One of the most telling things you can do when you seek an answer is to run the numbers that may help you interpret the information for you.
Many people are at least familiar enough with Poker to understand ‘3 of a kind’, that means getting three kings, or aces, or two’s, in any case the odds of getting three of a kind are 47 to one. According to research by Morningstar only 17 mutual funds (they tend to be called managed funds this side of the Atlantic) out of 2,100 returned a profit so that means its about 123 to 1 odds that your fund performed.
A point of interest is that of the seventeen in profit for year to date and the last twelve months three of them are run by the same person, and that person is also a woman [which might tell us that it’s not a mans world after all! Female fund managers are rare so it is great to see that the ones who do enter the game are doing an exceptional job]
Startling information by any means and sobering to think that so many people can all get it so wrong, but it isn’t by design, it’s due to the fact that when a problem the size of the credit crunch hits that even the good guys get blown away, in fact, in the recent markets the winners are simply the people who have lost the least!
Money is harder for corporations to raise and because of that the corporate debt market margins are rising nicely, we saw one cross our desk recently for a well known institution offering an 18% return! that’s even better than owning a share because with corporate bonds your initial outlay is guaranteed (to the extent that anything is guaranteed).
It will be no surprise that the mareketing of bonds will become more and more popular, with emphasis on how ‘secure’ they are. It suits two market drivers, firstly many firms need finance – especially banks – and secondly shares are causing too much trepidation which will drive many investors into the arms of the bond men.
So to put the last 12 months in perspective, the odds are that no matter how smart you are or how well you pick your stocks or investments that you have lost out overall. That doesn’t mean you won’t win tomorrow or in the long term, it’s really just to keep things in perspective, personally I have taken a beating on stocks despite several good calls, property is getting hammered and there seems to be no safe haven, even gold has been tumbling. The lesson to take from this is to continuously keep your mind open and ear to the ground, money lost goes somewhere, the trick is to become or invest in that somewhere.