For decades I have been arguing against the worthless fee-based advice of the activist investment industry and argued instead that Aussies without a lot of financial market expertise should, in the main, invest in close to no-load mutual funds such as Argo Investments, Australian Foundation Investment Company and Milton Corporation. Management fees are close to zero and these firms track a broad portfolio of quality stocks with returns that outperform those of the expensive stock pickers. I picked up the basis for vthis view from Burton Malkiel’s A Random Walk Down Wall Street which is the best book on investment I have ever read. Its now in its 10th edition having first been published 40 years ago.
Over at Greg Mankiw’s blog is an erudite interview with Malkiel. Please watch it. (123)
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I’ve never heard of the Milton Corporation, but I can only approve.
Seriously, you can’t say that listed investment companies aren’t stock pickers. That’s exactly what they are. Hopefully they are good ones, which is why anyone would invest in these companies, which means paying for their salaries and other expenses.
Literally you are correct. But they are long-term investors who don’t generally trade. Their transaction costs are negligible ( .2% is a lot less than 2%) and they invest in a broad portfiolio of core stocks. The only bias I can see is something of a high preference for financial stocks.
Milton is a great investment company.
They aren’t overweight financials. It’s the Australian economy (and by extension, stock market) that is overweight financials. Apart from BHP and Telstra, the only blue chips we have are banks and insurance companies. (I exaggerate, but not much.)