When I say a dog fund I’m not referring to a savings fund for your dog! I’m talking about investment funds. The worst performing investment funds have been named and shamed in a recent ‘Spot the Dog’ guide published by online investment service Bestinvest.
This is an opportunity to find out if the funds you are using in your pension or investments are underperforming as poor performance and will have a significant impact on your future wealth. Remember, you could be paying high fees for this underperformance!
What is a dog fund?
I’m not entirely sure on why dogs are singled out as a symbol of a bad investment fund manager. Perhaps it’s because a dog could do no worst at picking stocks? Perhaps it’s because some of these funds should be kept in a kennel?
Personally I feel to link underperforming fund managers is unfair on dogs!
Remember, fund managers are paid handsomely for managing your life savings and if you’re not getting value they should be named and shamed.
For the purposes of the report, Bestinvest class a dog fund as one that has underperformed its benchmark for 3 consecutive 12 month periods, and that has underperformed the benchmark by 5% or more over the entire 3 years.
There are some household names on this list:
- HSBC with 5 funds.
- St James Place with 4 funds.
- Invesco with 7 funds.
- Janus Henderson with 8 funds!
Overall 111 funds were identified, holding £54.6 billion in assets.
This is yet another indictment of the fund management industry and shows that most ‘Active’ fund managers do not beat the overall stock market over the long term.
What to do if you have a dog fund
You may be tempted to get out of one of these dog funds straight away and one of the things you might do is look for the current best performing fund manager.
This is what causes so many investors to underperform the actual investment itself. You get the investor return rather than the investment return. Let me explain.
Funds may do well over a certain period. They may have made the right call and past performance looks good. But that’s what it is, PAST performance. If you enter the fund now you don’t receive the past performance, you only receive the performance from now. Managers that have done well because of one call rarely repeat their success.
So what should you do?
Just capture the market return.
You never have to worry about….
- Making the right calls at the right time.
- Underperforming or out performing.
- Paying excessive charges for an active service that has been proven not to deliver.
This can be done by low cost market tracking funds. The key is to ensure you have the right mix of stocks, bonds, cash and property to suit your financial plan. As I’ve always said, Investment performance is 90% asset mix and 10% stock selection.
If you have a dog fund and would like assistance finding a better alternative please give us a call. We’ll be happy to deliver you a better service and probably save you fees at the same time too!
Risk warning:
Stock market linked investments and any income from them, can fall as well as rise and is not guaranteed. Any figures quoted are for illustrative purposes and should not be taken as a forecast or guarantee. Past performance should not be seen as an indication of future returns and clients may get back less than they have invested.
