If you look back at the GFC, it took the all ords 10 years to get back to where it was prior to the GFC
Very true, but it does rely on dividends, a lot of funds and companies havent done that well, some have, some havent.The price returned where it was 10 years later but the total return was much sooner, in 2013Q3, just ~5y later.
Price adjusts downwards to account for dividends paid and the ASX pays a lot of dividends, so it's not really accurate to ignore the total return.
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Take the 1987 crash, which affected Australian businesses much more than the GFC, which was U.S and Europe centred, the 87 crash sent many major Aust companies to their grave.
If that's an actual rule then so be it but it does mean they aren't a truly passive tracker of the index if they're trying to influence the operations of companies within it.Investment managers are expected to exercise all corporate actions and voting rights unless the Trustee (ETFs are a Trust structure and so there are Trustees) tells them how to direct a vote. If they do, the investment manager must exercise the corporate action or voting right according to the Trustee's direction.
Nor does it include inflation : not that negligible even thenThe price returned where it was 10 years later but the total return was much sooner, in 2013Q3, just ~5y later.
Price adjusts downwards to account for dividends paid and the ASX pays a lot of dividends, so it's not really accurate to ignore the total return.
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If that's an actual rule then so be it but it does mean they aren't a truly passive tracker of the index if they're trying to influence the operations of companies within it.
If they absolutely must vote, because some rule requires it, then it should be in a manner that's as neutral as possible in my view without conscious decision making. Cover up the questions, toss a coin and tick the boxes accordingly.
My reasoning being that if they're consciously influencing the business then they're not doing what they say they're doing, that being passively tracking the index, but are instead aiming to manipulate the nature of businesses within that index. That's not a truly passive approach to investing if they're exercising their own opinion as to what ought to occur.
Same concept as a weather bureau shouldn't be setting up a sprinkler next to the rain gauge. Their job is to measure, record and report the weather, not to create it.
In the case of index funds, if a particular fund becomes large to the point that it holds enough shares in a company to change the outcome of anything being voted on well then that's getting a very long way away from a passive approach if they're effectively running the business.
Nor does it include inflation : not that negligible even then
You get 4% dividend but 2 or 3% inflation and get taxed on the privilege..and now,it is not 2 or 3%....
My reasoning being that if they're consciously influencing the business then they're not doing what they say they're doing, that being passively tracking the index, but are instead aiming to manipulate the nature of businesses within that index. That's not a truly passive approach to investing if they're exercising their own opinion as to what ought to occur.
the way I see this is that we (aka "the people") give these guys (ETF, super and other investment funds) the money and we then give away the power attached to the holding for free (be they union or retail super fund)so did those super funds vote against the remuneration report after the Hayne Royal Commission , for instance , after all they should be more interested in the corporate governance than other peripheral issues
You're still an investor in the underlying businesses and part of the value of your shares is the voting rights.
With an ETF a person is a unit holder via a trust structure. While you may have a beneficial interest, the Trustee is the legal holder of the assets (at least I think it works that way.) A generalised view attached.
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yes , you are correct BUT that is not how they are advertised to the retail folk ( index ETFs ) , and they can be useful when used like that , unless we enter a long-term Depression , like say Japan ( still lagging from the 1990s)An ETF has nothing to do with passive holding except that some ETFs track a market cap weighted index.
You can have a passive portfolio with no fund at all, and most large portfolios are exactly that.
yes , you are correct BUT that is not how they are advertised to the retail folk ( index ETFs ) , and they can be useful when used like that , unless we enter a long-term Depression , like say Japan ( still lagging from the 1990s)
and many shares in good companies have done nicely even in the 10 years i have held them , although adding to BHP in the dips makes them look better
BUT the trick is to buy GOOD companies ( not just ones with a large market cap. ) and that is why index ETFs have an edge they buy EVERY stock in that index at the time you bought it , and the attracted retail investors don't need to do much research ( but the SHOULD anyway )
again true , but those managers ( hopefully ) get plenty of scuttlebutt on the various companies , via their analysts , networking , company presentations , the better managers are aware of a company they are invested in , has stretched the credit limits , has a flailing management , faces staff issues or supply chain issues , etc etc , and of course can access solid data on whether a take-over offer ( of an invested company ) is a good deal or not .I cannot direct the managers of LICs how to vote in regard to specific companies the LICs may hold.
the second part is about picking solid investments ( or fund managers ) against 'vanilla ones ' ( buy some of everything and hope )
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