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Not Lazy Investing, More Cost Efficient Investing |
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27 September 2010 |
Justin Urquhart Stewart is one of the most recognisable and trusted market commentators in the media. Originally trained as a lawyer, he has observed the retail market industry for 20 years whilst at Barclays Stockbrokers and developed a unique understanding of the market's roles and benefits for the private investor.
Justin Urquhart Stewart is one of the most recognisable and trusted market commentators in the media. Originally trained as a lawyer, he has observed the retail market industry for 20 years whilst at Barclays Stockbrokers and developed a unique understanding of the market's roles and benefits for the private investor. Justin provides financial advice to clients of Kester Cunningham John Financial Planning LLP.
Somewhat pejoratively it has been called lazy investing by some. The growth, no the proliferation, of Exchange Traded Funds (ETFs) over the past decade has been quite astonishing. Invented in California in the early 1990's and only introduced to the UK a decade ago, we have seen these financial mushrooms grow from zero to shortly in excess of 3000 different funds. However, if you are unfamiliar with these financial animals I had better explain. ETFs are essentially index trackers that trade as shares. So for example, you could just buy a FTSE 100 or an S&P500 index tracker either as a fund, run by people like Vanguard, or an ETF run by people like iShares or Deutsche Bank at a very low cost.
These investment structures at their best are wonderfully simple. They are cost effective and very precise investments as they just track the index of whichever asset class is selected. As a result these have been very popular initially in the US and are now spreading rapidly around the world. So the rather patronising term of 'lazy' would imply that the more enthusiastic investment managers would be applying all their skills and expertise to selecting individual stocks rather than just betting on the index. Well quite right too and some active fund managers can - but the truth is, and the facts show, that most of them can't |
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