“Time in the Markets”. What the Asset Gatherers want you to Believe

Like most subjects in life, investing and the stock market are topics with strong opinions on both sides of any argument. After all, the stock market is simply all about disagreement, that’s what makes it work – You believe that share X is overpriced or has no prospects for the future, or you have made the profit you want and think now is a good time to sell. Whereas I believe you are wrong, I think share X is good value, cheap even, I think it has great prospects for the future and I think there is more profit to come.

So, there you have it – we disagree, so you sell and I buy.

One often debated topic is investment performance and the statement “it’s time in the market that matters, not timing”

Many question how one can justify this approach when there are so many variables involved in individual investment choices and reasons for investing, add in the possibility of the unexpected and ever changing personal circumstances and you have a recipe for disaster if you simply believe that you should just hang on in there for as long as possible to get the best returns from your investment.

Anyone can conduct investment research today using high quality sources such as Trustnet amongst many others. In doing so, you can soon see that by taking the blanket approach of just staying in the market whatever comes, you may be exposing yourself to a long wait for those elusive profits.

According to Bestinvest’s most recent “spot the dog fund” article, Jupiter fund managers have managed to return -27.6% over the last 5 years on their UK growth fund, Legal & General have turned £100 in to £58 over the last 3 years. Ok, I hear you say, this year is a particularly bad year due to Covid 19, but UK markets are down around 10% on the year today, so what did these fund managers do, or not do, to make greater losses? Conversely, many fund mangers are producing very positive one, three and five year investment returns, even in the current environment.

Another example and interesting fact, in March 1998, the FT100 index was around the same level it is today, so if you had invested in an FT100 tracker fund for this long, you may still not have made a profit!!

If it’s “time in the markets” that matters, how much “time” exactly do I need?

This article is not about naming and shaming fund managers for their lack of performance it is about questioning that tired old phrase “it’s time in the markets that matters”.

Many investment professionals believe it has one single purpose – the fund manager simply wants you to leave your money with them for as long as possible, regardless of how well they perform, because, even though they may perform terribly, they will still take their annual fees. They are asset gatherers, building a great business, for themselves and their shareholders – with your money.


Just imagine, if your fund manager has £10 billion of funds under management and charges 1% a year, whether the investments grow or not, that’s £100 million a year in income. If your chosen fund loses 10% this year, in this example, the manager still gets paid £90 million, but you lose money!

Asset gathering also creates an additional problem – the fund manager gets so big that it becomes difficult to actually do the thing you are paying them for – trade the markets to maximise profit and build your capital.

When a fund manager wants to sell out a large position, they can find that they move the market by their selling and end up getting an average lower price as they sell tranches of a stock over a few days.

So big is definitely not better.

But the facts prove it right?

Many who live by this self-serving mantra will be able to give you examples of how, if you had invested for the “long term” you would have made significant profits. But they conveniently gloss over the reality by selecting a suitable period to base their statement on.

No-one knows how long “long term” is anymore.

What if the time you want your money, is the time when markets fall, have had a bad year or have just gone nowhere – do you want to hear “never mind, if you hold on it will come back, it’s time in the market that matters”?

So, what can you do to make sure it’s YOU that gets the most from your investments?

First of all, lets be clear, I am not saying that it is easy or even possible to “time” the markets, but there are clearly better times to invest than others and sometimes it’s just better to stand aside.

But you should definitely not accept this excuse for poor performance or poor value from any fund’s manager

Start being a little more discerning when selecting your investment manager.

Here are a few things to consider:

  • Past performance is exactly what it says – PAST – just because an investment manager did well last year or for the three previous years, for example, it doesn’t mean they will do just as well this year or in the future.
  • Check a manager’s performance against the main indices – if the funds you are looking at return broadly the same as the main indices, then you will always get whatever the market gives – positive or negative returns. You are paying for an investment management service that is not being delivered. Look for consistency in positive performance.
  • Charges – Charges are important, but don’t get too hung up on them, its real value for money that matters. If your fund manager returned 12% you wouldn’t mind paying 3% in charges surely? I would prefer that option to a manager that returns 3% and charges 0.75%! But expect the charges to be clear, simple and fair, without multiple layers. Make sure you know the total charges, everything.
  • Never choose your fund manager because they are famous – Think Neil Woodford – one of the UK’s most respected investment managers for over 25 years, until it all started to go wrong in 2018.
  • Consider the manager’s process – what are their portfolio holdings – not just the top 10 – all of them. What’s their stock selection and review process, how would the manager react to major market movements and are they positioned to take advantage of market corrections? No-one has THE secret to investment success, all managers play on the same playing field, with access to the same tools, it’s all about hard work, having structure and systems.
  • Transparency and service –It’s your money, expect good service as a minimum, expect your investment manager to keep you informed and expect them to make growing your capital their number one priority.

In Summary

There are many good investment managers out there who regularly beat the market, sadly there are more who underperform significantly and hide behind the “time in the markets” mantra.

Expect your investment manager to perform and deliver growth that beats the market. That’s what you are paying them for, otherwise, you could just buy a basket of FT100 shares and wait, while you convince yourself that it’s “Time in the market that matters”

If you would like help to review your investment portfolio, get in touch at info@middletonprivatecapital.co.uk

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