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Blog posts with the tag "Lars Kroijer"

Two must-read books for investors – Gregor Logan

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Mark Dampier, head of research at Hargreaves Lansdown has just published an excellent book, ‘Effective Investing‘, outlining how the reader can take control of their own finances. Whilst suggesting a discussion with a professional is always a good starting point, he rightly points out that the development of online platforms, greater tax incentives such as ISA’s and free research available online have made the process of looking after one’s own finances much easier, although not entirely effortless. Even if you invest through a professional, reading this book will equip you with a much better understanding of what is being done on your behalf and improve your ability to question both the process and outcome.

Should you be setting out on a journey of self-investing, Mark lays out in a reader-friendly, logical way: how to go from blank sheet of paper to being fully invested in carefully chosen, actively managed funds suitable to your investment objectives and risk tolerance. He suggests the choice of which funds to buy is as important, if not more important, than getting your asset allocation right. He offers help and assistance in reducing the “bewilderingly large” number of funds down to a few that you might sensibly own.

Lars Kroijer in his also excellent book ‘Investing Demystified‘ starts out with a different and contrasting theory; that the markets are actually quite efficient and seeking to be one of the few who does manage to outperform is most likely to end in tears. With this as the key premise of his investment methodology, he suggests that by deciding on a sensible asset allocation, which is in turn invested through low cost tracking funds, you are much more likely to meet your expectations. The certainty of compounding of the added return from very low fees more than makes up for the chance of outperformance from actively managed, but high fee funds. He too then takes the reader on a journey from theory to fully invested practice.

These two writers agree on many aspects of investing, the critical difference is whether it is worth paying more in the hope, not certainty, of achieving above market returns from the funds you own.

One way to assess who has been correct historically is to back test the aggregate results of the wealth managers in the City. By doing what is referred to as attribution analysis one can determine and compare how much of a portfolios return comes from asset allocation (i.e., the percentage in equities, bonds, property and cash) and the return actually achieved form these assets, commonly known as stock selection. The results are unequivocal, using the same asset allocation, the low fee, index tracking solution offers superior returns. Although in theory the professional should be able to choose funds that outperform, in practice, in aggregate, they choose funds that underperform after fees of course.

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Welcome to my website. I'm Gregor Logan, an independent management professional with over 35 years of experience in all asset classes, including equities, bonds, property, private equity, alternative assets and bonds. I previously held senior-level roles at MGM Assurance, Pavilion Asset Management and New Star Asset Management.

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