INVESTMENT BLOG
About The Chimp
Professionally Managed Funds Information & Help
Beating the market is hard. Indeed, only a minority of professionally managed funds beats the market over time. The majority, often the vast majority, gets beaten. In other words, a chimpanzee throwing darts at a list of investments tends to do better than the average professional choosing investments from the same list.
Investing always involves making predictions. If you buy a particular stock you are predicting, directly or indirectly, that it will behave – perform – in a certain way over a certain timeframe. Same goes for passive funds. In buying a passive fund, you have decided not to make predictions about the underlying investments – that is the point of a passive fund – but you are still assuming and thus predicting that the fund will behave in a certain way. For example, a passive balanced fund may have performed well in recent decades, but this does not mean it will perform well over the next decade or two. Balanced funds in the late 60s and throughout the 70s performed very poorly in real terms due to high inflation. Another prolonged period of high inflation could see a repeat of this.
Whether and when the prices of financial instruments are predictable can be determined scientifically using statistical analysis. Moreover, artificial intelligence and big data have rendered predictabilities harder to find.
Beating the dart-throwing chimp is about locating patterns in financial markets in a sea of noise.
Sign up at the bottom of the page to receive posts from The Chimp by email.
About Me
The FT: “Since the introduction of a new investment process by Mr Elston, the fund has undergone a remarkable turnaround in performance and has produced alpha on a consistent basis”
A What Investment subscriber: “I like Peter’s common sense approach to investing, and have done for **** years!” I think the **** should be read as ‘many’ rather than as an expletive!
Citywire: “the loss of Elston [I shuffled away from a job not off my mortal coil] is a setback given his profile as a market commentator on the media and his well-regarded monthly investment letters”
South China Morning Post: Peter was described as “one of the smartest financial minds in the market”, a bit excessive frankly!
A What Investment subscriber: ”As always the publication is an excellent read, particularly Peter Elston’s piece. That should be a prescribed read for all new investors.”
I have been a fund manager since 1988. I love my profession but am ambivalent, to say the least, about my industry. Too many sharks, too little value added. While I spent the first few years of my career as an equities fund manager, I later became a specialist in asset allocation and multi-asset investing. My angle with respect to the world of investment is to consider, using a sound understanding of probability and statistics, whether, when and over what timeframe some price series, a market or sector index for example, is predictable.
Too much investment commentary involves views being expressed when they shouldn’t be. Predicting the outcome of a what is in fact a random series is of course absurd but it happens all too often, whether within the industry or in the financial media.
I am also a Fellow of The Geological Society and have a keen interest in climate change as well as ESG investing more broadly. I love investing and writing about it. I hope you like The Chimp. She’s quite playful when you get to know her.
Sign up at the bottom of the page to receive posts from The Chimp by email.
PeterElston
Peter Elston