Pick a fund, any fund…pick a manager, any manager
Tim Hartford is an economist and a sophisticated thinker.
In the Weekend FT Tim writes about fund managers and passive investing and suggests all financial assets have the same expected risk adjusted returns or ‘not far off’ and then way pay for active asset managers.
I heard something similar at a presentation in Zurich where a friend of mine compared long term returns from commodities and equities and deduced that they are more of less the same over, say a 30 year, period.
There are obvious flaws in these observations and conclusions:
1. The size of each asset class is different and if we were to allocate assets to each class in more equal way, the risk-return profiles of the different asset classes would change., simply because commodities cannot absorb the amount of capital allocated to equities.
2. For the average productive citizen who starts to invest in financial asset around 27 or 30 years of age, waiting for outcomes over another 30 years is plainly bad economics. Investments need to pay off in absolute terms over much shorter time spans. After all one is taking risks for all periods one is invested.