Connect with us

Business

Finance: Neil Woodford, financial genius?

Legacy Phuket Gazette

Published

 on 

PHUKET: I know this has been written about in other media already, but as this fund and its manager have a great track record and I believe we are nearing a sale in stocks, it is a good discussion to review. For those of you who don’t know the fund or manager, Neil Woodford ran the Invesco Perpetual Income Fund for 25 years and achieved an average rate of return of more than 13 per cent. GBP 1,000 invested when he started would be worth more than GBP 25,000 today.

He has recently left the fund and opened one of his own, vowing to continue the exact same strategy upon which he built his success. His successor at the old fund is Mark Barnett, a former colleague who also has a successful track record, but with less experience. On the one hand, Invesco is a big institution and that helps investors feel safe. I personally have been burned on specialist funds enough by now to prefer the big name fund houses, yet the 25-year track record does speak for itself.

For overseas investors, it may be difficult to access the new fund on some of the international platforms, but a direct investment may be an option for those who simply love the manager. In my opinion though, the statistics quoted are a little bit deceiving as they ignore the impact timing would have on the results of investing with either manager. As so many academic studies have shown, asset allocation is far more important than individual security selection. I will explain this in simple terms next, but in my opinion it isn’t so important which manager you choose.

If you invested with either manager right before the last of the two big crashes, guess what? Your performance to date would be abysmal. If you bought either manager at the bottom after the last crash, your performance would be way above average. Do you see the picture? In the end you could have dollar cost averaged, for example putting 1,000 pounds per month into either fund, and made an extremely nice return over the last decades. Or you could have waited for a crash but missed the bottom significantly, and still have done extremely well. This matters far more than which fund within an asset class you invest in.

So how will you know when it is a good time to invest in either of these funds? The answer lies in the overall valuation of the developed world’s stock markets, and the S&P 500 is the most watched index by most traders even though the funds we are discussing would be investing in FTSE-based stocks. I would set a target on the price to earnings ratio of the S&P 500 at something like 12 to start nibbling (say 20 per cent or so of a position you hope to build from your cash holdings), and go in heavy when it dips below a P/E of 10. Historically, you would never have gone wrong buying at these valuations, even if you were still off the absolute bottom a little.

This strategy is good because a bull market always ends with valuations over 20, meaning even if corporate profits stagnated, which they never do over the medium term, you will likely double your money in the next bull market. The last few bulls have gone on to silly valuations, but setting a target to sell say half when the 20 level is reached and then scaling out at levels like 25 or 30 would have never steered you wrong.

David Mayes, MBA, resides in Phuket and provides wealth management services to expatriates around the globe, focusing on UK pension transfers. He can be reached at david.m@faramond.com or 085-335-8573. Faramond UK is regulated by the FCA and provides advice on pensions and taxation.

— David Mayes

 

Get more from The Thaiger

📱 Download our app on Android or iOS
👋 Have your say on our Thailand forums
🔔 Subscribe to our daily email newsletter
📺 Subscribe / Join YouTube for daily shows
👍 Like/Follow us on Facebook
🐦 FOLLOW us on Twitter
📷 FOLLOW us on Instagram

image

Join the conversation and have your say on Thailand news published on The Thaiger.

Thaiger Talk is our new Thaiger Community where you can join the discussion on everything happening in Thailand right now.

Please note that articles are not posted to the forum instantly and can take up to 20 min before being visible. Click for more information and the Thaiger Talk Guidelines.

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Archiving articles from the Phuket Gazette circa 1998 - 2017. View the Phuket Gazette online archive and Digital Gazette PDF Prints.

Follow Thaiger by email:

Drugs3 hours ago

Police nab 600kg heroin drug bust, year’s biggest in Northeast

Koh Samui6 hours ago

Koh Samui unaccustomed to Covid-19, many act in dismay

Thailand8 hours ago

Bangkok Airways extends flight suspension to August 11

Sponsored2 days ago

Experience Phuket’s Islands with 5 Star Marine

Welcome back to Thailand!

Thaiger is getting behind local businesses for the restart of tourism in Thailand - up to 50% discounts across all advertising packages!

Thailand9 hours ago

7 Jomtien Beach curfew breakers arrested

Thailand10 hours ago

Buri Ram pig stable converted into gambling den: 22 arrests follow

Thailand11 hours ago

“Fake news” banned, Thai media say order infringes on freedoms

image
Join the conversation on the Thaiger Talk forums today!
Phuket11 hours ago

Precarious Phuket: open internationally, closed domestically

Best of11 hours ago

Top 5 tattoo parlours Bangkok

World11 hours ago

Duterte approves lockdown measures for Manila

Best of11 hours ago

The Best Pizza in Bangkok with Delivery

Thailand11 hours ago

Thailand News Today | worker camp woes, ‘fake news’ crackdown | July 30

Best of12 hours ago

Best Premium Hotel Buffets in Bangkok

Coronavirus (Covid-19)12 hours ago

CCSA considers extending restrictions in “dark red” zones for another 14 days

Thailand12 hours ago

Fake dead bodies used in Phuket protest, police plan real investigation

Best of12 hours ago

Top 5 adventure tours in Chiang Mai

Thailand5 months ago

Thailand News Today | Thai Airways in rehab, All go for Songkran | March 4

Tourism5 months ago

Phuket’s nightlife. Yes, bars and clubs are still open | VIDEO

Phuket5 months ago

Thailand News Today | Covid passport talks, Thai Airways heads to court | March 2

Tourism5 months ago

Phuket Thai food treats you need to try | VIDEO

Thailand5 months ago

Thailand News Today | Bars, pubs and restaurants ‘sort of’ back to normal | Feb 23

Tourism5 months ago

In search of Cat & Dog Cafés in Phuket Town | VIDEO

Thailand6 months ago

Thailand News Today | Gambling crackdown, Seafood market to reopen, Vlogger challenge | Jan 21

Thailand6 months ago

Thailand News Today | Covid testing for visas, Business impact, Vaccine approval | January 19

Thailand6 months ago

Thailand News Today | Weekend Bangkok bombs, Thailand fires, Covid update | January 18

Thailand7 months ago

Thailand News Today | Stray car on runway, Indonesian quake, 300 baht tourist fee | January 15

Thailand7 months ago

Thailand News Today | Governor off respirator, sex-trafficking arrest, condo prices falling | January 14

Thailand7 months ago

Thailand News Today | Chinese vaccine, Thailand ‘drug hub’, Covid update | January 13

Thailand7 months ago

Thailand News Today | Bangkok may ease restrictions, Phuket bar curfew, Vaccine roll out | January 12

Thailand7 months ago

Thailand News Today | Covid latest, Cockfights closed down, Bryde’s Whale beached | January 11

Thailand7 months ago

Thailand News Today | Southern floods, Face mask fines, Thai Air Asia woes | January 8

Trending