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I hold managed fund because I have only become aware of Index trackers recently.For me I will never invest more than my £5640 this year.Thus with charges and stuff the trackers seem costly when you start selecting different funds. Have done a lot of research on Index trackers and may yet be tempted via my wifes allowance.
I tend to go with active funds via reading a lot of "expert" comments..and looking at rankings.The TERS are scary but then but If it matches my risk appetite and gives returns in line with the sector benchmark or above then I am happy.I notice some state stay clear of multi managed funds due to high TERS .These where some of the first funds I have ever bought with H_L..Now two years old but will hold them for a while yet.0 -
Perelandra wrote: »Could I ask what sort of return you're hoping to get over the long term, in real terms, from this strategy?
I read recently that the multi-decade real return (after inflation) from an 80:20 portfolio is 5% but over the last decade only 4.6%.
I have done my pension planning based around a real return of 2% (3.5% inflation, 5.5% return) and have expectations of upside.I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
Perelandra wrote: »Now that the discussion thread has diverged a little (and very useful thread as other people have said!)
Could I ask what sort of return you're hoping to get over the long term, in real terms, from this strategy?
I retired in 2005. My planning was based on an average 3% inflation (I use CPI) and a 4% return in cash terms - rather more pessimistic than Gadget. Over the past 7 years inflation is below plan, expenditure against the CPI inflation adjusted budget is below plan and investment return is higher so I am happy.
Of course being retired at a relatively early age makes me even happier!!!0 -
rather more pessimistic than Gadget
That's no bad thing.
As it happens, I use pull downs in my spreadsheet, and my plans work even at 4% investment return and 3.5% CPI. And that's without state pension and with a 4.4% drawdown cap on pension income, which will hopefully rise over coming years.
There is promise of lots of upside, but I like to think I'm also prepared for flat markets or even downside.I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
Suggest you check the holdings, particularly % by sector.
*sigh*.
Don't you think I have?
Fact is, a LOT of funds are simply closet trackers.Looking at the top performers over 5 years for UK Equity I find that the sector allocation is totally different.
eg for the top performing UK Equity managed funds the top sector is:
MFM Slater Growth - electronics
Unicorn outstanding british companies - industrials
Liontrust special situations - industrials
Yes there are some specialist funds that have bet on a particular sector and have done well as a result. That doesn't prove that those funds have any particular skill though, all it proves is that their bets went the right way in the last 5 years.
Out of 1024 funds, 512 should underperform for each of 1 year, 256 for each of 2 years, 128 for each of 3 years, 64 for each of 4 years, 32 for each of 5 years, 16 for each of 6 years, 8 for each of 7 years, 4 for each of 8 years, 2 for each of 9 years, and 1 each and every year for 10 years.
That's pure random luck.
Out of 1024 funds run by monkeys with typewriters, 1 will outperform every year for 10 years.
And of course after 10 years that fund would undoubtedly have attracted billions in assets, perhaps £10 billion or more, and would be siphoning off £100m+ in fees, just by use of a monkey.0 -
I've been doing some more tweaking to my suggested portfolio. I have been trying to get close to the ACWI - MSCI All Country World Index Fund.
20% - FTSE All Share Index
14% - FTSE World Europe ex UK Index
40% - USA S&P's 500 Index
9% - FTSE World Japan Index
7% - FTSE World Pacific excluding Japan Index
10% - FTSE All World Emerging Index
Which gives me:
40.0 - United States
17.6 - United Kingdom
9.68 - Eurozone
8.53 - Japan
5.11 - Asia - Developed
4.58 - Asia - Emerging
4.44 - Europe - ex Euro
3.22 - Australasia
2.62 - Latin America
1.14 - Africa
1.03 - Europe - Emerging
0.04 - Middle East
0.01 - Canada
This still underweights USA by about 6%, and overweights UK by about 9% to give a bit of home bias. I'm not too comfortable making the UK only 8% of my portfolio as the ACWI suggests! Europe is underweight by about 1.5% but Japan, the Pacific, and global emerging markets are pretty much bang on.
How does this look?
If I compare this to the HSBC World Index Balanced Portfolio I have overweighted the USA by about 15%, underweighted Japan by about 6% and the emerging markets by around 1-2%. I guess the "balanced" fund is slightly more risky.
Adding more risk again and comparing the with the HSBC World Index Dynamic Portfolio the USA is overweighted by almost 20%, Japan overweighted by 1%, and the Pacific/EM underweighted by almost 5%.
Could I trouble you all again for comments and suggestions on the above weightings?
I think I'm happy with as close as I've got to the ACWI, but I'm unsure as to the risk/reward ratio regarding lowering the US exposure in order to push EM.0 -
Could I trouble you all again for comments and suggestions on the above weightings?
They look sane to me. As you know, I have more of a home bias and also a tilt towards both value and smaller caps, but the long-term merits of those plays were slim in the past and perhaps not existent in the future!I think I'm happy with as close as I've got to the ACWI, but I'm unsure as to the risk/reward ratio regarding lowering the US exposure in order to push EM.
Some people will tell you to heavily over-weight EM and that the US is washed-up and lazy, whereas others will tell you that EM is over-bought and corrupt and the US is an international power house. You're going to have to make up your own mind on that one.
From a pure value POV, US and UK are currently fair value, European and Japan are cheap, and no-one really knows how to value EM.
If you look at the chart in that Vanguard target allocation document, which I'll link to again at the end of this message, there is a pretty chart showing which territories and asset classes have done best for each year of the last decade. I have stared long and hard at that chart, as have many bright people, all of us trying to see patterns and predict the future, yet to no avail.
https://www.vanguard.co.uk/documents/adv/literature/target-allocation-appproach.pdfI am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
I bank with HSBC, (not my share portfolio) however they have something new called the Global Investment Centre, within this is a portfolio analyser linked into morning star data. Feed in your portfolio and it tells you what areas you are exposed to etc.
I found it quite nifty,0 -
Looks good to me. I think you're right to favour the UK relative to the ACWI... personally, I would probably take it a bit further (probably at the expense of Europe and Pacific). I think you're right not to underweight the US significantly as the HSBC funds have done.
Given that you're pretty clear on how you're going to run your tracker portfolio, I think at this stage it's just tweaking according to personal preference. Just one thing to bear in mind, unless you rebalance very regularly, it's going to be difficult to keep percentage-perfect allocation. I would probably just round off to the nearest 5%.
Just one last thought, if you are now trying to match the ACWI index with an increased UK allocation, it might be worth doing a final check to see if there is a cost effective way of using just ACWI and UK index trackers. I realise upfront costs would probably be more (e.g. Vanguard funds), but may be worth a final check.
BTW, I haven't heard back from Interactive Investor... don't hold your breath!0 -
I have been trying to get close to the ACWI - MSCI All Country World Index Fund.
Terrible idea. To copy the status quo and allot most money to USA is to completely ignore the problems that country has.
Do you love their endless politics, their gigantic debt, the trade deficit, the reliance on global trade rather then any based on their own people
Which aspect will yield the greatest returns, to just copy the world index blindly is about the worst investment strategy Ive seen on these boards.
If intending to go down with the Titantic at least really love that boat, dont just copy an index to do whatever other people do
Make a personal choice on what will succeed and why or employ an IFA
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