As an investor, this may surprise you

When a portfolio or a fund experiences growth, many investors assume it is performing well. But a rising market lifts all boats, even those with poor investing strategies.

In short, when the market is rallying any clown can make money, but as Warren Buffett once said, ‘only when the tide goes out, do you discover who’s been swimming naked.’

The reality is, according to Yodelar and the Investment Association, 90% of investors could see higher returns without increasing costs or risk if their portfolios were invested more efficiently.

Positive portfolio growth doesn't automatically mean you're maximising returns relative to the risks you're taking. Too often, investors mistake an upward trajectory as proof of investing proficiency, without realising market forces are doing the heavy lifting.

For instance, let’s say you have seen your investment in a Global fund grow by 38% over the past 5 years, which initially impressed you, upon further analysis you may discover that the average return for all funds in the Global sector stood at 53.21%, with the top-performing funds returning as much 77.74% during the same period (as is the case).

We have shown in the past how a small increase in yield can affect the value of a portfolio over time, but let’s take the above example of the underperforming fund (Fund A), and the highest performing fund in the sector, (Fund B). Both have made money, but here is the difference.

If a client starts with £50,000 and invests in the lower yielding fund returning 38% over 5 years, then at the end of the period the investor has a portfolio worth £72,115. Now you might be happy with this, after all, you have made a reasonable return.

However, if you had invested in the top performing fund within the same sector, your portfolio would be worth £102,951. Give it another 5 years and the difference will amaze you.

Fund A = £104,014

Fund B = £211,979

Don’t be complacent. A small difference in yield could make a huge difference to your life.

The following extract was taken from an article by the fund advice site Yodelar and it points out some very interesting facts.

Within this article, we (Yodelar) highlight the significance of evaluating fund performance by comparing them not only to their own growth but also to other funds within the same sector.

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The top quartile funds in each sector show cased significantly higher 5-year returns compared to the sector average, highlighting the potential benefits of selecting more efficient funds.

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The highest performing fund sector over the last 5 years was unsurprisingly Technology & Technology innovation with an annualised performance of 18.8%.

The next best performer wasIndia/India Subcontinent with an annualised performance of 15.96%.

Third was North America, everyone’s favourite destination for their money, with an annualised performance of 14.9%.

The top 20 trading strategies on TPP since inception have an average annualised performance of 22.4%. That’s not the top, or the top three, but the average of the top 20.

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The Importance of Fund Performance

Past performance does not guarantee future returns, but research has shown that funds and fund managers with a history of outperformance are more likely to outperform going forward than those with a history of poor performance.

Holding Managers Accountable

While past returns don't predict the future, they provide an important accountability measure for fund managers. Those maintaining high comparative performance have demonstrated a reasonable ability to continue delivering competitive returns. In contrast, chronic under-performers exhibit an inability to generate desired outcomes.

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The Underperformance of Prominent Fund Managers

Despite overseeing £168billion for clients across their in-house fund range, St. James's Place (SJP), the UK's largest restricted advice manager, has struggled to deliver top-tier performance. In our most recent Best Funds report, only 2 of their 36 unit trust funds featured, with SJP ranking 50th out of 102 fund management brands in our Fund Manager League Table.

Despite their continued poor performance, St. James’s Place continues to increase its customer base with many of its investors unaware of just how poor the majority of their funds rank compared to their peers. 

Hargreaves Lansdown, who manage £9.7 billion in their 15 funds, ranked even worse. None of their funds featured in our best funds report with 12 of them receiving a poor performing 1 or 2 star rating (out of 5). Based on their funds' performance, Hargreaves Lansdown ranked 100th from 102 fund managers in our Fund Manager League Table.

These examples underscore the critical importance of thorough fund and manager research to identify truly best-in-class options aligned with investment objectives. Reputation and brand recognition alone do not guarantee competitive returns, making rigorous analysis essential for efficient portfolio outcomes.

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The golden egg of outperformance is very very difficult to achieve, but at TPP our only goal is exactly that. We don’t want to merely toe the line of mediocrity. Investors are frustrated with a wealth management model that is tired and outdated. What we have built at TPP offers you more.

Of course nobody can guarantee future performance, that is the portfolio managers dream, but sadly it is just that, a dream. What we can do is provide you with the best trading strategies available to us, in order to maximise your returns and get you closer to that dream.

Our professional traders build portfolios which look to increase the value of your investment over time and in any market climate. We have shown how a small increase in performance can have a large increase on the value of your capital so don’t accept the status quo of high fees and low yields.

It’s what we do. Use our knowledge to maximise your returns.

Please click here and contact us if you would like more information. To open an account please visit our website at www.tppglobal.io

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