When we do any investing for clients it is a two tier process. First of all we look out for half decent long-term performance and this is usually over 5 years, and then we look at the short-term performance over the previous 3 months to just ensure that funds are working for us both long term and short term. This tends to give us a good bit of consistency over time and helps with fund selection and investment, but needless to say, in the troubled times that we are n today – it is irrelevant, because we don’t have any long-term performance.
What we have been looking at in the last week or so, is short-term performance only, and whether this is enough to persuade us to invest some clients monies. Interestingly when I looked at some low risk funds recently, I did come across 5 funds that were worthy of another look as their performance in the last month alone ranged from 1.80% to the largest at 3.16%. That’s something given all the turmoil in the world just now.
The top performing fund was an Infrastructure Income fund, and then we had 2 Absolute type funds so even in all the turmoil, there are some funds that are still performing. You might then say – should we not invest in those funds ? and my answer would be no, because you are not looking over a long enough period to be able to make a reasonable decision. Yes some funds are doing well over the last month, but in my opinion, that is not enough time to commit money to an investment, and in fact if you look at the best performing fund – which I said was an infrastructure fund – these types of funds are measured over years and not a single month.
One of the main things that I have repeatedly said about investing is that you need to do your research over and over again – research is not a one off thing, and needs to be done repeatedly, and with perhaps different approaches as well. MAP only invests a clients money if we can see reasonable long-term performance and also short-term performance, as well as having a reasonable consistency and a half decent sized fund – at least £100 million plus.
If you invested solely on short term performance, you would probably end up switching funds every month or so – and that is a waste of time, and wouldn’t earn you anything. MAP won’t start to invest the money that we currently have in cash awaiting investment until we can see viable performance stats over the long and short term, and we need to see some green shoots appearing before we start.
So remember – when in doubt DON’T.
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