With markets around the world rising, passive investors are outperforming their active compatriots. The decision to passively invest, buying exchange traded funds and index funds, can sometimes be a no-brainer.
The fees are lower and the returns are higher on average.
You might be thinking: Why not just put your money in an equally-weighted market fund and leave it for the next decade?
It’s an option if you just want exposure to stocks. Not only will that leave you exposed to economic growth and corporate profits going forward, but it’s also an investment that you won’t have to worry about for a number of years.
But that’s not to say passive investing always trumps active investing. There are a handful of investors who can achieve higher returns than the market over the long term. A few US investors that come to mind are Warren Buffett, Joel Greenblatt, Mohnish Pabrai and Seth Klarman.
Also in the running is Aussie billionaire and co-founder of Platinum Asset Management Ltd [ASX:PTM] Kerr Neilson.
Yet in the fiscal year ended June 2016, investors wouldn’t have called Neilson a superior stock-picker. His international fund fell 6.3% — the worst performance in four years.
Since then, however, Neilson’s picks have come good. Just some of Neilson’s picks this year included Samsung Electronics Co. Ltd [KRX:005930], Tencent Holdings Ltd [HKG:0700] and PICC Property & Casualty Co. [HKG:2328].
Source: Google Finance
Those investments are up 42%, 85% and 15% respectively so far in 2017. As reported by Bloomberg:
‘The result was a rally in the stock between July and September that tops any quarter since 2009. But hold the bubbly: the gains have only clawed back about two-fifths of the rout suffered in 2016, its worst year on record.
‘…Analysts aren’t convinced the tide has turned — not one of the eight tracked by Bloomberg recommend buying the stock. They expect Platinum to post a third straight year of lower profit in 2018. Part of the reason is April’s decision to cut management fees on the international fund and some others to 1.35 percent from 1.5 percent. Investors can also choose to pay a 1.1 percent fee along with a 15 percent outperformance charge for some funds.’
However, if Neilson’s investments continue to rise, beating the market comfortably, his fund could claw back capital, leading to higher profits and dividends into the future.
If you want to discover more potentially lucrative investment trading ideas, take a look at the four stocks which we believe could perform strongly for the rest of 2017.
Junior Analyst, Money Morning