The £450bn Reason To Manage Your Own Money

Being an investment fund manager is a wonderful job. Nice lunches, six-figure salary and the chance to travel the world.

If you fancy a career change, you should try it. It doesn’t matter if you’re not up to the job — most fund managers aren’t, either.

Time and again, research shows that three out of four fund managers regularly fail to outperform the stock market index they are handsomely paid to beat.

Now a new survey suggests it’s even worse than that.

Nine Out Of 10 Fund Managers CAN Be Wrong

Research by shows that just 89 out of 1,087 funds surveyed have delivered over the longer term. That means nine out of 10 fund managers aren’t doing their job properly.

While most fund managers aspire to mediocrity, many don’t even achieve that, says managing director Brian Dennehy.

He estimates that £450 billion is languishing with underperforming fund managers. If you’ve got money in a pension or stocks and shares ISA, some of that will be yours.

Say you had £10,000 in what Dennehy terms an ‘ugly’ fund in the UK All-Companies sector 10 years ago. Today it would be worth £19,385.

The average ‘vintage’ fund, one of the top 89, would have turned it into £31,838. That’s some difference.

Mediocrity Comes At A Price

The problem is, how can you identify one of these vintage funds? Dennehy has a list on his website, which may help.

But this begs another question. Why invest in funds at all, if nine out of 10 are destined to be either mediocre or downright ugly?

You won’t find out the answer for years, by which time you could have shelled out thousands of pounds in fund charges.

There’s a reason fund managers are rich, and you’re not.

One Way to Get Back On Track

A much cheaper way to invest for the future is to a low-cost tracker fund, that simply follows the fortunes of a chosen index, such as the FTSE 100 or FTSE All-Share.

If you do this, you will beat fund managers three times out of four. And save a small fortune on charges, too.

There Is a Better Way

Alternatively, you could build your own portfolio of stocks and shares, which you can buy cheaply and easily through an online stockbroker.

You could start by investing in solid FTSE 100 companies like pharmaceutical giant GlaxoSmithKline, global spirits giant Diageo or household goods company Unilever.

If you are happy to take on a bit more risk, you could bet that bad bank Barclays will finally come good or Tesco will prove it is a super market again.

Make that career move. Become your own fund manager. You can surely do a better job than nine out of 10 of them.

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Harvey Jones has no position in any shares mentioned. The Motley Fool recommends GlaxoSmithKline, Tesco and Unilever. The Motley Fool owns shares of Tesco and Unilever.