De meeste vermogensbeheerders en beleggingsfondsen beloven de markt te verslaan, anders kunnen ze hun hoge kosten niet verantwoorden. Ze kweken de Illusie dat dit ze ook lukt, door het actief selecteren van aandelen, het timen van markt en het selecteren van fondsen (de 3 ‘beleggingspelletjes’). Helaas blijkt uit ruim 50 jaar wetenschappelijk onderzoek dat dit in de praktijk niet klopt. Niemand heeft continu superieure kennis en de markt laat zich ook niet ‘timen’. Er zijn geen beheerders, geen aandelen fondsen, en geen adviseurs die op lange termijn consistent beter presteren dan de markt.

Door een overdaad aan marketing van de financiële industrie, dagelijkse berichtgeving in de media en onze eigen ‘menselijke gebreken’ zijn we niet goed in staat door die Illusie heen te prikken.

Dit boek, in het Engels geschreven, geeft op een korte, humoristische, maar zeer duidelijke manier weer hoe wij meegesleurd worden in de beleggingsspelletjes van de industrie, wat de kosten hiervan zijn, wat het gevolg ervan is voor de lange termijn groei van ons vermogen en wat wij er tegen kunnen doen. Er wordt tevens uitgelegd waarom de belangen van beleggingsindustrie en de klant meestal haaks tegenover elkaar staan en hoe dit opgelost kan worden. 

3    Introduction

5    The Investment Illusion

7     1.1 Stock picking: the investor’s favorite game

9     1.2 Fund Picking: the advisor’s favorite game

13    1.3 Market Timing: the fortuneteller’s game

16    1.4 Conclusion

17  The Investment Solution

17      2.1 Simple Truth 1: Discipline and taming the beast: you!

22     2.2 Simple Truth 2: ‘Going Dutch’ works wonders

27     2.3 Simple Truth 3: Manage risk, don’t chase return

30     2.4 Conclusion

31  A Flawed business model

31      3.1 Flaw 1: The conflict of interest

32     3.2 Flaw 2: The revenue model

35  Fixing the Flaw

35     4.1 The fee-only advisor

36     4.2 The customer owned firm

39 Summary

41  Epilogue

43  Appendices

43     Appendix 1: From Berkshire Hathaway’s 2005 Investment Letter

45     Appendix 2: Academic research

49     Appendix 3: Warren Buffet as a hedge fund

50     Appendix 4: Market timing - The story of Quincy & Caroline by Dalbar Inc.

51     Appendix 5: The Arithmetic of Active Management Appendix

54     Appendix 6: Example of a balanced No-Nonsense Portfolio

56     The authors: Marius Kerdel and Jolmer Schukken

The Investment Illusion

The asset management community has moved from investing to speculating. From focusing on reliable long-term returns from residual income and economic growth, to chasing short-term price fluctuations in unpredictable markets. This move has created a lot of ‘financial’ activity that is detrimental to the return for the ultimate investors.

The math is simple: corporations generate profits, which in principle are available directly to their investors. However, a whole layer of brokers, fund managers and advisors, or ‘helpers’ has emerged to reroute and redistribute these profits, even though the ultimate group of investors has not changed. All costs incurred by these parties are deducted from the corporate profits before they reach the ultimate owners, the investors. The group of ‘helpers’ and their income has been growing continuously. Unfortunately, the more the asset management industry takes, the less the investor makes.

Costs of investing vary between brokers, funds and countries and depend on the liquidity of the security involved. This makes it challenging to determine the exact level of costs ‘in general’, but reasonable estimates can be made. To the average investor the cost of ‘intermediation’ may not look significant on an annual basis, but compounded over a longer period the impact can be devastating. For a European investor who works with an advisor, the average annual costs are estimated to be around 3% of the assets under management. The average gross income on stocks (dividends plus capital appreciation) between 1900 and 2009 was 8.6% globally. The average investor starts saving about 40 years before retiring. A sum of $1,000 invested at the global historical rate will grow to $27,100 over this period. However, deducting the annual cost of 3% reduces the sum to $8,800, just 33% of the market return. Comparing results to the market is not completely fair, as some level of frictional costs to purchase and hold a diversified portfolio of stocks is inevitable. However, 3% is not just ‘some level’. It is a value-destroying amount that should and can be avoided. As John Bogle puts it: “the wonderful magic of compounding returns is overwhelmed by the powerful tyranny of compounding costs.”

Of course costs to the investor equals revenues for the asset management industry. Herein lies the core of the problem. It is in the industry’s interest to promote as much activity as possible, as this allows them to charge the investor the maximum amount, both for the high level of transactions and for their perceived ‘added’ value. After all, why pay someone who doesn’t do anything? That is why the whole marketing machine of the industry is focused on spawning more investor activity. The industry is supported in this endeavor by the financial media, and the biggest advertisers in financial media are? ... exactly.

The core message of the asset management industry is that we, the individual investors, can use them, the managers of assets, to outsmart and outperform the other investors. In convincing us that this is possible, most ‘advisors’ focus on three investment activities, or games, as we will call them:

     1) stock picking,

     2) fund picking, and

     3) market timing.

The notion that you can beat the market by participating in these games is what we call the “Investment Illusion”. Since billions of marketing dollars and countless media hours are spent on promoting this illusion, it takes a wise person to resist. Unfortunately most of us end up playing along and the harm to our financial wealth can be significant.