http://blogs.reuters.com/globalinvesting/2010/02/26/the-art-of-being-passive/ Insights behind the investment headlines Mon, 20 May 2013 22:30:40 +0000 hourly 1 http://wordpress.org/?v=3.4.2 http://blogs.reuters.com/globalinvesting/2010/02/26/the-art-of-being-passive/comment-page-1/#comment-3591 UKplc Fri, 26 Feb 2010 17:12:10 +0000 http://blogs.reuters.com/globalinvesting/?p=3495#comment-3591 For those of modest wealth there is an advantage to picking the stocks yourself across the sectors yourself rather than buying into passive funds. You will be averagely lucky even if you don't exactly track the index, and why be obsessive about that at long as it's a 50/50 overperform/underperform probability? Individual stocks will have a much greater divergence over a financial year than any passive fund. If you buy separate stocks and split them between yourself and your partner you can take your full capital gains every year because at least some of them will go up - bed-and-breakfast them between the two of you. That would get you £20,200 tax free gains locked away even in years when the FTSE has fallen. When I say 'pick' I do not mean attempting to pick winners - somebody out there is doing worse than average and it can't be funds that outperform the market before costs, of necessity it can't be a random selections, so it must be punters following tips or stockbrokers recommendations. If you do this consistently, cashing in your winners every year you can also build up a bank of capital losses potentially to offset a sale of a second home etc. For those of modest wealth there is an advantage to picking the stocks yourself across the sectors yourself rather than buying into passive funds.
You will be averagely lucky even if you don’t exactly track the index, and why be obsessive about that at long as it’s a 50/50 overperform/underperform probability?
Individual stocks will have a much greater divergence over a financial year than any passive fund.
If you buy separate stocks and split them between yourself and your partner you can take your full capital gains every year because at least some of them will go up – bed-and-breakfast them between the two of you. That would get you £20,200 tax free gains locked away even in years when the FTSE has fallen.
When I say ‘pick’ I do not mean attempting to pick winners – somebody out there is doing worse than average and it can’t be funds that outperform the market before costs, of necessity it can’t be a random selections, so it must be punters following tips or stockbrokers recommendations.
If you do this consistently, cashing in your winners every year you can also build up a bank of capital losses potentially to offset a sale of a second home etc.

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