The other day I had a bit of a dig at a fund manager who was proclaimed a superstar for generating an average return of 9%pa for 15 years. I pointed out that the long term rate of return for the All Ords Total Return Index was 13.2%pa so our superstar was well off the pace when it came to matching the market rate of return.
One of the comments I received prompted me to get off my bum and converted this differential to a dollar mount. I find converting things to actual numbers helps clarify the mind in that it assigns a cost to mistakes that can be made. Too often traders are a little too relaxed about their errors and don’t fully account for the drain simple mistakes make. The choice of fund managers is such a simple error.
As I have said before I can only offer a hypothetical as to what I would do if faced with the choice of fund managers for something like my superannuation. I would simply stick everything in an index fund. The reason for this is adequately shown by the chart below which compares the return on a $1,000 investment based on the returns for our fund manager and the All Ords TR Index.