Our content this month are as follows:-

• Mexico Here He Comes!
• Predictions - Predictably Wrong
• Books we have Read
• Business Information
• Quote of the Month

On Saturday 4th March, Noel heads for Mexico to undertake his 650 kilometre bicycle ride across Mexico in support of Macmillan Cancer Relief. With your support he has raised approximately £15,000 for the charity and we would like to thank all who contributed for this fantastic level of support.

Noel assures us he is fit for the challenge, although he is understandably apprehensive about Day 3 when the group tackles a climb of 3,000 metres in approximately 40 kilometres, as one client commented "this is the sort of thing that should not be undertaken without a helicopter!".

We are sure you will join us in wishing Noel best of luck and we are all looking forward to seeing him, safe and sound, on his return.

It is wicked of us we know, but from time to time we collect the predictions of financial "experts" for future reference. We have looked back to the middle of 2004 just to see what the gurus were saying at that time and they have not disappointed us. In fact, the only reliable thing about these forecasts is that we are safely guaranteed a good giggle at the experts’ expense.

In the Sunday Times of 16th May 2004, David Butterworth asked "is this the end of the bull market?" John Hatherly of M & G thought the market would continue to be strong because of rising interest rates and a reducing oil price (our italics). Oh dear! Right for the wrong reasons!

Patrick Evershed of New Star thought the market would be flat for the rest of the year because of rising interest rates - whoops!

Andrew Smithers, a well-known Investment Consultant, advised holding cash thereby missing out on returns of 13% and 22% in the UK stock market.
Patrick Connolly of John Scott Advisors, also advised holding cash at the very attractive rate of 4½ % - aren't you glad he wasn't advising you?

Our favourite, however, comes from Money Week of 11th June 2004. The headline is "The stars say it's time to sell". So, what's this about? Are film stars now making predictions about the market? It's worse than you think! Merryn Somerset Webb (who now incidentally has a column in the Sunday Times) comments "today you are better off selling than buying pretty much every asset class". She goes on to say "According to Barron’s, the rare transit of the Venus across the Sun on Tuesday bodes very ill for the stock market". She goes on to quote Henry Weingarten who glories in the title of Head of the Astrologers Fund, described as a Financial Research and Consulting Company!

Mr Weingarten explains that the position of the planets at the moment raises the spectre of violence and suggests that markets could easily tumble this month. Ms Somerset Webb is tempted "to dismiss all this as utter nonsense", but manages to resist the temptation - indeed she informs us that Mr Weingarten is famous for being very, very right. I wouldn't be surprised if you thought we were making this up, but I can assure you we have a copy of the article in the office (it is a little damp as no one who reads it fails to be reduced to tears of laughter).

We could go on, but we do have limited space. All of this nonsense merely emphasises that if you indulge in market timing you will get things wrong; there is no feasible alternative to constructing well diversified portfolios of low-cost institutional grade funds and, happily, as a result of doing this our clients are spared reading the ramblings of fantasists.

This month we are recommending "The Little Book that Beats the Market" by Joel Greenblatt.

Mr Greenblatt is famous for being a Managing Partner of Gotham Capital, a private investment fund in the US which claims compound returns of 40% per annum.
The book recommends a magic formula for choosing stocks, but when distilled down is simply a value approach to investing. Linked with a website, Mr Greenblatt will give you his formula for choosing companies to invest in. We would suggest that this approach will be something of a rollercoaster ride, even if it is successful in the long run and risk appears to be ignored in the book. Despite its simplicity, we suspect there is an awful lot of work involved for the ordinary investor. However, it may be a bit of fun for a small amount of capital (this does not constitute an investment recommendation).

Of more interest to us is that Mr Greenblatt covers why index investing, particularly with a small value tilt, is more successful than active fund management.

The book is small and runs to only 155 pages and, for an understanding as to why both professional and ordinary investors find it difficult to beat the markets with conventional active management, it is a worthwhile read.
The book is available from Amazon.co.uk and if you have any trouble obtaining it please contact jayne@indexfundadvisors.co.uk.

Remember - if you want to profile your business in this section simply contact Jayne Vale, who will make the arrangements.

"Those who bring sunshine into the lives of others cannot keep it from themselves."

James Matthew Barrie
1860-1937, Author of Peter Pan