Horse racing punters have as much chance of winning the big
prizes as many investors have in successfully investing for their
retirement. And as the Epsom Derby approaches (Saturday June 4),
one investment advisor reckons that following the horse-racing
tipsters is no better than following an investment active
fund-manager.
According to Noel Farrelly, director of Index Wealth Management
investing and horseracing are all too similar.
"The chances of backing a horse-racing winner is remote - but
here's the interesting bit. In any one year, 30% of
horseracing tipsters will make money for their followers, but
year-on-year, it is never the same 30%. Compare that with investing
money in funds and the markets and you'll find again that in any
one year, 30% of active fund managers - dealing with our savings -
will beat an index, but year-on-year it is never the same 30%.
"Both investing and betting involve putting money at risk with
the hope of a return - and both can result in savings being lost if
the gamble doesn't pay off," said Noel.
"In fact, investing is even trickier. Whilst there are only 20
or so horses in The Derby, there are some 6,000 funds to choose
from in the investment line up. The odds of picking the right
investment winner are pretty long."
Noel Farrelly, who advises high net worth individuals on their
investment approach, believes that whilst horseracing can be
exciting, investing should be boring, steady and
reliable.
"The Epsom Derby lasts for just minutes but investing should be
for the long-term, at least five years and preferably ten," he
says.
"Long-term savings and pensions are just too risky to play with.
An approach to asset allocation and risk should be thought about
very carefully and the asset should be stuck to unless there is a
very good reason not to. Choosing low-cost institutional
grade index funds will enable you to finish the race and in the
longer run, you will be among the very front runners."
And will Noel be having a flutter on June 4?
"Without a doubt, yes. I'll pick the horse I fancy and
regard my stake as a bit of fun. That way, I won't care if I lose
it - which I probably will."