As Machado said, only a fool confuses value and price. From the point of view of the long-term investor, who buys shares in good companies at attractive prices relative to their present and future earnings multiples, it would already be absurd and foolhardy to buy and sell these shares in the short term without associating these decisions with the value of the respective businesses. But it would be even more absurd to do so. short term trading in a portfolio of actively managed mutual funds, The investor can also set up tempting automatic buy and stop-loss (sic) orders, with portfolios at the free will of their respective managers.
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That is what ING offers to their clients, with the consequent benefit to the bank for this service, obviously. But as it is not as simple operationally to automatically buy and sell a fund at a pre-established price as it is for a share, what they offer their clients is a «warning» service when the fund's price reaches the marked price. It is then that the client will decide whether or not to sign a buy-sell-transfer order for these funds, which will usually take a couple of days to execute. Oh, and of course, this «service» is only available for ING brand funds, which means that everything stays at home.
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In a review of the practice of share trading (including stop-loss), we have to say that it is the usual modus operandi of savers who are less qualified as investors. In other words, those who move away from long term investment by buying businesses whose good value/price ratio they know, and instead approach the mere bet on any ticker listed, regardless of the good or bad performance of the listed company's business. They are even oblivious to whether there are prospects and an adjusted valuation of a company's business, a commodity, an index or any derivative behind that ticker. For most of them, it is enough to have a ticker or a changing price to bet on more or less frantically, conveniently dressing up this practice with all kinds of trading courses, technical analysis and macros that disguise their gambling with a patina of expert investment.
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However, generally speaking, an investor who knows the value of the companies in his portfolio will be more interested in buying them the more the price of their shares falls. Conversely, the more expensive the shares are in relation to the value of the company, the more interested he/she will be in selling them. In contrast, short-term stock trading is associated with completely ignoring the real value of the company. This is why technical analysis and other trading methods usually recommend buying stocks when prices are rising and selling them when they are falling. (Here we could make the exception of the very few quantitative hedge funds that have been making money for decades, but they would be the exception that proves the rule and would only be the exception that proves the rule. accessible to well-informed investors and with capital in excess of 300.000′- euro).
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As we said, ING is now tempting its clients to carry out this trading practice also in their portfolios of actively managed funds. Active management is so called because the manager of each fund actively makes decisions by buying and selling stocks or bonds. From there, the net asset value of the fund will be the -usually- daily quotation of the entire portfolio at market price, after deducting the commissions and expenses of the active management itself and of the fund (on active and passive management you will be interested in the article that Cluster Family Office recently published on the website of COBAS AM, the manager of Francisco García Paramés: «Passive Management, Active Management»). Therefore, it makes even less sense for the saver to make decisions to buy or sell the fund when, not only does he not know the value of the businesses bought, he does not even know which businesses he has bought and sold. The manager of such a fund or the liquidity it accumulates on a daily basis. It would also not allow you to benefit from one of the key investment drivers that every value manager strives to achieve: co buy low and sell high, since such trading and stop-losses would completely detract from good active management.. Moreover, as fund trading is an absurd and rare practice, the saver would not even have the possibility to benefit from the self-fulfilling prophecy that technical analysis sometimes offers.
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In short, yet another brainstorming strategy of the Machiavellian marketing department on duty, whose priority has never been and never will be the customer's benefit, but that of the financial institution itself. More wood to keep savers away from the right investment path.