by Cherry Reynard from interactive investor, 29th October 2024:
Every investor understands the basic premise of investing: to sell something for more than they bought it for. However, while objectively straightforward, it is fiendishly difficult to do in practice. Time, markets, and emotions can all get in the way. This is the appeal of the “set and forget” investment, where someone does the hard work for you.
There are two problems with the “buy low, sell high” idea. The first is that relatively few people are able to do it effectively. Every year, consultancy group Dalbar runs a study comparing the returns of the stock market to the returns of investors in the stock market. In 2023, it found that the average equity investor earned 5.5% less than the S&P 500. Year in, year out, the study shows that investors pull money out of the market at the wrong time (i.e. at the bottom) and invest it at the wrong time (i.e. at the top).
The second problem is that most people don’t have the time and energy for hours of fund research. They have jobs, children, a social life. Even the most enthusiastic investment geek cannot hope to keep track of the disparate factors that might influence a portfolio, which could include – but are not limited to – elections, geopolitics, inflation, interest rates or the economy. They will also need to keep track of fund manager moves, fund group mergers and team changes.
This is a clear argument to look for a manager who takes all this complexity off your hands. These managers will harness their expertise to insulate you from the highs and lows.
Ben Conway, head of fund management at Hawksmoor Fund Managers, describes how this can work in practice: “The valuations between different asset classes is always in flux. We will switch from fund to fund and asset class to asset class according to whether we identify a margin of safety. We aim to own growth at the right part in the cycle, and value at the right point in the cycle. We like to stick to very disciplined managers with a clear philosophy.”..
Ruffer trades at a small discount to net asset value (NAV), but if investors are looking for a bargain, James Carthew, head of investment companies at QuotedData, suggests RIT Capital Partners, currently on a near-30% discount. RIT Capital Partners uses a multi-manager approach, spreading its money across a wide range of asset types, including private equity and debt.
Read more here