an expert on the causes of the Great Depression. However, even based on our limited background reading it is evident claims that government stood by and did nothing during the depression are entirely false.

Like today’s politicians they had the urge to do something. And they did.

Furthermore, it appears it only made things worse.

So while you read about the global economy emerging from recession, and that ‘green shoots’ of recovery are showing, make no mistake that the global economy is yet to face the full force of the recessionary and depressionary meltdown.

Hey look, we’re not even going to sit on the fence or hedge our bets here. Rather than the current fiscal stimulus packages being positive for the economy, they are actually the last thing the economy needs.

How can we be so certain? Simple, any intervention by government in the machinations of market forces leads to negative consequences. It has always been the case and it will always be the case.

When will this all happen? Well, that’s harder to predict. All I can say is you’ve enough time up your sleeve to prepare for it. But don’t wait too long!

The reason government intervention is so bad is that it’s impossible for any one person or group of people to micro-manage an economy. If we’re given the opportunity we’ll expand on it tonight. If not, you’ll read about it next week in Money Morning.

But while we’re on the subject of micro-managing an economy, we’ll say the same thing about fund managers too…

Who are Australia’s Best Fund Managers?

Often, you’ll read fund manager X or fund manager Y boasting how they manage $50 quadrillion or $100 bazillion. It’s the funds management equivalent of ‘mine’s bigger than yours.’

While that may look great at the annual funds management awards and we’re sure it looks equally great on their CV. But if you’re invested in those funds it’s terrible.

In fact, when it comes to choosing a fund manager then you need to throw out the window everything anyone else has told you. With one exception, but I’ll get to that in a moment.

If you are determined to put your money with a fund manager you actually need to avoid the big guys. The big fund managers serve their purpose, but they are just the McDonald’s of the finance industry.

If you want something without having to put in too much effort, and you like the look of glossy brochures, then go for it. The big fund managers will give you that.

But they’re also more likely to give you average returns. Simply for the fact that the larger the fund the more representative the fund is of the broader market. If a fund manager has $300 powzillion in funds under management that’s a whole lot of money that needs to be invested.

That means they have to diversify the cash ever further so they don’t become too overweight in one stock.

Now, that isn’t to say there’s something wrong with investing in a fund that follows an index. There isn’t. If you really have no interest whatsoever in taking some control over your investments then index investing is fine.

But if that’s what you want then you better make sure you’re invested in a real index fund. And in that case you want as big as you can get. Passive funds like these should charge next to nothing in fees, and it will give you a return no better and no worse than the rest of the market.

However, if you do have an interest in your investments, then investing in a large mainstream managed fund should be your last choice.

Not all managed funds are bad. In fact they are especially good if you want to get yourself some exposure to overseas markets or areas of the market where it just isn’t possible or feasible to invest small sums directly.

In reality, there’s nothing better than having complete control over your own investment choices – rather than having your investments made for you by some faceless fund manager sat in front of six computer screens in an office on Martin Place or Collins Street.

It may sound like a cliché, but the best fund manager for your investments is you.

So the key is to put in some effort, get yourself an investing gameplan and then back yourself. Only that way will you have a real chance of potentially locking in better than average returns.

Other Stuff on the Markets

The S&P/ASX200 gained 1.15% yesterday, while overnight on Wall Street the Dow Jones Industrial Average added 83 points. In Europe the FTSE100 gained 1.85% and the CAC40 added 2.08%.

The price of gold in Australian dollars is trading at $1,134.10, while in US Dollars it is trading at $934.73.

The Aussie dollar remained strong versus the US dollar and Japanese Yen, trading at USD$0.8246, and JPY78.88.

Crude oil closed overnight at USD$66.59.

For the biggest movers on the market yesterday click here…