BARE­FOOT IN­VESTOR

The Sunday Times - - BUSINESS - SCOTT PAPE

Ionce knew a very rich guy in his 60s who prided him­self on call­ing a spade a spade. “You’re fat!” he once said to a bloke we’d just been in­tro­duced to. “Hey!” I said, com­ing to the poor guy’s de­fence (while si­mul­ta­ne­ously suck­ing in my gut).

“What? It’s the truth. Look at him. He’s a prime can­di­date for a heart at­tack,” he said, be­fore con­de­scend­ingly di­rect­ing this to the stranger: “You need to look af­ter your­self. I’m telling you this for your own good.”

True story. Iron­i­cally, he was him­self built a bit like Shane Warne, circa 1993.

Any­way, my wife says that some­times I be­have like him when she wheels me out in so­cial set­tings — the only dif­fer­ence is that I’m bru­tal about peo­ple’s fi­nan­cial flab.

Case in point. A while back at a bar­be­cue a guy I didn’t know struck up a con­ver­sa­tion with me, say­ing he had his su­per with what I knew to be a high-fee fund. He wasn’t ask­ing for ad­vice, just mak­ing po­lite con­ver­sa­tion on a Sun­day af­ter­noon.

“What on Earth made you go with them?” I asked, head cocked, eye­brow raised. But be­fore he could bur­ble out an an­swer I said: “I mean it’s just a stinker of a fund.”

Last week, in­vest­ment group Stockspot came out with its an­nual Fat Cat Awards, which ranks the worst-per­form­ing su­per funds. What do all th­ese crazy cats have in com­mon?

They all charge high fees, pre­sum­ably to pay for all their ex­pert fund man­agers.

Now, if you’re a Bare­footer you’ll know I’m a skinny cat who likes in­dex funds (i.e. low-cost funds that me­chan­i­cally track the stock mar­ket, rather than be­ing ac­tively man­aged).

Guess what Stockspot found?

“Over the past five years we found only 4 per cent of bal­anced funds beat an in­dex fund. And across all in­vest­ment cat­e­gories only 13 per cent of funds beat the in­dexed op­tion”, adding that this is a global phe­nom­e­non in which “ac­tively man­aged funds have been un­able to match low-cost in­dexed op­tions”.

They say there are only two things to con­sider when choos­ing a su­per fund. First, find the right type of fund based on your ca­pac­ity to take risk. (Which Bare­foot de­codes as any­one un­der 40 should go for growth, any­one over 40 should find a bit more bal­ance.) Sec­ond, choose the fund with the low­est fees. (Which is ex­actly the recipe I fol­low in my book.)

So, if you’ve read this far and are think­ing to your­self “maybe I’m get­ting licked”, by all means get in touch with your fund and call a spade a spade.

Tread Your Own Path! The Bare­foot In­vestor holds an Aus­tralian Fi­nan­cial Ser­vices Li­cence (302081). This is gen­eral ad­vice only. It should not re­place in­di­vid­ual, in­de­pen­dent, per­sonal fi­nan­cial ad­vice

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