How to Win the Loser's Game
Pensions and how they're managed by funds managers in the UK are the major focus of the documentary, How to Win The Loser's Game. It has a sort of news meets education film feel, and is meant to inform, as well as to expose a flaw in the way the majority of people in the United Kingdom's money is being handled by funds managers that they are then expected to pay.
The film liberally uses generous amount of animations, in text form, and graphics that mostly reinstate what is being said by the narrator. In this way, watching the documentary can feel sort of like watching a professional or classroom setting presentation.
Getting the most out of How to Win The Loser's Game does require viewers to have a particular level of knowledge when it comes to the matters that are being discussed. It's more of a process that you need to understand, as opposed to a list of terms that will seem familiar but refer to things that are fundamentally different in the practical ways that they apply to many everyday people's finances; having to do with an entirely different economy than the one here in the United States. Maybe this film will interest you enough to learn more and revisit it.
This program submits a theory on how the market works and who it works for, and supports this theory with data and evidence compiled from various sources. It lacks any sort of frill, and relies solely on the quality of the information being shared, and the factuality of the statements. It's one for the investors in the UK, and the monetarily minded anywhere.
@Silvan Schumacher: Right down there with lawyers and politicians I see: "We currently work on making financial planning and investing into ETF portfolios available to the broad public" ETFs are (already) available to the broad public.
The financial markets are absolutely NOT efficient, much of the time. They are only fairly priced at a certain point, not necessarily halfway, from being driven from low extremes to high extremes and back again by those who run the game. Every now and then, the game gets out of their control, like in 2008 when a number of the banksters were left holding the Subprime or Junk Mortgage Backed Securities bag.
For instance, as I recall in a year prior to 2003, the low for Crude Oil futures was about $17/bbl. In 2008 the high was about $140/bbl. Halfway is about $78.5 which was well over the fair price. Even today 17.11.07 crude is still over $50/bbl which is significantly over priced considering the historic prices compared to historic supply and the glut of oil from all the drilling that occurred from 2003 to 2008 while the economy did a nose dive in 2008 and the fine print in those drilling contracts forced the oil to be sold. Just how did they get crude up to $140/bbl? They built tank farms, filled and parked the sea going tankers, filled the strategic reserve at the highest prices, keeping as much oil off the market as they could, while those heavily into that manipulation kept bidding up the futures contracts. In layman's terms it was a conspiracy to jack the hell out of crude. Who went to jail? No one of course. Who went to jail over the Mortgage BAcked Securities scam? Less than a handful and not the most guilty.
Just saying, anyone who steps foot into the financial markets should know beforehand that they are stepping into a viper pit and act accordingly. About 70% of a days trading is High Frequency Trading = computer algorithms nickel and dime-ing you on your trade entries and exits, trying to game each other, and so forth. Meaning develop or use a system, make sure it works first via back testing and paper trading, use VERY little real money to test it live, and if it still works, use a little until you can take your original amount out and use theirs (your gains). Cash out your gains often and put them in your mattress (so to speak).
A usa bank is a place where they loan out 9 times deposits, so your money is already gone. What about FDIC insurance? What about it? If enough banks go, then they will make new rules. Even if they don't, do you have 2-10 years to wait for your dough while they drag their heels? That occurred in the years ago Savings and Loan crisis. They don't pay enough interest for the risk you are taking that the bankster will run off with your money. Fact is they already did. That will be evident when enough people need/want their cash at the same time. Such as a future economic crisis. Even the Great Depression had full years + of up swings on the way down to the bottom.
THE GOVT IS NOT YOUR FRIEND AND PROTECTOR. Govt agencies protect corporations from YOU. Those are the cold hard facts people need to wake up to.
EMH is based on a pure and perfect market. People misbehave in the real world. Without active management and analysts who provide the information, there is no way the market can be efficient. And regarding bonuses, banking managers can easily set their own wage just like any corporate managers do. It is simply a nature of capitalist culture.
Just keep an eye on newspapers and trade the news, leading indicators what're thoooose?
There are so many flaws in this documentary. Warren Buffet takes takes the mick out of bad investors in the quote used, if there were fewer funds to invest in the costs would be higher as that's basic supply and demand... but those "investors" should just blindly sit and wait in the hope of marginal returns unwavering and ingnoring (or ignorant to the noise).
Should you listen to the speculative noise? Mostly no, some yes. Of course there is a whole lucrative industry around opinions... if you're not prepared to look at the data itself, then a fund may help. Make sure any advisor you have is Independent, but understand that regardless of how independent they are they may have their own biases - so are they truly independent :) Let's not forget they have to be paid too.
I see with passive is you attribute 0 weight to everything on a market you are prepared to take on stock that on paper you'd avoid. This isn't crap that's being falsley labled (junk bonds being labled AAA as per 2000's) - it's crap. You're also buying Google, Apple, Microsoft - but also Blackberry (formerly RIM whi saw a 12% growth in December apparently) ... but you'd just sit on everything in the hope it all go up. To quote Warren again "Diversification is a protection against ignorance. It makes very little sense for those who know what they're doing."
And that's kind of what I got from this. I will read The Intelligent Investor by Benjamin Graham.
The Efficient Market Hypothesis is a theoretical concept. It does not reflect the reality of the market where people can trade new information, peoples' reactions to news and so forth. I doubt any of the Nobel Prize winners or academics have placed a single trade.
I agree with you Ben. The efficient market hypothesis is taken as a given and there is too much focus on the aggregrate. In the end you will make costs in passive investing as well and this will keep you under the index/benchmark.
The mathematical argument after 41 minutes is laughable. There is no doubt that passive funds have a fantastic role to play in any portfolio - 70% of actively managed funds dont beat their benchmark - however there is clearly a place for managers such as Neil Woodford who has consistently outperformed the market greatly at a slightly higher cost than buying a passive fund. This whole documentary takes the efficient market hypothesis as a given which is ridiculous. This is a theory which relies on humans to do their job and come to the same conclusion as others at its core, which is clearly not true.
Good point Fabien; however, there are also less risky investments you can make using ETFs, for instance into government- or corporate bonds. You will enjoy better returns compared to your saving account and not suffer too much in case of a crisis.
Combining more risky ETFs with less risky Bond ETFs, will allow you to control your risk, which should be tailored to a specific objective you have in mind.
We currently work on making financial planning and investing into ETF portfolios available to the broad public;
It's a good plan unless you need the money during a recession. It took 5 years for the DJIA to recover from the 2008 crash and reach 14000 points again. And looking at the current chart at 18000 points, it sure looks like it's about ready to crash again.