There are eleven types of mutual fund: knowing them will help you find the good and avoid the bad. — Spend time studying funds, and you’ll begin to recognise “types” that crop up over and over again. Get to know these types (there are eleven of them) and you’re on your way to understanding which funds to hold, and which to avoid like the plague. I originally identified these when…

Investors are abandoning small caps in favour of big companies, because the behemoths always fare better in tough markets, right? Nope. They don’t… — This year has been a nightmare for most active fund managers, particularly in the US. Markets have risen, but much of that is because the index’s mega-caps have rallied while most smaller (or, more accurately, less huge) companies have flatlined. Sensibly diversified active processes just don’t work under those conditions.

To reach the peak of the investment world, you must balance several contradictory impulses. This is hard, but the best make it look easy. There are plenty of competent fund managers. Sadly, merely being competent won’t justify their fees, let alone mine on top. So, as a professional fund buyer, I need to find exceptional managers, and they’re a rare breed. They’re rare because they have an unusual collection of characteristics, some of which…

The investment industry says volatility equals risk. This is wrong and, ironically, raises the actual risk of you losing money. — Our industry has become dangerously obsessed with volatility. What was once just a small part of good risk management has become all-consuming: Volatility data increasingly dictates investment decisions and is hardwired into products and legislation. In many cases, this is leading to the exact opposite of the intended outcome: clients…

Nature doesn’t just hate a vacuum, it’s not keen on concentration either. By co-ordinating our investment and economic activity around market indices, are we creating a huge too-big-to-fail problem? — In April 1831, an accident occurred that forced the British army to change its procedures. The event was unforeseeable, though hindsight makes its causes — and its simple solution — seem obvious. A company of soldiers marched on to the Broughton Suspension Bridge, which began to vibrate in unison with…

“Money isn’t important. It’s getting what you need that matters. Money is just one way of getting it.” — We’re all wrong in how we think about money. Luckily for 50 years that hasn’t mattered much. But over the last few years it’s begun to matter, and I suspect it will come to matter a lot more in future too. Then we’ll end up knowing more about what money…

The lessons to be learned from one of the UK’s fund management greats. — The above fund has a personal edge for me. Its sister fund, Stewart Investors Asia Pacific Leaders, was one of the first I inherited when I began analysing funds for Premier in 2007. …

The fund management industry has a few beliefs that are followed without question. Here are two of them. — Professional fund buyers have rules of thumb; shortcuts that tune out the noise to zone in on funds that (we hope) will work like a dream. But rules of thumb are, by definition, inaccurate. They have exceptions. And where there are exceptions, there are opportunities. …

Some fund managers perform well but then turn out to be duds. How can you spot them in advance? — During the pandemic we all learned about ‘false positives’, a concept previously confined to drug testing and statistics. The appearance of two little red lines, when there should have been one, caused all sorts of avoidable chaos. False positives are rife in the investment world too: There are plenty of…