Index vs managed funds the great war
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My concern would be having a significant amount all in one SIPP or S&S ISA on the one platform, as you would only be covered up to £50k by the FSCS if there was a major fraud. Although maybe a minimal risk I would not like all my eggs in the one basket if a significant sum.BananaRepublic wrote: »And I had various other pensions. Generally these pensions limit the range of funds you can access, and their charges are high, so all but my current work pension have been transferred to a SIPP.
If you have a number of volatile equity funds that have peaked at different times, I think rebalancing would have probably increased your portfolio growth as you would be selling when high and buying back when low.I know that rebalancing has good science behind it, but I’m sure it would have hit my portfolio growth.0 -
My concern would be having a significant amount all in one SIPP or S&S ISA on the one platform, as you would only be covered up to £50k by the FSCS if there was a major fraud. Although maybe a minimal risk I would not like all my eggs in the one basket if a significant sum.
If you have a number of volatile equity funds that have peaked at different times, I think rebalancing would have probably increased your portfolio growth as you would be selling when high and buying back when low.
I invest mostly with You Invest, and they do not own my funds, they are simply the financial advisor. So for major fraud it would require them to sell my funds and walk off with my money. I believe that would be rather hard for someone to do. For one thing I would be alerted to the presence of a sell order which would allow me to warn You Invest that something was wrong. I suppose someone could corrupt the system so as not to alert me, and then to siphon off the money, but it would be rather hard given that the software is managed by a team and it would require complex changes in many areas. So yes it is possible, but so unlikely that I am not worried.
Regarding rebalancing, I’m not convinced. It would have consistently taken money away from my Jupiter European fund, which has always excelled. And it would have shoved money into my Japan fund which for 15 years was poor, due to the market being poor.0 -
BananaRepublic wrote: »I use a method that many others here use, and really there is no other unless you pick at random. Essentially I decide on a market or sector, such as UK small companies, and then I look for funds that have consistently good performance. By that I mean that they do not outperform because of one stellar year and nine modest ones. Clearly that stellar year is likely due to luck, so overall the fund performance is modest. But consistent good performance over ten years suggests a good fund with a sound methodology.
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Me also +
1) Sector distribution - eg large overweight position in any sectors particularly tech or finance is a bad sign.
2) If there is a choice of funds that meet the other criteria, performance during the bad years can be more important than performance in the good ones.0 -
So when you make your actively-managed fund choices, what process do you follow? It has been suggested in this thread, and elsewhere, that to have a portfolio of actively-managed funds you need to pick the right ones. So my question is, quite literally, how do you do this?
There are many ways of doing this, but my method is fairly simple.
Look at discrete annual performance, short term performance (3yrs) and long term performance (10yrs+) to find the consistent. Try not to be overweight to funds with heavy weightings in certain sectors or too concentrated, and I always try to find reasons why a fund has outperformed or underperformed. A good example of this is Woodford, who outperformed the market in 2014/15 with his low weighting to commodities, but then lagged it when commodities rallied later on.
I'll also look at ratios such as beta and volatility to gauge risk adjusted return. It's no good simply picking the best performing fund in a sector if the only reason it outperforms is because it takes more risk than the rest.0 -
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Thanks so much to everyone who is sharing their techniques for choosing active funds
I would love to make my portfolio 100% equity (mainly because bonds seem dull and I am probably greedy) but everything I read basically says "If you make your portfolio 100% equity you are being a silly sausage so don't do that!" (mine will be 28% bonds in total)Me also +
1) Sector distribution - eg large overweight position in any sectors particularly tech or finance is a bad sign.
2) If there is a choice of funds that meet the other criteria, performance during the bad years can be more important than performance in the good ones.
If you had to choose a sector to be overweight in what would you choose and why? Many of the funds I am looking at tend to favour banks/software which is sort of annoying. I am looking to diversify as much as possible.
I am getting a strong sense reading this that a lot posters simply pick a group of diverse, active funds which have preformed the best over the last ten years? This all seems a bit too simple. Are there any other ways of picking? I know with shares it is important to read through annual reports and listen to conference calls, in order to get a sense of where the stock may be going, is there any such meticulous selection process for managed funds?0 -
If you had to choose a sector to be overweight in what would you choose and why? Many of the funds I am looking at tend to favour banks/software which is sort of annoying. I am looking to diversify as much as possible.
I am overweight consumer defensive, tech and healthcare, evens on industrials and underweight pretty much everything else. I am 100% in equities but hope that my defensive stocks will hold up if there is a crash or pullback.I am getting a strong sense reading this that a lot posters simply pick a group of diverse, active funds which have preformed the best over the last ten years? This all seems a bit too simple. Are there any other ways of picking? I know with shares it is important to read through annual reports and listen to conference calls, in order to get a sense of where the stock may be going, is there any such meticulous selection process for managed funds?
Some fund managers do put a fair amount of effort into explaining their methods, but not many. You can watch Terry Smith and Nick Train on YouTube. Fundsmith and Scottish Mortgage both hold detailed AGMs which you can watch or read. Neil Woodford (or his team) blogs on his website several times a month. It was this sort of stuff that led me to invest in Lindselltrain and Fundsmith funds, in additiona to their outstanding historical performance.0 -
For the average investor It could be as simple as looking at the last Ten years as well as 1&3 & 5 and looking at max drawdown & standard deviation and the info online,company fact sheets etc or you could do much more work(or as others will say go passive and probably save time).A couple of months back i was looking at VLS 80&60 as a pension fund choice on Citywire and on all time scales you can see funds from TB wise & Royal London consistently near the top of the tables so maybe worth a look if i go that route.But they will have nothing like the same makeup as VLS and on Trustnet are even in different sectors.And the past performance is no guide quote will come into play which is when it stops being simpleThanks so much to everyone who is sharing their techniques for choosing active funds I would love to make my portfolio 100% equity (mainly because bonds seem dull and I am probably greedy) but everything I read basically says "If you make your portfolio 100% equity you are being a silly sausage so don't do that!" (mine will be 28% bonds in total)
If you had to choose a sector to be overweight in what would you choose and why? Many of the funds I am looking at tend to favour banks/software which is sort of annoying. I am looking to diversify as much as possible.
I am getting a strong sense reading this that a lot posters simply pick a group of diverse, active funds which have preformed the best over the last ten years? This all seems a bit too simple. Are there any other ways of picking? I know with shares it is important to read through annual reports and listen to conference calls, in order to get a sense of where the stock may be going, is there any such meticulous selection process for managed funds?0 -
Would you please explain what the skills are that are needed to be able to make the correct choices for active funds?
The ability to interpret a graph has got to be high on the list, in fact when I think about it that’s about it for me.
Time will let you know if active is the thing for you.0 -
I am getting a strong sense reading this that a lot posters simply pick a group of diverse, active funds which have preformed the best over the last ten years? This all seems a bit too simple. Are there any other ways of picking? I know with shares it is important to read through annual reports and listen to conference calls, in order to get a sense of where the stock may be going, is there any such meticulous selection process for managed funds?
There's a lot of numerology and plain guess work at play, and faith that a good manager will continue to be good. I choose not to go down that rabbit hole.“So we beat on, boats against the current, borne back ceaselessly into the past.”0
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