Member Info for fela96

I'm not sure diversification is the answer actually. The answer seems to be fully investing in US indexes. Even US-centric investment trusts seem to be massively trailing the US market.

For example, ATT vs. Nasdaq 100, over past 5 years: ATT loses. +80% vs +111%

SMT vs S&P 500, over past 5 years: SMT loses (badly). +27% vs +61%

OK maybe they're too tech-focused, so maybe a global fund like BNKR?

BNKR vs S&P 500, over past 5 years: BNKR loses. +13% vs +61% (admittedly not including dividends)

Fundsmith equity vs S&P 500, over past 5 years: +55% vs +61% price (total return similar, Fundsmith loses)

Can anyone name a single investment trust (not including niche plays) which beats the nasdaq 100 over 5 years? The only one I can name which even beats the s&p 500 is ATT, but why not just invest in a nasdaq or s&p tracker?

That's demonstrably untrue, plenty of ITs trade with a persistent discount which just widens and widens over the decades, or until the fund collapses. I mean, if it were that easy you could make a tonne of free money with a simple strategy of being long ITs on a discount, and short those on a premium. Has anyone back-tested that strategy? I highly doubt it works.

Anyone's guess these days. This trust's SP took leave of its NAV a while ago and seems to have a mind of its own.

Technical analysis is pseudoscience and if you're in here to make a quick buck I suggest going elsewhere.

OK Senator, show me figures that prove SMT wins against a basic global tracker on a 5 yearly basis. Show me you could have bought SMT 5 years ago and sold it now for a greater profit. And then I'll agree with you that it's not folly.

It really sounds like you want a hedge fund. Hedging against currency fluctuations and short term market sentiment is really not in the remit of this type of investment. It's just insignificant compared to the exponential returns on offer from getting into businesses at the private equity stage.

And by the way, the reason SMT acts as a short cable position (in a very roundabout way) is because it can't find any decent UK growth businesses to invest in. To me this suggests the pound is only headed downwards long term. If the UK turns itself around and starts nurturing successful businesses again, I'm sure SMT's UK allocation will reflect that ready for its positive influence on GBP.

Sure. I like the companies SMT is invested in (mostly). I would be surprised if in 20 years from now at least one of them hasn't exploded in value. I like its strategy and am happy to see that they haven't wavered in this difficult investing environment. I can afford to wait for returns, my time horizon on this is 30 years.

I don't say anything I don't mean and I don't mean anything I don't say. I was only ever pointing out the folly of claiming you should judge SMT on its 5-yearly performance.

Fungibility has absolutely no relevance, and anyway houses approach fungibility in some markets (for example, rental flats in popular cities) and in the limit as a portfolio size increases, but that's going off on a tangent.

The point is, investors determine what your SMT shares are worth to you. The NAV doesn't. There is absolutely no guarantee that a discount to NAV will narrow; in fact there are loads of investment trusts with wide discounts which persist for years and years, and get wider.

The only instance in which the NAV determines value to you as a shareholder, is if the trust liquidates and assets are returned to shareholders. Hopefully that won't happen with SMT.

I think that's delusional. The value of anything is what you can expect to be paid for it. You can't sell SMT shares for their NAV, you can only sell them for the market price.

The market price is of course determined by active market participants, which of course is a small subset of shareholders.

Your argument is as good as saying "my house mustn't have dropped in value because only a small percentage of homeowners are buying and selling houses. Do you really think that tiny minority determines the value of all housing stock?". Yes, they do, because a homeowner who isn't buying a house isn't going to help you sell yours.

Let's clear a few things up:

1. Position is not the same as representation. The King effect describes how those at the top of the leaderboard tend to dominate the charts. Just because the UK has a GDP ranked at 5th or 6th in the world, doesn't mean it produces 20% or 16.7% of world GDP, it doesn't. It produces ~3% of world GDP.

2. When I say niche, I mean in the sense of "unrepresentative". Comparing a globally invested fund to a stock market containing 3% of world market cap, conveys very little if any useful information and the only reason to do so is by either ignorance or sophistry.

3. The NAV isn't the value of SMT. If SMT were trading at a premium, would you be castigating those praising its performance and saying it only barely beats its benchmark on a NAV basis? No of course you wouldn't :-)

And Senator1, likewise. On a purely mathematical basis, SMT loses to its benchmark over the previous 5 years. A zero-thought strategy of global equity investing would have beaten it over that period. I'm not saying the next 5 years will be the same, but if your criteria is "how well did I do over the previous 5 years", you're better off going with a passive fund than SMT.

Holders (myself included) can try all sorts of mental gymnastics after the fact to justify holding this trust but the opportunity cost so far is real whether we like it or not. Comparing to niche benchmarks like the UK or Thailand is completely irrelevant whether that's what the majority of investors do or not.

Walp, you're over-complicating it. It's very simple.

To win on a 5 year basis you need to beat your benchmark.

SMT does not beat a simple passive global equity fund like the Vanguard global all cap (GBP) accumulation fund over the previous 5 years.

Therefore SMT fails a 5 year check. No need for all the bellyaching or reading between the lines.

Not seeking reassurance no. Just pointing out that "judge over 5 years" isn't an argument in SMT's favour.

I'm not the one claiming SMT is a failing investment trust - I hold it as my largest holding so presumably that would have to involve a level of cognitive dissonance.

I'm only responding to the people who keep claiming that you should "judge over a 5 year time scale, don't be so impatient" (paraphrasing). Because, at the moment, SMT fails on the 5 year time scale as well as any shorter term perspective.

Sure, but I was responding to the idea posted by Senator1 that BG ask to be judged over 5 years:

" "yes but you must evaluate us over 5 years". in today's fast moving world that is an extreme luxury that few, as managers, are afforded."

If it is indeed true that BG ask to be judged over 5 years, then SMT is a failing investment trust, correct?

It's natural but I'd argue not rational. If it were rational, then supposing I was to move to Thailand, would it then be fair to judge my remaining SMT investments against the Thai stock index?

The UK market is niche: the total global stock market cap is over $100T. Therefore FTSE 350 is about 3% of global equities. Is it fair to judge a globally invested fund against a stock market index representing 3% of global equities? It would be like judging a Premier league football team with the freedom to hire the best players in the world, against the performance of, say, the Japanese national team.

Why use UK indexes, the UK is a niche stock market. (Apple, a single company, has a larger market cap than the entire FTSE 100!).

The correct index to use is something like the FTSE Global all cap. The Vanguard global all cap (GBP) fund is up 45% in the past 5 years, which beats SMT. Therefore SMT has failed correct?

If they say "you must evaluate us over 5 years" then they are failing by their own strategy. SMT loses to global index funds over the past 5 years doesn't it?

To further illustrate my point: the only time during the past five years where SMT's returns outstripped the Nasdaq were during the covid bubble.

https://imgur.com/a/rZp7XqL

Throughout that period its volatility was a lot higher.

Sure, it's not a nasdaq tracker, but if you can get better 5 year returns (and I mean 100% vs 30%) on a simple nasdaq tracker, what is the point in putting up with all the volatility of this trust? Nasdaq has much lower volatility and much higher long term returns...

The NAV has underperformed the nasdaq the past two years though, in a big way. Discount just exaggerrates ongoing underperformance imo.