As this thread was last updated in 2012, can anyone recommend a good book to explain how to read and understand graphs? Pension companies provide graphs to show how well funds are performing but beyond the basics, what else should I be looking for in these graphs? How can they be of use in helping me to decide whether or not to remain in a fund or to change to a different fund? What sort of things should I be looking for in these graphs and what are the most relevant date ranges to study? These are the sort of points that I would like learn more about.
What should I be looking for in pension fund performance history graphs?
- Thread starter RickyJ
- Start date
Steven Barrett
Registered User
- Messages
- 5,114
Markets aren't predictable so you shouldn't look for any patterns. Past performance graphs give you an idea of what kind of ups and downs you can get.
It is true that past performance is not indicator of future performance but we do know that equities outperform bonds in the long run.
You certainly shouldn't be looking at past performance figures for actively managed funds as there are other factors involved in their performance such as who was the fund manager at the time, how lucky were they, what investment philosophy did they have.
Steven
www.bluewaterfp.ie
It is true that past performance is not indicator of future performance but we do know that equities outperform bonds in the long run.
You certainly shouldn't be looking at past performance figures for actively managed funds as there are other factors involved in their performance such as who was the fund manager at the time, how lucky were they, what investment philosophy did they have.
Steven
www.bluewaterfp.ie
Ah I can see this thread getting past the 15 pages...... I hope the poor OP who made his first post is ready!!!
Thank you for your comments but I would still like a book recommendation please. When I had to choose which funds to use for my PRSA 10 years ago, I looked at the historical graphs. I decided to choose 3 different funds and I have stuck to these since then. If my memory serves me correctly, the equity fund based in Asia had a steep curve, which I thought meant good returns but high risk, so I decided to put 20% of my monthly amount in this fund. The other two funds, both equities based, one in European stocks and the other in dividend yielding equities. I thought these would be two safer options than the first one so I spit the other 80% equally between these funds.
On checking a recent graph for the previous three years, the fund based in Asia shows a growth of 52% in July 2018. It peaked at 62% in June 2018. The other two were similar to each other, showing a growth of 28%. Based on the last three years, it seems that these graphs were very similar to the original graphs that I looked at. However, when I looked at the graphs for the previous ten years, there was a big difference. The fund with the dividend yielding equities showed an increase of 150% and the fund based on the Asian companies increased by 100%.
Surely, there must be a reason for all pension companies to present these graphs to consumers even though they clear state past performance is not a reliable guide to future performance. If the graphs are going up most of the time, with the occasional dip, we feel good but there must be more to then than this.
In terms of the dividend yield equities fund, does this mean that if I had €20,000 in that fund ten years ago and I didn't pay into that fund for those ten years, it would be worth €50,000 today? Can the various fund graphs be of any use in deciding where to move money to, if I wanted to move the money to a safer fund, especially as it seems these funds have performed quite well over the past 10 years? It is these sort of simple questions that I would like to read about so that I would have a better understanding of how these types of investments work. It is very easy to commit to putting a certain amount of money away every month and to forget about it until the time comes when you need it. I want to be able to understand if it is in the best place during that time. I understand that there are other aspects of saving / investing that also have to be considered such as taxation of any profits, when will I need access to the money and in this particular case, how long I have before I retire.
On checking a recent graph for the previous three years, the fund based in Asia shows a growth of 52% in July 2018. It peaked at 62% in June 2018. The other two were similar to each other, showing a growth of 28%. Based on the last three years, it seems that these graphs were very similar to the original graphs that I looked at. However, when I looked at the graphs for the previous ten years, there was a big difference. The fund with the dividend yielding equities showed an increase of 150% and the fund based on the Asian companies increased by 100%.
Surely, there must be a reason for all pension companies to present these graphs to consumers even though they clear state past performance is not a reliable guide to future performance. If the graphs are going up most of the time, with the occasional dip, we feel good but there must be more to then than this.
In terms of the dividend yield equities fund, does this mean that if I had €20,000 in that fund ten years ago and I didn't pay into that fund for those ten years, it would be worth €50,000 today? Can the various fund graphs be of any use in deciding where to move money to, if I wanted to move the money to a safer fund, especially as it seems these funds have performed quite well over the past 10 years? It is these sort of simple questions that I would like to read about so that I would have a better understanding of how these types of investments work. It is very easy to commit to putting a certain amount of money away every month and to forget about it until the time comes when you need it. I want to be able to understand if it is in the best place during that time. I understand that there are other aspects of saving / investing that also have to be considered such as taxation of any profits, when will I need access to the money and in this particular case, how long I have before I retire.
They generally like to show the funds that have gone up - this gives the prospective customers a good feeling (the implication being that they will continue to go up) and thus enhance the chance of a sale and the profits that go with it - remember, the companies are in business to make a profit and you are the one paying for that. Often I think that funds that don't do well are merged with other funds and disappear from the lists so only funds with good records remain.
The most important thing, in fact, probably the only thing, is to choose funds with the lowest % costs ie the lowest profit margins for the companies. These are obviously not the ones the companies want you to buy but hey, it's your money
I don't think that is very good advice. You should choose the funds that meet your risk appetite and if you want to risk your capital or protect it etc.
Of course you need to check the fee's but don't just blindly select the fund with the lowest fee. You might not be saying that but worth spelling it out for others.
Gordon Gekko
Registered User
- Messages
- 7,365
No it isn’t. What about track record etc?
Steven Barrett
Registered User
- Messages
- 5,114
I think you need a bit more understanding of investing rather than looking at graphs. I recommend https://www.amazon.com/Smarter-Investing-3rd-edn-Decisions-ebook/dp/B00GAYHH8I/ref=sr_1_1?ie=UTF8&qid=1535440168&sr=8-1&keywords=smarter+investing+tim+hale (Smarter Investing) by Tim Hale. A good place to start
Steven
www.bluewaterfp.ie
Steven
www.bluewaterfp.ie
Steven Barrett
Registered User
- Messages
- 5,114
I'm with the others, that's bad advice.
Even if you go with a passive world equity index fund, what is the tracking error of the fund ie how good are they in actually tracking the index that they are following? People think that being a passive index manager is an easy job when in fact it is the opposite. I have spoken to some and they said it is an incredibly stressful job as they have to hit the mark every day. Some passive fund managers are way off the money.
Steven
www.bluewaterfp.ie
In addition to the actual tracking error, you should understand what is being tracked and how it is done. I would be very careful of any fund tracking a small index, say an Irish or Swiss government bond index, there just are not enough instruments around to enable them to replicate it completely on a consistent basis. So synthetics will be used and when things go wrong it can get very nasty very quickly.
Benjamin Graham, "The Intelligent Investor"
But if you are going to seriously get to grips with it then prepare for 3 or 4 years serious study.
Maybe 4/5 years study.
@ Jim2007- "A Random Walk down Wall Street." Thanks for the recommendation.
@ cremegg - But if you are going to seriously get to grips with it then prepare for 3 or 4 years serious study.
Maybe 4/5 years study.[/QUOTE].
Ok ... thanks! Perhaps my original comment shows my naivety but as my pension pot grows, I think it is even more important to have some knowledge of the world of investments.
Re. Benjamin Graham, "The Intelligent Investor". As it was first published in 1949, do you think the basis for his strategies are the same now as they were in the 40's and 50's? Are markets very different now than they were in 1949? I believe it is quite heavy reading and I would prefer something a bit lighter to be delving into.
@ cremegg - But if you are going to seriously get to grips with it then prepare for 3 or 4 years serious study.
Maybe 4/5 years study.[/QUOTE].
Ok ... thanks! Perhaps my original comment shows my naivety but as my pension pot grows, I think it is even more important to have some knowledge of the world of investments.Re. Benjamin Graham, "The Intelligent Investor". As it was first published in 1949, do you think the basis for his strategies are the same now as they were in the 40's and 50's? Are markets very different now than they were in 1949? I believe it is quite heavy reading and I would prefer something a bit lighter to be delving into.
In terms of book recommendations, I think Investing Demystified by Lars Koijer is excellent.
He has also distilled his central thesis into a series of short videos -
https://www.kroijer.com
I would also highly recommend Your Money and Your Brain by Jason Zweig of the Wall Street Journal.
He has also distilled his central thesis into a series of short videos -
https://www.kroijer.com
I would also highly recommend Your Money and Your Brain by Jason Zweig of the Wall Street Journal.
Yes people are still doing the same dumb sh*t today as they were then and no doubt will do in the future. US title insurance being a classic example. It is practically impossible for a title insurance company to loose money and get every time a hurricane or similar weather conditions are announced they go on sale at a discount. People don’t understand what they own - you don’t loose title to a property just because it is under water or hit by a hurricane, there will be no claims!
A lighter read along the same lines: [broken link removed]
Its not about strategies, and that is the point. Its basically a maths textbook applied to stock valuation. It is absolutely as relevant today as at any other time. The only slightly new concept in the intervening years I can think of is EBITDA.
A small amount of knowledge in this area is more dangerous than none. Your comment about Asian equities being high risk high return and this being reflected in a steep curve struck me forcibly as an example of this.