Tim Hale based plan- comments please?
Comments
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Yet the sector allocations used are management decisions. By making your own management decisions, you must be believing that you can do better and have that edge?
If you put it like that, then you could say that opting for "passive" products is a management decision, and so passive investing is actually active investing.
I make my allocation decisions based on my appetite for risk, rather than on trying to do better.0 -
If you put it like that, then you could say that opting for "passive" products is a management decision, and so passive investing is actually active investing.
I was more on about you choosing x% into UK equity, y% into Emerging etc. That is a management decision. Choosing vanguard to be your selection of trackers in all areas is also a management decision (as vanguard are not the only trackers and different tracking benchmarks are available). So, these are all management decisions.I make my allocation decisions based on my appetite for risk, rather than on trying to do better.
But you must believe you can go better than vanguard. Otherwise, you would purchase the VLS instead.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
I was more on about you choosing x% into UK equity, y% into Emerging etc. That is a management decision. Choosing vanguard to be your selection of trackers in all areas is also a management decision (as vanguard are not the only trackers and different tracking benchmarks are available). So, these are all management decisions.
But you must believe you can go better than vanguard. Otherwise, you would purchase the VLS instead.
I'm not sure that I can do better than Vanguard, to be honest, at least without taking on more risk than I am happy with. I'm simply hoping that whatever product I invest in will reliably track the index it is supposed to track at a relatively low cost, and that a lot of those cost savings will be passed on to me.
Perhaps VLS would be a suitable purchase, because I don't think my current portfolio is doing much better (or worse, for that matter). However, I would only want to put £50,000 max into it, for reasons explained previously, so I would still have to make management decisions regarding what non-Vanguard funds to invest in.0 -
I'm not sure that I can do better than Vanguard, to be honest, at least without taking on more risk than I am happy with. I'm simply hoping that whatever product I invest in will reliably track the index it is supposed to track at a relatively low cost, and that a lot of those cost savings will be passed on to me.
Perhaps VLS would be a suitable purchase, because I don't think my current portfolio is doing much better (or worse, for that matter). However, I would only want to put £50,000 max into it, for reasons explained previously, so I would still have to make management decisions regarding what non-Vanguard funds to invest in.
Sounds like a sound plan..........
Indexing will free you from excessive fees and the siren song of active managers. It doesn't need to be complicated and you don't need to have your investing toe in every pond. Get a plan, understand it and stick to it. Don't go chasing return and ignore people that will try to sell you added return for a fee and extra risk. Passive indexing is actually an active decision to accept the benchmark's return....and one that maximizes your changes of success rather than active funds which give you a lower probability of a larger return.“So we beat on, boats against the current, borne back ceaselessly into the past.”0 -
Please don't try to mislead people like that. Passive investing effectively guarantees to fail to beat benchmarks every time, unless tracking error takes it over or active strategies like stock lending are also used.* It's almost 100% failure rate, not higher chance of success.bostonerimus wrote: »Passive indexing is actually an active decision to accept the benchmark's return....and one that maximizes your changes of success rather than active funds which give you a lower probability of a larger return.
That almost 100% failure to beat or even match the index is sometimes worthwhile because there is also a low chance of underperforming by a lot and there's no need to pay attention to things like manager changes to get that consistently small underperformance.
If you want any significant chance of succeeding in matching or beating the index you have to go active. But that requires more work and when it doesn't work out the underperformance can be greater, so it's not for those who don't want to pay attention. Since most people don't want to pay attention that makes passives quite widely useful.
*The target Vanguard tracking errors vary with the fund but are normally about 0.3% so at UK prices it's unlikely that the tracking error will be high enough to match the index. The annual report gives the targets and achieved errors.0 -
You should do some shopping around. At least the All Share and global equity indexes should be available cheaper elsewhere and probably most of the rest as well.bostonerimus wrote: »Vanguard Global Bond Index Hedged 20%
Vanguard FTSE Developed World ex-U.K Equity Index 35%
Vanguard FTSE U.K. All Share Index Unit Trust 15%
Vanguard U.K Government Bond Index 10%
Vanguard Emerging Markets Stock Index 10%
Vanguard U.K Investment Grade Bond Index 10 %0 -
If there is a greater chance of underperformance with active funds that makes me more inclined to stick with passive funds, as I don't really want to be constantly monitoring and chopping and changing active funds, to try and ensure they don't underperform.That almost 100% failure to beat or even match the index is sometimes worthwhile because there is also a low chance of underperforming by a lot and there's no need to pay attention to things like manager changes to get that consistently small underperformance.
If you want any significant chance of succeeding in matching or beating the index you have to go active. But that requires more work and when it doesn't work out the underperformance can be greater, so it's not for those who don't want to pay attention. Since most people don't want to pay attention that makes passives quite widely useful.0 -
If there is a greater chance of underperformance with active funds that makes me more inclined to stick with passive funds, as I don't really want to be constantly monitoring and chopping and changing active funds, to try and ensure they don't underperform.
You dont need to be chopping and changing active funds. It wouldnt do you much good anyway.
The meaning of short term "underperformance" when comparing index funds with active ones needs careful attention. For example, you may have indexes which are highly volatile and active funds in the same sector which are less volatile. Since "underperformance" is defined by measurement against the index, for a significant period of time such active funds will be showing "underperformance".
Looking at the trustnet "Risk Score" volatility for the UK All Companies sector I see that out of 247 funds the FTSE100 trackers are all in the top 25% and the All-share trackers are near the top of the second 25%.
The important thing is how your portfolio behaves as a whole. That is determined by what assets you invest in and in what %s. I am at the moment a 100% active investor but have never changed fund investments on the basis of performance. Changes are only necessary when the investments held by the fund are no longer fully compatible with the overall asset allocation of the portfolio. Either when my objectives have changed or when rebalancing can no longer be easily achieved with the current set of funds.0 -
Horses for courses. If you're looking for fire and forget, long term buy and hold, then trackers can work well for many people. If you're looking for reliable income you'll find the pickings pretty thinIf there is a greater chance of underperformance with active funds that makes me more inclined to stick with passive funds0 -
Horses for courses. If you're looking for fire and forget, long term buy and hold, then trackers can work well for many people. If you're looking for reliable income you'll find the pickings pretty thin
And a lazy investor would be better with a multi-asset fund as a portfolio of single sector funds will need work whether it is fully passive, managed or a combination.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0
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