{"id":20522,"date":"2021-03-28T11:37:19","date_gmt":"2021-03-28T14:37:19","guid":{"rendered":"https:\/\/thelaker.ca\/?p=20522"},"modified":"2021-03-28T11:37:19","modified_gmt":"2021-03-28T14:37:19","slug":"column-big-names-dont-mean-big-gains","status":"publish","type":"post","link":"https:\/\/staging-z.thelaker.ca\/?p=20522","title":{"rendered":"COLUMN: Big names don\u2019t mean big gains"},"content":{"rendered":"\n

By Jennifer Rideout, Wealth Advisor, Assante<\/em><\/strong><\/p>\n\n\n\n

In the world of finance, the media tends to cover the \u201cbig names\u201d with awe. They dutifully record the pronouncements of billionaire investors, and scour regulatory filings to see where large funds are placing bets.<\/p>\n\n\n\n

At one level, this is totally understandable. For an individual to have amassed so much money, they often made prescient decisions at some point. And in the case of large, so-called \u201cinstitutional\u201d investors, they\u2019re often staffed with bright people and given money to invest by the ultra-wealthy.<\/p>\n\n\n\n

So, should the average investor copy what these \u201cpros\u201d are doing?<\/p>\n\n\n\n

Generally speaking, no.<\/p>\n\n\n\n

It may surprise you to hear this, but there\u2019s no reliable connection between the fame of these large investors and their returns.<\/p>\n\n\n\n

In fact, there\u2019s quite a bit of evidence that in recent years, bigtime investors and investment funds have actually underperformed.<\/p>\n\n\n\n

For example, some of the people who made headlines by successfully betting against the U.S. housing market before its collapse have not come close to replicating those gains. One of those investors, billionaire John Paulson, actually saw a fund his firm manages plunge 70%<\/a> in four years.<\/p>\n\n\n\n

And it\u2019s not just specific people that have lagged: 2018 was the first year in a decade<\/a> that an index of hedge funds actually outperformed the S&P 500 plus its dividends. To give you a sense of how highly paid hedge funds are, their typical fee structure is known as \u201c2 and 20\u201d; 2% on assets under management, and then 20% of all profits. And yet they still have done badly!<\/p>\n\n\n\n

Yet more proof is seen in how large university endowments have performed.<\/p>\n\n\n\n

As the publication Institutional Investor explained<\/a> it late last year:<\/p>\n\n\n\n

Endowments and foundations have underperformed broader markets since the financial crisis, lagging behind a <\/em>simple 60-40 portfolio<\/em><\/a> of stocks and bonds. The worst-performing non-profits, however, were large university endowments, according to a <\/em>paper<\/em><\/a> from the National Bureau of Economic Research\u2026These results \u201csupport the conclusion that the investment wisdom of top universities is largely a myth, as one could expect to earn these types of returns simply by chance,\u201d authors Dahiya and Yermack argued.<\/em><\/p>\n\n\n\n

Lessons for Investors<\/p>\n\n\n\n

For the individual investor, it\u2019s important to not just blindly follow what the \u201caugust\u201d names in finance are doing with their money. In other words, just because a well-known hedge fund manager is bullish on a certain stock doesn\u2019t mean it\u2019s a wise idea to buy it. And just because some large funds publicly think there could be a market crash doesn\u2019t mean that will happen, either. They don\u2019t have a greater crystal ball than anyone else.<\/p>\n\n\n\n

There is actually some good news, however, when you step back and consider all of the evidence of how the big names fare against the market. And the good news is that for all the resources the billionaires and hedge funds have, it doesn\u2019t appear to put them at any advantage against a well-diversified portfolio of stocks and bonds held by the typical investor.<\/p>\n\n\n\n

Another way of saying this: bigger doesn\u2019t mean better when it comes to investing.<\/p>\n\n\n\n

Jennifer Rideout<\/strong><\/p>\n\n\n\n

Wealth Advisor<\/strong><\/p>\n\n\n\n

Assante Capital Management Ltd.<\/strong><\/p>\n\n\n\n

Assante Capital Management Ltd. is a Member of the Canadian Investor Protection Fund and Investment Industry Regulatory Organization of Canada. This material is provided for general information and is subject to change without notice. Every effort has been made to compile this material from reliable sources however no warranty can be made as to its accuracy or completeness. Before acting on any of the above, please make sure to see a professional advisor for individual financial advice based on your personal circumstances.<\/em><\/p>\n\n\n\n

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By Jennifer Rideout, Wealth Advisor, Assante In the world of finance, the media tends to cover the \u201cbig names\u201d with awe. They dutifully record the pronouncements of billionaire investors, and scour regulatory filings to see where large funds are placing bets. At one level, this is totally understandable. For an individual to have amassed so […]<\/p>\n","protected":false},"author":2,"featured_media":20523,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[111,997],"tags":[1364,2,1350,1271,1365],"class_list":["post-20522","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-column","category-columns","tag-assante","tag-fall-river","tag-finances","tag-jennifer-rideout","tag-wealth"],"_links":{"self":[{"href":"https:\/\/staging-z.thelaker.ca\/index.php?rest_route=\/wp\/v2\/posts\/20522","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/staging-z.thelaker.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/staging-z.thelaker.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/staging-z.thelaker.ca\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/staging-z.thelaker.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=20522"}],"version-history":[{"count":0,"href":"https:\/\/staging-z.thelaker.ca\/index.php?rest_route=\/wp\/v2\/posts\/20522\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/staging-z.thelaker.ca\/index.php?rest_route=\/"}],"wp:attachment":[{"href":"https:\/\/staging-z.thelaker.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=20522"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/staging-z.thelaker.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=20522"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/staging-z.thelaker.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=20522"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}