{"id":61594,"date":"2014-10-08T09:53:30","date_gmt":"2014-10-08T13:53:30","guid":{"rendered":"http:\/\/countingpips.com\/?p=61594"},"modified":"2014-10-08T09:53:30","modified_gmt":"2014-10-08T13:53:30","slug":"the-secret-big-fund-managers-dont-want-you-to-know","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2014\/10\/the-secret-big-fund-managers-dont-want-you-to-know\/","title":{"rendered":"The Secret Big Fund Managers Don\u2019t Want You to Know"},"content":{"rendered":"
October 8, 2014<\/div>
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By MoneyMorning.com.au<\/u><\/a><\/p>\n

Stocks<\/a> have had a rough and tumble time these past few weeks.<\/p>\n

It’s been even rougher on the small-caps.<\/p>\n

You shouldn’t find that strange. In fact, when you think about the forces battering Australia’s economy…it’s predictable.<\/p>\n

But just because small-cap stocks<\/strong><\/a> have taken a breather, it doesn’t mean you should ignore emerging companies altogether.<\/p>\n

If you overlook this sector, you could miss some sensational gains.<\/p>

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And if you approach small-cap investing based on what’s happened across an index…you’re playing the wrong game.<\/p>\n

Let me explain…
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The small end of the stock market can be a bad neighbourhood when investors lose their appetite for risk.<\/p>\n

That’s because when companies and markets are looking shaky, people often flock to what they view as the safety of large companies.<\/p>\n

The price action of the past few weeks bears that out to some degree.<\/p>\n

The past fortnight has shaved 2.5% from the value of the Aussie blue chips<\/a> in the S&P\/ASX 200 [ASX:XJO]<\/strong>.<\/p>\n

But the minnows in the S&P\/ASX Small Ordinaries [ASX:XSO]<\/strong> have fared worse. In the same period, these stocks have lost 3.6%.<\/p>\n

The speculative end of the market has underperformed recently. As a small-cap analyst, I won’t hide from that.<\/p>\n

But here’s the secret: Small-cap investing is always<\/em> about stock-picking.<\/p>\n

You’ll never reap huge triple-digit percentage gains by punting on the direction of a market index.<\/p>\n

But with a few carefully chosen speculative stocks, you can rev up your investment returns so powerfully that you’ll leave the index-huggers in your dust.<\/p>\n

I’ve helped thousands of investors lock in stratospheric gains on small-cap stocks this year. And with your permission, I’d like to help you do the same<\/a>.<\/p>\n

I’ll reveal some of our big recent winners in a moment.<\/p>\n

But first, let me show you one of the most powerful reasons why small-cap stock picking can reward you so richly.<\/p>\n

In short: making money from the stock market<\/a> is as much about avoiding losers as it is about picking winners. And there are many losers to avoid in the small-cap sector.<\/p>\n

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Big gains on the table<\/strong><\/h2>\n<\/p>\n

If a fund management company is ‘taking care of’ your wealth…this chart may alarm you.<\/p>\n

And by ‘taking care of’, of course, I mean ‘siphoning management fees away from’.<\/p>\n

It reveals the extent to which professional small-cap investors have been beating the market. Just as importantly, it shows how much value your average large-cap fund manager destroys.<\/p>\n

By the way, this affects every Australian with a superannuation fund<\/a> that isn’t self-managed.<\/p>\n

As measured by Morningstar, the chart shows the performance to 30 June 2014 of actively managed Australian investment funds over one, three and five years.<\/p>\n

Each bar shows the percentage of fund managers who underperformed<\/em> their benchmarks. In other words…the taller the bar, the more value the fundies destroyed.<\/p>\n

<\/a>
\nSource: S&P Dow Jones Indices<\/em>
\nClick to enlarge<\/a><\/em><\/div>\n<\/p>\n

You should draw two conclusions from this. <\/p>\n

Here’s the first: The average large-cap fund manager is no good at generating ‘alpha’. That’s fundie jargon for ‘beating a benchmark’…which itself is fundie jargon for ‘performing’.<\/p>\n

You probably won’t find that headline in the next glossy brochure from your super fund.<\/p>\n

But the second conclusion could make you rich. It shows that the small-cap sector offers you a far greater chance of beating the market.<\/p>\n

The fact that so many small-cap fund managers beat their benchmark shows you that big potential gains are on the table.<\/p>\n

All you have to do is ignore the no-hopers…carefully select some speculative winners…and enjoy the ride.<\/p>\n

By the way, investing<\/a> in speculative companies is always risky business. You should never allocate more of your wealth to any one speculative stock than you can afford to lose.<\/p>\n

And of course, most of the companies in the Small Ordinaries are volatile. Many of their shares don’t offer investors much hope of making money.<\/p>\n

You can leave those stocks for the birds.<\/p>\n

Over the years, I’ve honed a technique<\/a> that sorts small-cap losers from the potential winners.<\/p>\n

And when these stocks win, they can win big.<\/p>\n

You can reap tremendous rewards if you back a winning company while it’s still a speculative punt.<\/p>\n

For example, take the little healthcare company that has brought my readers a total return of 166% in just over a year.<\/p>\n

Or how about the cutting-edge tech stock I tipped to my Australian Small-Cap Investigator<\/em> readers in August? It would be unfair to my subscribers if I told you the stock’s name and ticker symbol…but as of this morning, in less than two months it’s brought my readers a whopping 232% gain.<\/p>\n

Not all of my picks hit the stratosphere as quickly as that. But every small-cap stock I recommend offers huge potential to electrify your portfolio.<\/p>\n

There are rich potential rewards waiting for you in the small-cap sector. <\/p>\n

You don’t have to spend hours reading balance sheets, and you don’t have to risk a lot of money up front.<\/p>\n

All it takes is a few minutes a week…a desire for explosive gains<\/a>…and a healthy sense of adventure.<\/p>\n

Cheers,<\/strong><\/p>\n

Tim Dohrmann+<\/a>
\nEditor, Money Morning<\/em><\/strong><\/p>\n

Join Money Morning on Google+ <\/u><\/a><\/strong><\/p>\n

The post The Secret Big Fund Managers Don\u2019t Want You to Know<\/a> appeared first on Stock Market News, Finance and Investments | Money Morning Australia<\/a>.<\/p>\n

\n<\/img><\/a> <\/img><\/a> <\/img><\/a>\n<\/div>\n


\nBy MoneyMorning.com.au<\/u><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

By MoneyMorning.com.au Stocks have had a rough and tumble time these past few weeks. It’s been even rougher on the small-caps. You shouldn’t find that strange. In fact, when you think about the forces battering Australia’s economy…it’s predictable. But just because small-cap stocks have taken a breather, it doesn’t mean you should ignore emerging companies […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-61594","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/61594","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=61594"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/61594\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=61594"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=61594"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=61594"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}