By Paul Nojin
I’ve got my angry hat on today! I’m angry because of a gigantic hoax that Australian investors are the victims of.
I’m talking about the claim that value investing is a sound approach for Self-Managed Super Funds.
This hoax explains why so many investors get poor returns.
The empirical evidence is overwhelming. Australian investors are being sabotaged by the false idea that value investing is a responsible way to invest in the share market.
The truth is that Self-Managed Super Funds achieved a very underwhelming average annual return of just 4.87% in the 10 years to the end of 2016, and you can bet the majority of these SMSF managers identify as value investors.
It’s all well and good to be a value investor if you are Warren Buffett, BUT if you are a regular person investing your Self-Managed Super Fund it is very dangerous to try and emulate his approach.
Warren Buffett is to investing what Rembrandt is to fine art. Just because you get a canvas, paints and brushes, and study the masters, will NOT mean you can create fine art like Rembrandt.
And just because you use the intrinsic value approach to investing does NOT mean you will achieve success as an investor like Warren Buffett.
It might be the right way to go for Warren Buffett and for market geniuses but for people with Self-Managed Super Funds value investing is a high risk undertaking.
Most fail, as that average return of 4.87% shows.
Consider the performance of the professional stock pickers using a value model.
S&P and Dow Jones, the administrators of the US indices, conducted an in-depth study that showed 84% of active fund managers underperformed the index in the 5 years to the end of 2016. You can read about the study on Bloomberg.
That is a gobsmacking statistic.
Let’s not forget these are the titans of the market we are talking about, and 84% of them fail in their endeavour to beat the market over the long term.
For those with Self-Managed Super Funds this information is very sobering.
You don’t have to take my word for it. Warren Buffett agrees 100%.
Warren Buffett himself often warns investors NOT to listen to those that claim to be emulating his style of investing. He does so by referring to a $1 bet he has with a friend.
Warren Buffett wagered $1 that in the long run index investors would outperform the fund managers who charge fees for picking stocks, the majority of whom claim to be Warren Buffett followers and copycats.
For the record, I’m NOT advocating index investing.
I will discuss the pros and cons of index investing in a later email. For today I simply want to convey the point that the majority of investors fail, the majority of whom are in some way acting based on a value approach.
I repeat again, the confirmation that what I’m saying is correct is the fact that Warren Buffett himself tries to warn you against trusting these copycats and so called value investors with his ongoing references to that now infamous $1 wager.
The great tragedy for Australia is that far too many SMSF investors are trying to emulate Warren Buffett.
This situation has arisen because the media influences the mainstream narrative, and drives the false conclusion that value investing is a superior approach for those with Self-Managed Super Funds.
This is a big problem. It is the root cause of the poor track record of Australian investors over the long term.
The media knows we are hard wired for a good story, so they constantly refer to Buffett and value investing in a way that enables the Buffett copycats to flourish.
It seems clear to me that Warren Buffett has contempt for the newsletters and fund managers that claim to emulate him.
Put yourself in Warren Buffett’s shoes. Of course he dislikes the fact that so many advisers and fund managers use his name to benefit themselves. How else can one explain the fact that he regularly encourages people to invest in index funds rather than with an active manager. He does that by constantly referring to the infamous $1 bet noted above.
It is critical you know all of this. I’m presenting you with the information you need to have if your investments are to perform better than the average SMSF performs, and to remind you, the average annual return for the 10 years to 2016 was 4.87% per annum.
My arguments and focus are solely for your benefit. I’m in this to help you. It is that simple. Over the last 21 years I have a perfect track record providing uncompromised and powerful advice on how to prosper in the market.
In coming posts you will hear from some of my long term clients about why they love being Members of The Super Investor.
You really must face the music if you wish to be a successful investor in the long run, and in coming posts I’m going to play more of that song for you.
Next I will explain the minutia of value investing to highlight exactly why it is so dangerous for Self-Managed Super Funds.
In the meantime, if you wish to get your investing on track I invite you to join The Super Investor.
The Super Investor provides a stress free approach to investing in Australian shares and is the perfect solution for investors who want a peaceful and stress free life.
I invite you to join The Super Investor today to take advantage of our superior approach to investing.
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