Every investor seeks for an edge. Doubly so for those advising them – the notorious “helpers” and “super helpers” as Warren Buffett calls them. So it’s no surprise investment professionals enjoy creating new tools which they claim delivers an advantage (with the benefit of also helping justify their fees).
Buffett believes in keeping things simple, for instance by investing in a low-fee index tracker rather than actively managed unit trusts. His approach has a lot to recommend it: managing your own money delivers the peace of mind that always flows from better understanding. Also, sticking with the basics often delivers superior returns.
My Biznews colleague Jackie Cameron recently came across results of research supporting this keep-it-simple approach.
Jackie writes: “Among the first financial calculations drummed into my head by my accounting teacher was the price-to-earnings (PE) ratio. The PE ratio is regarded as a fairly easy tool to assess whether a company’s shares look...