Season 4 Episode 8:
The Intelligent Fund Investor with Joe Wiggins

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This week we’re speaking to author and CIO of Fundhouse Joe Wiggins. Joe’s latest book focuses on fund investing and the ways this is different to generic ideas around investing. There is a huge amount of wisdom in Joe’s ideas here and quite a lot that goes against the grain of the fund and consulting industries.

We talk about what “risk” really is, complexity, and the lure of certainty. Joe catalogues many of the underappreciated behavioural challenges facing fund investors.

We think anyone involved in fund investing will get something useful out of this conversation.

Links mentioned:

We discuss:

  • Why this book, why now?
  • What are some of the key ways that fund investing differs from stock investing, are these differences underappreciated?
    • For example, the “disposition effect”: in stock investing we tend to hold onto losers because we don’t want to “admit” we were wrong. But this gets reversed in fund investing and that’s because there is someone else to “blame”.
    • What size of group or team is ideal for running funds?
  • Key concepts from the book:
    • Star managers
    • What investment risk really is
    • On complexity
    • Certainty sells and the issues this creates
    • Fund manager incentives
  • How to think about time horizons and the way we report on funds can set us up with a bad decision-making environment by focusing too much on the short term
  • Investment principles, and why these matter, but are usually meaningless
  • How the fund landscape has changed over recent years and how Joe sees it changing in the future

What’s one thing you would like listeners to take away from this: 

Appreciate how difficult fund investing is, it’s a major decision-making problem because of the behavioural aspects. It's a really difficult thing to do well, it’s important to think about the challenges it presents.

What is the most underappreciated thing about investing?

Private investors have a major behavioural advantage over professional investors – no responsibilities for reporting over the next month or next quarter. You can make good long-term decisions and stick to them. The behavioural challenges can be a lot more acute for professional investors.

Any recommendations for good books or podcasts:

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