Wednesday, 13 July 2011

Do you back the horse, the jockey or the racecourse?

When investing in a new investment, one of the first questions that I ask myself is the above question:
Am I backing the horse, the jockey or the racecourse?

If I choose to back the racecourse, I think of it as picking a sector (geographical, like China, or sector, like mining). I do this particularly when investing in tracker funds and ETFs.

If I choose the jockey, I'm backing the competencies of a fund manager (of an investment trust, unit trust or OEIC).

If I choose the horse, then I'm basically picking individual shares myself.

Which is best?

As is usual in life, its horses for courses. (groan!)