Financial Advice

[AlmightyBender]

Most are, but momentum investing is not the worst option out there.

I think most investors and fund managers will use past performance as one of the most important criteria in deciding whether to buy a share or not.

That would be why quants analyst and equity analysts use research databases.

If they didn't I'd have been unemployed.

If they do that then they should be unemployed depending on what kind of fund they run. Theoretically they should only be using past data and performance to better understand the current position and environment of the investment and then make a decision to invest based on that current position and their assumptions about the short and long term positions of the investment. The past is the past and logically it should not be used when making long term investment decisions. You should only consider what is happening now and in the future. This is fundamental investing.

However for trading (i.e. not investment) then technical analysis does look at past performance and the call to buy or sell does incorporate analysis of the price movement. But again this is not investment but only short term trading and there are huge differences in risk and purpose of the two.

 

[supersunbird]

Ja, I'm not sure how one can totally ignore past performance.

If the unit trust I want to invest in is a top performer (say in the top 20) over 1, 3, 5 and 10 years periods then the chance is decent they will continue to perform in such a level and it would be safe to invest some of my funds in it.

 

[nakedpeanut]

Frankly I think you're an idiot if you ignore past performance.
True you should never just base your investment on it but also consider present and possibilities for the future.

But the only "facts" you have are the past performance of the company, their management team, and customers etc.


Just to comment on this whole DJ vs Marco thing.
As much as I understand you knocking him about the things he says. Many are obviously from his experience and have worked for him. Luck and just the right timing has worked for him. Which I hope people are aware of. He's allowed to share this experience.

Whether his definitions or explanations are correct, may be ignorance or just him trying to explain it simplistically I don't know. A lot of the stuff you talk about (DJ) is beyond me. Which brings me to my next point.

This is a forum on the internet (not even an investment one). If you put all your cash in an investment, that some random sprouts as having 400% return guaranteed.
Well frankly you deserve to loose your cash for being an idiot.

I agree somethings he has said are a bit reckless but that brings be back to the point above. You have to research and understand your goals and the investment vehicle you are putting your money into. I research ETF for 2 months, before parting with my cash.

@ OP I hope you just read different sources and focus on two things.
1) How risk averse are you?
2) Duration of your investment?
This will help you answer what investment vehicle you should look at. This will then give you an idea of what a realistic expected return should be.

Anyways what a mess of a thread.

 

[undesign]

Just because your mumbo jumbo uneducated stab in the dark round****ery works for YOU doesn't mean you should dish out ADVICE. That's the point.

 

[ClintZA]

I have repeatedly searched for a table I was once privvy too which showed the risks of basing investment decisions on past performance but have yet to find the same one. It is unfortunately not saved on my PC either. Rather frustrating as it perfectly illustrated the issue with basing decisions on past performance. It showed funds over a 15 year period. It showed their performance position relative to their peers. The only thing that stood out from the table was how previous performance is in no way indicative of possible future performance. Often a fund performing in the top quarter one year could very easily be in the bottom quarter the following year, and vice versa.

As stated I cannot find it but in searching now I came across something that I felt would be of value to share in regards to this topic:

As the late Benjamin Graham, father of value investing, pointed out to his readers, past performance is useful in calculating the value of a stock, bond, mutual fund, or other asset only so far as it is indicative of what is to come in the future. Often, the very best time to invest in a particular area is when it has suffered from horrific industry trends over the recent past. Take the oil sector, for example. In the late 1990’s, black gold was trading at $10 a barrel and very few analysts saw an end to the energy sector’s woes. Yet, over the past six years, an investor in refiners such as Valero or an integrated giant such as Exxon Mobile have experienced wonderful returns.

Another one:

Very few funds manage to consistently repeat top half or top quartile performance. Over the five years ending March 2010, only 1.7% of large-cap funds, 2.2% of mid-cap funds, and 4.6% of small-cap funds maintained a top-half ranking over five consecutive 12-month periods. Random expectations would suggest a rate of 6.25%.

As Warren Buffett says, "if investors insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy only when others are fearful".

 

[nakedpeanut]

Just because your mumbo jumbo uneducated stab in the dark round****ery works for YOU doesn't mean you should dish out ADVICE. That's the point.

True but it's an open forum and these things are bound to happen.

I'm usually giving advise in the Hardware section and you always come across people giving horrible advice. But that's just the nature of things. You don't turn some ones thread into a 9 page argument when all they wanted was some advice. You could have corrected OP and given him the right advice ( which was done IMO and that should have been that.)

Now look at what you making me do :/

 

[nakedpeanut]

I have repeatedly searched for a table I was once privvy too which showed the risks of basing investment decisions on past performance but have yet to find the same one. It is unfortunately not saved on my PC either. Rather frustrating as it perfectly illustrated the issue with basing decisions on past performance. It showed funds over a 15 year period. It showed their performance position relative to their peers. The only thing that stood out from the table was how previous performance is in no way indicative of possible future performance. Often a fund performing in the top quarter one year could very easily be in the bottom quarter the following year, and vice versa.

As stated I cannot find it but in searching now I came across something that I felt would be of value to share in regards to this topic:



Another one:



As Warren Buffett says, "if investors insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy only when others are fearful".

See now that's god advice. And something I came across in my research.

 

[ClintZA]

I'm usually giving advise in the Hardware section and you always come across people giving horrible advice. But that's just the nature of things. You don't turn some ones thread into a 9 page argument when all they wanted was some advice. You could have corrected OP and given him the right advice ( which was done IMO and that should have been that.)

At risk of turning this into even more of an argument, I never understand this. How boring would this forum be if every question was answered in the first post and we all just moved on. Why do people moan about these discussions and arguments, and get annoyed when a thread keeps going? To me that is the point of having a forum. There are many places you could get an answer only without interaction.

 

[nakedpeanut]

At risk of turning this into even more of an argument, I never understand this. How boring would this forum be if every question was answered in the first post and we all just moved on. Why do people moan about these discussions and arguments, and get annoyed when a thread keeps going? To me that is the point of having a forum. There are many places you could get an answer only without interaction.

Hahaha no I know, some are even comical. But this happens with almost every financial thread of late. It just makes it tiresome. I'm genuinely interested in some of the things that are brought up as a result, but then we have to live through a rehash of what xy said in this thread and that thread blah blah.

 

[ClintZA]

Alf, besides this comment, I'll choose not to respond to anything you say directly to me here as you are clearly one of those that carries baggage from thread to thread. Act a little mature and leave one argument in the thread it belongs instead of tainting the entire forum with your issues with me.

And you'd do well to heed your own advice about personal attacks.

 

[ClintZA]

A warning for would-be investors who listen to some of the advice given here. As someone new to investing you need to differentiate between looking at past performance to see what the trend is, along with other data, and looking at past performance in terms of who the best performers were. Some seem to be confusing these two. Yes, analysts will obviously look at past performance but they do so to see what the trend is. A "man on the street" investor will often chase yesterday's winner, based on performances, and in all likelihood they would already have missed the boat. Past performance is also often used to get someone to switch an investment with promises of future performance based on what the portfolio has done in the past.

The risk with this is illustrated below (as stated I have battled to find a local table I had illustrating the same but it demonstrates the same thing). This table shows the performance of various indices.



An investor who focuses solely on past performance would look at the performance of the S&P/CITI 500 from 1995-1999 and think they were on to a sure thing. They would have been highly disappointed from 2000-2006 when they would have been in the lower half performance wise. On the flip side you had the Russell 2000 at the bottom in 1998/99 but right at the top on 2000/1.

To me this, more importantly, illustrates the importance of diversification for your average investor but it does, however, also show how past performance can be meaningless unless used in conjunction with other data.


You can see the table, with key, here: http://www.callan.com/research/download/?file=periodic/free/360.pdf

 

[ClintZA]

Please stay away from uncertified financial advisors, who havent heard of people like Warren Buffet, Benjamin Graham, and who are not familiar with investment strategies, like Value investing, Growth, Momemntum investing, or any other style, do not know what Equity analysts do, have never seen a share model etc etc.

These con artists should be reported to the FSB and locked up.

And be especially wary of those who change their stories once they've been shown up as liars.

Alf, could I ask you to provide me with your personal details? You are welcome to do so via PM if you wish. I do not take kindly to slander/dafamation and would like to remedy this. You can happily have mine too, in fact I have already shared them as I have nothing to hide on here, and report me wherever you feel the need.

 

[DJ...]

Most are, but momentum investing is not the worst option out there.

I think most investors and fund managers will use past performance as one of the most important criteria in deciding whether to buy a share or not.

That would be why quants analyst and equity analysts use research databases.

If they didn't I'd have been unemployed.

Though you're referring to vastly different metrics to what marco is. Quants involve far more than "looking for 60% y/y growth..."

 

[DJ...]

Ja, I'm not sure how one can totally ignore past performance.

One doesn't use use part performance in isolation, which has been marco's mantra for ages. Past performance helps to understand price movements, it is not an indicator of future performance though. It is a tool in analysing price points...

 

[Ou grote]

One doesn't use use part performance in isolation, which has been marco's mantra for ages. Past performance helps to understand price movements, it is not an indicator of future performance though. It is a tool in analysing price points...

Using past performance only would be moronic.

Point is that it generally is used, and the way in which it is used would determined. the user obviously and their investment strategy.
And they'd attend roadshows, meet with company management, read broker research, all sorts of things.


The other saying is that past performance is not necessarily a good indicator of future performance but it's a pretty darn good indicator.

 

[ClintZA]

Lance
Just learn to admit it when you are wrong, and maybe say sorry.

I know you crave credibility and respect, but you'll never get it with your attitude bud.

Who are you addressing? You not only enjoy slander and defamation it seems but also have no idea who you are talking to. Bizarre.

I still have not received your PM with your details. Please don't tell me you are petrified about being held accountable for the things you say and will hide behind your anonymity? As stated, I am not, and will happily exchange my details with you, along with my FSP number, and let you report me all you want. I do not talk crap and am happy to be held to anything I say.

Maybe you'd care to point out to all where exactly I was wrong?

Just to add, for the benefit of those wondering what the hell is going on here, prior to your attack I had not addressed you once in this thread but as a result of your apparent bitterness at what was discussed in the cycling threads you seemingly felt the need to get a little personal.

From your post count you seem like a regular here. Surely you know the rules better than most.

 

[ClintZA]

Skirting the issues again. I await your pinpointing of where I was wrong. I also await that PM, as stated I am opposed to slander and defamation.

 

[supersunbird]

WTF? Whats going on here? Stop bashing each other!!! It's the bash Marco-for-making-up-how-things-work thread... and helping the OP if one feels like it...

 

[nakedpeanut]

WTF? Whats going on here? Stop bashing each other!!! It's the bash Marco-for-making-up-how-things-work thread... and helping the OP if one feels like it...

I think we need a "Bash Forumite" section, where you can create a thread with their name and have a go at each other

I'll sell the popcorn! All proceed's I'll invest into the Nedbank BGreen ETF.

 

[ClintZA]

WTF? Whats going on here? Stop bashing each other!!! It's the bash Marco-for-making-up-how-things-work thread... and helping the OP if one feels like it...

Hey, I'm totally with you on the WTF front. I have little idea what happened here. I am assuming it is carry over from another thread. I would just like to learn here and find out where Alf feels I was so horrifically wrong. It will also help others not read it and believe it...

Try to read the thread objectively and see where you went wrong.

And then apologize.

Alf, let's get mature in this investing thread. People may heed advice given here so stop being cryptic and spell out exactly where I was wrong. Stop playing games. This is not TK or OT.