How to make £1m by being utterly crap at your job

[swee'pea99]

Be a banker.

Checkout this opening sentence from a recent Money Guardian article on how to invest in shares DIY:

"Fund managers are some of the highest-paid people in the City, regularly raking in £1m-plus salaries, yet fewer than four in 10 "actively managed" funds beat the market index over a 10-year period."

Read that last bit again...'fewer than four in 10 "actively managed" funds beat the market index'.

That means that these supposed 'experts', worth over £1m a year, quite literally do, on average, more harm than good. I find that quite mind-boggling. It's as though there was a whole profession of super car-tuners, who charged shedloads of money by promising to make your car go faster and use less fuel, and more than half the cars they tuned later proved to actually go slower and use more fuel...and yet they stayed in business.

How does that work?

I can only assume it's because the Home Counties are full of people called Clive who feel that being able to drop mentions of 'my broker' into the conversation at the dinner parties they hold for their similarly ghastly and bone-headed 'friends' is worth the cost.

And yet people who do necessary work that genuinely helps other people have to get by on minimum wage. If they can get a job. I tell you, things are tucked up, man. And yes, that's a typo.

Rant over..

 

[vernon]

Perhaps the 6/10 funds that don't beat the market index are managed by the fund managers who earn considerably less than £1m per annum.

The solution?

Keep your dosh in a biscuit tin and put them all out of work.

 

[ASC1951]

Be a banker.

Checkout this opening sentence from a recent Money Guardian article on how to invest in shares DIY:
.......
How does that work?

I can only assume it's because the Home Counties are full of people called Clive who feel that being able to drop mentions of 'my broker' into the conversation at the dinner parties they hold for their similarly ghastly and bone-headed 'friends' is worth the cost.
......
Rant over..

I wouldn't rely on the Guardian Money Section for financial information, tbh.

Bankers are not the same as fund managers; and brokers are completely different again. Very few brokers earn anything like £1m a year. Nor do many fund managers, come to that, although some do - generally those who are best at their jobs, as Vernon points out.

Journalists have to churn out a story just as much as fund managers have to churn their holdings. If you actually want to know how equity investment works, read a proper book on it. Something like this, for instance http://www.amazon.co.uk/Long-Short-Investment-Normally-Intelligent/dp/0954809327
It isn't particularly difficult to get a better return than the average City professional. I do it nine years out of ten. But it does require discipline and effort and over the long term you won't beat them by more than one or two percent. Over the long term, that is well worth it.

 

[swee'pea99]

I wouldn't rely on the Guardian Money Section for financial information, tbh.

Bankers are not the same as fund managers; and brokers are completely different again. Very few brokers earn anything like £1m a year. Nor do many fund managers, come to that, although some do - generally those who are best at their jobs, as Vernon points out.

Journalists have to churn out a story just as much as fund managers have to churn their holdings. If you actually want to know how equity investment works, read a proper book on it. Something like this, for instance http://www.amazon.co.uk/Long-Short-Investment-Normally-Intelligent/dp/0954809327
It isn't particularly difficult to get a better return than the average City professional. I do it nine years out of ten. But it does require discipline and effort and over the long term you won't beat them by more than one or two percent. Over the long term, that is well worth it.

I wasn't relying on the Guardian for financial information. I was relying on them to be accurate in saying things like 'more than 6/10 underperform the index'. That's not 'financial information'; that's information about the financial sector, which is quite a different matter.

The rest of your post rather proves my point, doesn't it? When a part-timer can outperform the experts 9 years out of 10, it doesn't say a whole helluva lot for the expertise of the experts, do it?

Come to that, if you can beat them at their own game, how come you're not a fund manager? Maybe you could get £1m a year...

 

[srw]

I
It isn't particularly difficult to get a better return than the average City professional. I do it nine years out of ten. But it does require discipline and effort

And luck and a high tolerance of risk.

 

[Markymark]

Maybe it was skewed by unforseen/dramatic events like 911 etc? Ie. they make money lots of the time, but there are some days which wipe out most people and even the best fund managers struggle to recoup their losses?

 

[swee'pea99]

Maybe it was skewed by unforseen/dramatic events like 911 etc? Ie. they make money lots of the time, but there are some days which wipe out most people and even the best fund managers struggle to recoup their losses?

The key phrase is 'beat the index'. The index would take an equal beating from any such events. The fund managers' 'contribution' is the difference between results they achieve and results that would have been achieved by doing nothing. And more often than not, it appears, doing nothing achieves a better result. Whatever the 'events'

 

[Arch]

And yet people who do necessary work that genuinely helps other people have to get by on minimum wage. If they can get a job. I tell you, things are tucked up, man. And yes, that's a typo.

Rant over..

'Twas ever so. Sh1t shovelers are the lowest of the low in every society, but without them, we'd be neck deep in sh1t...

Why? Perhaps it's something to do with mystique. The more basic your job looks, the less society thinks you're worth, because 'anyone can do that'. The fact that the vast majority don't want to do it doesn't count.

 

[RWright]

I think "actively managed" may be a key part of the statement. Not that the media would try to throw a little curve in there to hype a story or anything, especially not the Guardian.

 

[swee'pea99]

I guess you can't trust anything those darn Guardian journalists say, in between knitting their own sandals out of muesli. Let's see what those notorious pinko scumbags Forbes have to say on the matter...

"William F. Sharpe, the Stanford finance professor who devised the widely used Sharpe Ratio for measuring investment risk, recently took another looked at actively managed funds.

Such funds, principally mutual funds used by millions of retirement savers, controlled $11.6 trillion in assets held by U.S. investment companies at the end of 2011, according to the latest edition of the Investment Company Institute Fact Book.

In comparison, passive exchange-traded funds (ETFs), which don’t have managers and instead attempt to match the market, totaled $1 trillion.

Sharpe wanted to know if it was possible to find an actively managed fund that was worth buying. He examined an imaginary investor who saved up money to invest a lump sum and waited 30 years to retire. He found that the investor lost a shocking 38% of “total wealth” by the end. That was the gap between the two outcomes.

Put more simply, if you expected to have $1 million in your actively managed retirement funds, well, you ended up with $620,000 instead. The fund manager kept the difference."

 

[Cyclopathic]

Let's just do away with money all together and just live a peaceful pastoral existence growing vegetables and making humus.