Despite what almost every fund manager in the country will tell you, it’s hard to outperform the S&P/ASX 200 Index (ASX: XJO).

That’s why most active fund managers, despite the handsome management fees and salaries they attract, struggle to beat the market over a long period of time.

And what’s more, those that do manage it in a given year will most likely not manage it again the year after.

According to reporting in the Australian Financial Review (AFR), 87% of fund managers failed to beat the ASX 200 in performance in 2018. That’s a staggering statistic.

Of course, a large part of this underperformance comes down to fees. An ASX 200 index fund like the iShares Core S&P/ASX 200 ETF (ASX: IOZ) typically charges minuscule management fees (0.09% per annum in IOZ’s case). In contrast, it’s not uncommon for a managed fund to charge a management fee 10 or 20 times that.

If a managed fund has a fee of 1.5%, it needs to beat the market by 1.5% every year just to break even for you. That’s a tall order and (according to the AFR) one most managed funds don’t measure up to.

Is it possible to beat the ASX 200 index?

Beating the index is challenging because of how efficiently the index operates. It buys more of rising companies and kicks the underperformers out.

Just think of CSL Limited (ASX: CSL). CSL is the largest share on the ASX 200 with a share price of $286.66 (at the time of writing) and an ASX 200 weighting of around 8.2%. But 5 years ago, this was a $90 stock. As CSL climbed, an ASX 200 index fund would have been continually adding to CSL’s position – in other words, buying into a winner.

And without any of its investors lifting a finger. The process is automatic, with no room for human error. It’s this simplicity that makes index funds so formidable.

Now, we Fools think it is possible for ordinary investors to outperform the index. Not paying usurious fees to fund managers is one place to start.

But on top of this, you have to do a lot of research and work, find companies that are real winners and buy them at great prices – preferably when no one else wants to touch them. That’s partly how the great Warren Buffett managed to beat the market over multiple decades.

Beating the market is tough. But it is possible, and it’s also a highly lucrative pathway to wealth creation if you can find it and stay on it.

And if you decide it’s a path you don’t want to tread, there’s nothing wrong with sticking with an index fund either!

More reading

• What the 10 largest companies in the world have in common
• ASX 200 closes higher, banks keep rising
• 3 tips for surviving an ASX recession
• CSL share price lower despite COVID-19 vaccine news
• Why Alumina and Stockland share prices could outperform in coming weeks

Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Why is it so hard to outperform the ASX 200 index? appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/2U7nbLN

If you’re looking for some quality ASX dividend shares to buy, then the three listed below tick a lot of boxes for me.

I think they are among the best on offer for income investors right now. Here’s why:

Commonwealth Bank of Australia (ASX: CBA)

The first ASX dividend share to consider buying is Commonwealth Bank. I think the big four banks were severely oversold during the pandemic and, although they have recovered strongly over the last few weeks, I still think they are undervalued. My preference in the sector remains Commonwealth Bank due to the overall quality of its business. Next year I expect the company to cut its dividend to ~$3.70 per share. If this proves accurate it will mean a fully franked 5.4% FY 2021 yield.

Fortescue Metals Group Limited (ASX: FMG)

Fortescue Metals could be a great dividend share to own if you don’t mind investing in the resources sector. It looks well-positioned to deliver strong profit results in FY 2020 and FY 2021 thanks to sky high iron ore prices, improving production grades, and its low cost operations. And with the iron ore producer’s balance sheet looking strong, I suspect the majority of its free cash flow will be returned to shareholders. I expect this to lead to a fully franked dividend of at least 6% in FY 2021.

Telstra Corporation Ltd (ASX: TLS)

A third dividend share to consider buying is Telstra. The telco giant is one of my favourite income options right now due to its attractive valuation, generous yield, and positive outlook. The latter is thanks to the NBN headwind beginning to ease and its significant cost cutting. Combined, I believe Telstra could return to growth in the coming years. But thankfully, until then I believe it dividend is sustainable at 16 cents per share. This equates to a fully franked 5% dividend yield.

More reading

• ASX 200 closes higher, banks keep rising
• Here’s why I think CBA shares are a good buy today
• Ready to invest your first $2,000 in ASX shares? Do these 3 things first
• 2 ASX growth shares I’d buy before Afterpay shares
• Top broker tips the Vocus share price to zoom higher

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post These quality ASX dividend shares have very juicy yields appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/2UcaPSB

The Appen Ltd (ASX: APX) share price slumped 4.59% today to close at $29.08.

Why the Appen share price fell today

The drop came Friday after an after-market announcement on Thursday that revealed a number of Appen’s directors have been selling shares.

The company chair, Chris Vonwiller, sold 18% of his holding for an average price of $29 per share. He sold them for personal reasons, including philanthropy. This left him with a total of 9 million shares.

CEO and managing director Mark Brayan sold 18.6% of his holding at an average price of $30.60 per share. Brayan sold in order to meet tax obligations and to diversify his personal wealth. He continues to hold 418,309 Appen shares. 

Non-executive director Bill Pulver sold just over 45% of his holding in Appen at an average of $30.69 per share. This director sold in order to diversify his personal wealth and has a remaining holding of 332,384 shares.

Together, the directors sold an aggregate of 2.37 million shares, representing a total value of $68,919,600 at today’s share price. 

While the directors each gave reasons why they sold some of their holdings, this didn’t stop the Appen share price from falling in response today. 

The company’s share price today is down from its 52 week high of $32.30 reached in May. It has, however, risen 11.20% compared to this time last year. The company’s share price has also risen significantly since the beginning of January when it sat at $22.18.

Appen has seen considerable success lately through the development of its artificial intelligence (AI) products. The company builds software that can recognise language and images. At its AGM in May, Appen outlined that global AI spending is rising at 28% per year. This demonstrates that it has the ability to reach a rapidly growing market. 

The company’s revenue has grown at a compound annual growth rate (CAGR) of 59% since 2015. Underlying earnings before interest, tax, depreciation and amortisation have risen at a CAGR of 64% over the same timeframe.

Appen had $100 million in cash on its balance sheet in May.

More reading

• ASX 200 down 0.35%: UBS upgrades NAB and Westpac, Qantas soars again
• Why Appen, CSL, Openpay, & Zip Co shares are tumbling lower
• Why the Appen share price could come under pressure today
• 3 small cap ASX tech shares that could be stars of the future
• 5 things to watch on the ASX 200 on Friday

Motley Fool contributor Chris Chitty has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Appen Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Why the Appen share price fell nearly 5% today appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/3dFbgwo