Why Investment Performance Is a Distraction

[Clement]

I play with XIRR measure often. One thing to be careful is when fund first started, they can play with relative small size of funding. The performance can be manipulated by having more funds introduced for different markets, take higher risk on each of them or with low cost structure. When one of them do well, it is then widely marketed that the fund has been doing consistently well for many years with strong performance. And right after most retailers steps in, within a few years, the performance dropped.

Some strategies do well with small funds while others do well with larger funds. It all depends on the fund's investment intentions, ie passive stake or activist investment.

I understand this logic. My intention is to warn about possible manipulations by hands behind funds who play by numbers. Is like a flip of the coin. By throwing more coins, and when one of them do well consecutively, they are pushed out as champion. This will attract a lot of funding however such game cannot go on forever and soon performance shows up later again based on flip of the coin.

There are reporting standards for funds and I always prefer funds to that are gips compliant. I think investment process based appraisal might be easier to abuse. It is always in the fund's best interests to keep the secrets to their success to themselves. Therefore, many funds will market themselves as having superior proprietary models enabling superior investments. It is best to invest in managers whose strategies we understand and are qualified to evaluate.

[corydorus]

I play with XIRR measure often. One thing to be careful is when fund first started, they can play with relative small size of funding. The performance can be manipulated by having more funds introduced for different markets, take higher risk on each of them or with low cost structure. When one of them do well, it is then widely marketed that the fund has been doing consistently well for many years with strong performance. And right after most retailers steps in, within a few years, the performance dropped.

Some strategies do well with small funds while others do well with larger funds. It all depends on the fund's investment intentions, ie passive stake or activist investment.

I understand this logic. My intention is to warn about possible manipulations by hands behind funds who play by numbers. Is like a flip of the coin. By throwing more coins, and when one of them do well consecutively, they are pushed out as champion. This will attract a lot of funding however such game cannot go on forever and soon performance shows up later again based on flip of the coin.

There are reporting standards for funds and I always prefer funds to that are gips compliant. I think investment process based appraisal might be easier to abuse. It is always in the fund's best interests to keep the secrets to their success to themselves. Therefore, many funds will market themselves as having superior proprietary models enabling superior investments. It is best to invest in managers whose strategies we understand and are qualified to evaluate.

I think the most important is on fund manager that have integrity. This is far too few to be even aware. Regulatory standards are just deterrents.

[weijian]

IMHO, for companies, it might be more useful to look at historical BEHAVIOUR, rather than historical PERFORMANCE per say. Although performance is not driven solely by behaviour because other factors like market sentiment or industry trends do have a significant impact but as pointed out, historical market sentiment/industry trends are bad predictors of future. On the other hand, the thoughtful investor might find it more meaningful to focus on the behavior of the company/management, ie. do they walk the talk? are they prudent enough? do they shortchange minority shareholders etc etc.

As for funds, i think it is pretty much a no-brainer. Whether focusing on process or performance, the odds are stacked against the average guy after fees. Some considerations like the remumeration structure or how much of his/her total fortune is vested in the same fund, might be better considerations.

[Temperament]

Another words:
{ Assets allocation & Purchase price entry level
There’s nothing you can do better to control Risks and generate Profit by proper Allocation of Assets and buying those assets at the Right Price.
Right Price
“When” is more important than “What”.
In most cases, when you buy is more important than what you buy. You can make money on the most marginal company if you buy it at the right time; you can lose money in the bluest of blue chips if you buy it at the wrong time.
The right time is when a stock is selling reasonably near the low end of its trading range or at a historically low price/earnings multiple, or when any trustworthy guideline indicates a sharp reduction in risk. This low entry level provides a safety net dangerously missing at higher prices.
The wrong time to buy for a long-term investor is when a stock is selling near the high end of its trading range. Everything depends on the price you pay, regardless how gilt-edge the stock.}

Anyone like to try to share if he/she can better the above idea?

NB:
i am not proposing you don't have to value or consider the current situation of the company or stock.