Bacon and eggs: how's YOUR breakfast doing?
Breakfast is traditionally said to be the most important meal of the day, but can you track how well yours is doing?
In the cornucopia of customised and specialised indices, it is astounding that no one has yet come up with a family of breakfast indices. Surely in the innovative and imaginative world of exchange traded funds and commodities, someone is planning this.
Will UK retail investors be able to spot a bargain when they see one? In the US, Vanguard has made a business model out of keeping costs low and charging investors less. Now it has brought this model across the Atlantic, launching a range of index tracking funds with fees or total expense ratios that significantly undercut equivalent products currently available.
This is to say, these are passive products that are a lot cheaper than other passive products. If the products do what they claim to, the only difference between them should be the price, so a rational consumer would always choose the lowest price option.
But can we rely on rational consumers?
Recent research by fund ratings agency Morningstar into global fund markets found just one place where investors pay attention to the cost of investment products: Taiwan.
FTfm has been talking about the technicalities of more abstruse exchange traded funds for a while, so it’s nice to see a lively debate going on across the blogosphere. Leveraged and inverse ETFs come in for a good spanking in particular.
While the good folks of IndexUniverse, Abnormal Returns and Seeking Alpha make some excellent points, it is important to bear in mind that the problems are mostly not with the plain vanilla ETFs most investors are using. It would be a pity if the move to low-cost passive investment were deterred by the problems of a few foolish investors in products they had failed to understand.
Wealthy may enjoy luxury yachts, but they are paying too much for wealth management
Pity the poor private client – well poor is probably the wrong word, but apparently the wealthy are getting a bum deal from many of the advisers and private banks that look after their money.
They pay the highest fees and get the worst performance, according to Alan Miller, former chief investment officer at New Star Asset Management and now partner at Spencer-Churchill Miller, a wealth management boutique.
Mr Miller has seen the light and is using low cost exchange traded funds to build portfolios for clients, as he explains in a video interview. He says making asset allocation calls is the key to making money, rather than picking stocks.