On 30/10/17 23:42, Rich Freeman wrote: > If the big banks thought that investing for the long term would make > them more money they would do it. They have no loyalty to the > companies they invest in. If they can invest in a company one month, > and make more money by investing in a competitor that will put them > out of business the next month, they will. I'm not sure why a "long > term investor" wouldn't do the same if they could make money doing it. > They have money for the long-term, but that doesn't mean that they > have to keep it in once place.
The banks have nothing to do with it. The fund managers are rewarded for beating the index. They are NOT punished for missing the index. That means a fund manager who is bang on the average will get a bonus every second year. Paid for with investors' money. The quickest way for day traders to make a profit is to predict what the big boys are going to do (easy if you understand that most of them are index trackers who have little choice where to invest) and beat them to it. Buy shares that you have good reason are going to join the index next week, and dump them as soon as they do. Sell shares short that you think are going to be dumped from the index, and buy them back afterwards. Easy money! The thing about investing is to remember that the big boys are simply gambling with your money. If you can, do a Buffet, buy stocks you understand, and hang on to them. They'll go up. Imho the quickest way to stabilise the market and kill a lot of these shenanigans would be to demand that pension funds invest in companies that pay good dividends, well covered. In other words, if a company earns 50p/share and pays a 10p dividend, then the dividend "is covered 5 times". That means the pensions can't invest in speculative, highly geared companies. Which means those companies ARE going to invest in themselves, and will be good, solid companies unlikely to go spectacularly bust. Cheers, Wol
