WEBVTT - Quick bite: How do active managers decide when to buy & sell? 

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<v Speaker 1>You're listening to a share these podcast. I guess a

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<v Speaker 1>few things that we would look at as an active

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<v Speaker 1>investment manager would be undervalued stocks, or in fact overvalued

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<v Speaker 1>stocks in terms of the decision to sell. But let's

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<v Speaker 1>take an undervalued stock. For example, there might be a

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<v Speaker 1>really well run company that has some temporary bad news

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<v Speaker 1>that's going to affect the share price. A passive fund

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<v Speaker 1>will take that bad news and it'll just hit the index.

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<v Speaker 1>An active manager will look at that bad news and say, hmm,

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<v Speaker 1>does that bad news fundamentally change the strategic price of

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<v Speaker 1>this company and its outlook? Take for example, in video

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<v Speaker 1>sold off a couple of weeks ago on the Deep

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<v Speaker 1>seek News twenty percent. I think drop on the day.

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<v Speaker 2>Yeah, massive, like a trillion dollar loss.

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<v Speaker 1>But absolutely however, fundamentally quite a strong company. So a

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<v Speaker 1>number of active managers at that point might have gone,

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<v Speaker 1>you know what, we might be continuing to hold, or

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<v Speaker 1>we might acquire a little bit over this period of

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<v Speaker 1>time as we see how that Deep seek news plays out.

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<v Speaker 2>If we're looking at the activity that you do as

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<v Speaker 2>an active fund manager, you're kind of testing the market,

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<v Speaker 2>aren't you. You're kind of discovering prices so to some extent,

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<v Speaker 2>then are the passive funds kind of taking a bit

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<v Speaker 2>of a free ride on you.

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<v Speaker 1>Well, I think the passive funds aren't really doing too much.

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<v Speaker 1>I mean, the passive funds, in my eyes, are like

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<v Speaker 1>a train getting from A to B on a train track.

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<v Speaker 1>You know. The active funds are probably more like having

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<v Speaker 1>a GPS in there and they're kind of going, oh,

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<v Speaker 1>my goodness, there's a bit of traffic here, or there's

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<v Speaker 1>a bit of weather here, and therefore we're going to

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<v Speaker 1>have to take this route to get there quicker or faster,

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<v Speaker 1>Whereas the train you kind of just actually that noise

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<v Speaker 1>in the market you're probably not making decisions on because

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<v Speaker 1>you are just buying the index and you're taking the

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<v Speaker 1>ups and downs with the index. I think one of

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<v Speaker 1>the bigger risks that those are in passive funds need

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<v Speaker 1>to consider obviously, is that you know, in periods of

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<v Speaker 1>under perform months, you will just take the underperformance, whereas

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<v Speaker 1>an active manager will be working hard to consider where

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<v Speaker 1>the opportunities are to beat the index in terms of

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<v Speaker 1>that underperformance. They might be doing that maybe because you know,

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<v Speaker 1>they've recognized the market trend. For example, one market trend.

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<v Speaker 1>You know that I kind of look back in our

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<v Speaker 1>portfolios is around Spotify. At the beginning of COVID. You know,

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<v Speaker 1>we were looking at what Spotify might do, where they're

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<v Speaker 1>going to play a place in streaming, where are they

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<v Speaker 1>going to play a place in podcasts, Through research, through insights,

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<v Speaker 1>through for sights, I guess on what might happen at

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<v Speaker 1>an industry level.

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<v Speaker 2>It must be hard to filter that noise out of

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<v Speaker 2>the market that you were talking about there, because there

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<v Speaker 2>just seems to be so much going on.

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<v Speaker 1>It's funny, I was reading something the other day around

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<v Speaker 1>the noise in the market has never been greater. You know,

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<v Speaker 1>take America for example. In the past, decision would be

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<v Speaker 1>made in the White House, they would then be well

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<v Speaker 1>thought about and pushed out publicly. But today decisions are

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<v Speaker 1>being discussed in real time like theater. Effectively, you're watching

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<v Speaker 1>you're watching what's happening out there. But it is really

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<v Speaker 1>important to get back down to the fundamentals of a

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<v Speaker 1>company that you're investing in, the fundamentals of a region,

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<v Speaker 1>or the fundamentals of a sector in terms of where

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<v Speaker 1>we might play and shuffle investments around in those spaces

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<v Speaker 1>and the noise has to be filtered, otherwise you kind

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<v Speaker 1>of drown. Investing involves a risk you might lose the

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<v Speaker 1>money you start with. We recommend talking to a licensed

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<v Speaker 1>financial advisor.

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<v Speaker 2>We also recommend reading product disclosure documents before deciding to invest.