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The hunt for red herring

06052019_hunt for yield

The hunt for red herring

A “red herring” is known as something that distracts from a more important area of focus. There are numerous different attributions to the etymology of this saying. From 17thcentury fox hunters deceiving dogs with herring; to 19thcentury bandits using herring to throw bloodhounds off their scent; to early New England settlers leaving bits of red herring along their trail to confuse the wolves that were following. In equities today, perhaps “income yield” is the red herring – throwing investors off the scent of “total returns”.

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Andrew Macken is the Chief Investment Officer of the Montaka funds and the Montgomery Global funds. He established MGIM in 2015 in partnership with Montgomery.

This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.

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3 Comments

  1. Yep, I go to ASA events and I constantly amazed at members obsession with getting franking credits while neglecting other factors. I think it is the Red Herring and even if explained to some people they can’t move on from it.

    I reminds me of irrational economics where someone will drive across town to buy a special even though and the cost of the journey is more that the saving. People just hate to think they are missing out on a bargain

    The crazy thing is that the super funds are engaging in the same sort of nonsense but there they are trying to have the best returns.

  2. Con Katsiouras
    :

    It’s funny how this conversation goes down in a casual setting. Some people get it straight off the bat, others go round and round in circles (which is fine I may add).
    In conversation, there doesn’t seem to be a lot of middle ground. You either get it straight away and it resinates with you, or you don’t.

    It’s like Buffett said, some people just get the concept of “buying $1 for 0.50c”. Others don’t.

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