Asked by Anonymous
Asked on 27 Mar 2019
Which one should i do and why?
This is not an either-or. You can have a core, passive ETF portfolio,and use active management for asset classes that you don't really know much about, or for markets that need a lot of local know-how. Bonds can be one area, some EM markets, specialized commodities, and crash protection strategies, where active management can add to gains. Picking a fund manager (and evaluating his performance) also needs a lot of knowledge, so personal time and effort is a basic prerequisite for both options. ETFs have put a lot of pressure on active management fees, so its not that bad now - but you should totally avoid any "sales charges", and paying more than 1%. Bear in mind that you have to look at fees also from the point of view of the asset class and market the fund is invested in - some markets just have more taxes, wider bid-ask spreads, and less liquidity and therefore cost more, so can't blame the fund manager or the active ETF for higher costs.
Though I would be leaning towards self investment, it entirely depends on the returns that you are expecting to get from your investments and commitment level that you are wiling to put in to handling your own investment.
If you are guy that has the time, want better returns than the market, and are willing to put in the effort to really look at investments for a major part of the the day, reading up and perhaps doing your own analysis, then self investment is a good idea. Your ability in this case should be sufficient in order to create your own opinions and to invest by yourself - there are a few individual retail traders out there that are able to do so. But of course, this is still few compared to the millions of investors that are investing everyday.
If you don't have the time, don't wish to put in the effort, yet want substantial returns above the market, then self investment is as good as throwing random darts at a dart board - you won't get good picks because of your own skill, you get it because you are lucky. In this case, perhaps looking at a professionally managed fund is for you - that is if you have the money, and are willing to take the risk. When I say money, I mean alot of money for investments. When I say risk, I mean you could be up 20%, or down 20%, and it isn't consistent. Thats risky. If you are using your savings for your house, maybe this isn't the road for you. Why I say this is essentially because I don't want to totally discount investing in fund managers when they can perhaps value add and give you some form of exposure to the market that is in line with your investment goal, and manage it well. Though it's true we all want to invest by ourselves since it's definitely cheaper, the time and skill required for proper analysis isn't exactly cheap. Some people just won't have the time to sink into getting this skillset. If you're one of them, I don't think getting a cost efficient, well performing fund manager to help you invest your money is wrong.
If you are like me, looking to accumulate my wealth, maybe don't really have so much time to do my own in depth analysis, yet want some return that beats bonds and inflation, then you could look to just purely broad based index investing, which can easily be done by yourself through an ETF in the exchange or a very low cost index fund.You basically get the market return, which isn't bad at all if you are investing in the US S&P to be frank. Now you may say the investing in an index fund is the same as giving money to a fund manager, but essentially the low cost of it and the ability to efficiently reinvest back your dividends without the need for transaction cost is the main reason why I don't really consider such passive investment methods "giving money to the fund manager" . I only think that active investment management by these fund managers who seek to get above market returns as giving them the money to invest, since they charge quite exorbitant fees.
All in all, it depends on your investment commitment and goal.
It doesn't have to be just self-invest or giving $ to fund manager to invest.
Fund manager fees are too high compare to other options, these days all goes either buying ETF, index or uses Robo advisors with low fees.
I recommend start with Roboadvisor, with this as the guide: https://blog.seedly.sg/working-adults-easiest-ways-to-invest-a-monthly-sum-for-beginners/
If you have more time and really keen to DIY invest yourself, then you can sign on for more recommended classes to self invest ! :)
If the above answers are acceptable, remember that returns are unpredictable but costs are predictable so always go with the choice which has lower costs.
If not, a good fund manager can do the job for you but how to pick one is an art more than a science :)
Agreed with Jonathan. Unless you frankly can't be bothered or are too busy on your job, I believe everyone should pick up self-investments. However this is not to say you should skip the whole process of first understanding investments in general and good portfolio management as a whole, before diving into reading up about specific investments and executing them, what to buy...
Really not a fan of the traditional unit trust/mutual fund system. Just look at your parents generation to see how many who trusted their bankers and investment advisors were actually better off than just buying the S&P500 index. The worst part is many of these funds went under reputable IB names. Even if the funds were still netting a positive return, you have to factor annual charges which goes to their lavish offices and paycheques. Just start small and safe. Even if you make mistakes, you still learn for future investment decisions.
As the Chinese like to say: 靠自己最好（It is best to count on yourself)
Learn to invest on your own. There is no guarantee that a fund manager can perform well year after year and you still need to pay fees if there are negative returns. Not to mention that the average single digit returns generated by fund managers are frankly, uninspiring.