Short Term Investing: Damaging Your Portfolio Returns?

Short-term investing can have an impact on returns through higher trading costs and poor market timing

Cherry Reynard 11 November, 2016 | 8:00AM

2016 has been a year of considerable market noise: Turmoil over China at the start of the year has been followed by political disruption in the form of Brexit, and now the US election. Fund managers have had much to distract them, but many would argue that they should be able to see through short-term turmoil. Do they? To what extent is short-termism a problem for investors?

Average holding periods across the market have fallen

The prevailing view is that investors are too short-term, therefore fund managers are too short-term, and therefore companies are too short-term. Earlier this year, Neil Woodford, founder of Woodford Asset Management, called short-termism ‘frustratingly rife’ in fund management, arguing that it hindered the UK’s institutional investment industry’s ability to hold executive management teams to account.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
FP CRUX European Special Sit A Acc GBP131.51 GBP0.29
LF Lindsell Train UK Equity Acc462.07 GBP1.59
LF Woodford Equity Income C Sterling Acc13.08 GBP0.08
Scottish Mortgage Ord912.54 GBP0.67

About Author

Cherry Reynard

Cherry Reynard  is a financial journalist writing for Morningstar.co.uk.

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