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  • FIRST POST
    • aroominyork
    • By aroominyork 3rd Jul 17, 9:30 PM
    • 96Posts
    • 7Thanks
    aroominyork
    Views please on £280k investment portfolio
    • #1
    • 3rd Jul 17, 9:30 PM
    Views please on £280k investment portfolio 3rd Jul 17 at 9:30 PM
    I’d appreciate comments on this portfolio. It is for a £280k retirement fund which we will access in about 10 years. Alongside it I have a £100k workplace pension in a target date fund and £55k equity share in an investment property; we will soon have paid off our residential mortgage. At some stage, probably before retiring, I expect to receive a sizeable inheritance.

    If we could make this £280k fund increase an average 8%-10% pa we would be very happy, though of course we would want to reduce risk as we approach retirement and given how high markets are now we are concerned about taking too much risk to get 10%-12% in the first few years.

    We do not want over-exposure to the UK or US. We have just taken our funds away from an IFA and do not want to try to be too clever. Therefore our strategy is a) to have a default approach of investing in about three managed funds, b) adding equities in specific areas where we want to be heavier, and c) investing in short/strategic bonds to i) balance the extra equities, ii) keep our equity exposure below 65% as markets are high, and iii) have some low-risk funds to consider moving into non-UK equities if Sterling strengthens.

    1) The three managed funds are Royal London Sustainable World, Ballie Gifford Managed and Hawksmoor Vanburgh, with FEs of 83, 77 and 32 respectively. I think the first and third have historically provided the best returns relative to their FE, so I have allocated 20%, 10% and 21% respectively.

    2) We are drawn to Europe’s breadth of economies and choice. We are looking at Baring Europe Select (for SME), FP Crux European Special Situations and Man GLG Continental European Growth, allocated 4%, 4% and 7% respectively.

    3) We have put 4% next to First State Global Listed Infrastructure. I read this sector is a good defensive area but am willing to be convinced otherwise.

    4) Japan looks like it is going forward well so 7.5% on Baillie Gifford Japan Trust.

    5) We have a positive medium term view of India with a pro-business PM who looks set to be in power for a long time, so 7.5% on Jupiter India.

    6) 15% on bonds, through it’s hard to pick in this sector. I have gone for 7% Jupiter Strategic Bond, 4% Morgan Stanley Sterling Corporate Bond, 4% Rathbone Ethical Bond.

    The portfolio is about 63% in equities, though with Japan and India pushing 150 FE scores that may read closer to 70% in terms of risk. Geographically it is something like 29% UK, 27% Europe, 18% USA, 1% ANZ, 12% Japan, 9% India, 4% others.
Page 2
    • bostonerimus
    • By bostonerimus 5th Jul 17, 6:42 PM
    • 514 Posts
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    bostonerimus
    Thanks bowlhead and Thrugelmir. Self-managing investments seems the perfect exemplification of a little bit of knowledge being a dangerous thing. I cannot argue with anything either or you say, but equally importantly I do not aspire to having your level of knowledge. So what it comes down to is this: how should someone like me go about developing and monitoring an investment strategy? Or is the bottom line that the path is strewn with people who came unstuck and should have stayed with an IFA? When I search the web on how to put together an investment portfolio, it says little beyond a) diversify, be risk aware and rebalance, and b) here are 25 or 100 funds we like.
    Originally posted by aroominyork
    There's no need for an IFA. Just buy VLSxx for the equity allocation you want and you are done.....it will rebalance automatically. Or you could buy a Global Equity Tracker and a Global Bond tracker in the proportions you require and even add in another tracker if you want to overweight a region eg if you want some home country bias you could add a UK Equity Tracker. Rebalance periodically and you are done. I've done that with a 3 fund portfolio for 30 years and it has allowed me to retire at age 52 with a net worth large enough that I'll never need to spend any of my pension pot.
    Last edited by bostonerimus; 05-07-2017 at 6:45 PM.
    Misanthrope in search of similar for mutual loathing
    • Rollinghome
    • By Rollinghome 5th Jul 17, 7:04 PM
    • 2,089 Posts
    • 2,276 Thanks
    Rollinghome
    When I search the web on how to put together an investment portfolio, it says little beyond a) diversify, be risk aware and rebalance, and b) here are 25 or 100 funds we like.
    Originally posted by aroominyork
    TBH a) is pretty good advice. You might add to be both risk aware and very conscious of the level of risk you can sensibly take on. Guidance on that can be the most useful advice an IFA can give. And keep costs to a minimum unless higher costs are sure to increase net returns. (They rarely do).

    b) is less useful as there's little evidence for persistently predicting future out-performance of funds. A safer approach may be to use tracker funds until you are confident you need and can select active managed funds that could do better.
    • aroominyork
    • By aroominyork 5th Jul 17, 9:30 PM
    • 96 Posts
    • 7 Thanks
    aroominyork
    Just buy VLSxx for the equity allocation
    Originally posted by bostonerimus
    Um, what is VLSxx please?
    • Audaxer
    • By Audaxer 5th Jul 17, 9:56 PM
    • 251 Posts
    • 73 Thanks
    Audaxer
    Um, what is VLSxx please?
    Originally posted by aroominyork
    Vanguard LifeStrategy funds - there are 5 funds depending on what percentage assets to bonds you wish, e.g. if you want 60% equities and 40% bonds, you would buy a Vanguard LifeStrategy 60 fund. They are very straightforward and cheap at a 0.22% ongoing charge. Don't think because they are cheap they are not very good - they are well diversified and an excellent choice in the opinions of many investors on here.
    • bostonerimus
    • By bostonerimus 5th Jul 17, 10:22 PM
    • 514 Posts
    • 252 Thanks
    bostonerimus
    aroominyork's questions and troubles are an excellent example of how people can be confused by the volume of opinion, advise and funds available.......you just can't see the wood for the trees. Most people should keep things simple and if they do that they simply won't need an IFA to manage their money and they can save on those fees. So buy multi-asset funds to get the equity percentage you want.....most people in the accumulation phase are going to be 80% to 60% in equities.......or use a global equity and a global bond tracker to do the same.

    So you end up with a portfolio with one, two or maybe three funds that you can easily track. There's no need for an individual emerging market fund, you'll own some of that in your global equity or mulit-asset fund. You might be able to do better with 10 or more active funds in particular sectors......but you might do worse and seriously who wants the bother of managing all those funds and I'm not going to pay an IFA 1% to do it.
    Last edited by bostonerimus; 05-07-2017 at 10:26 PM.
    Misanthrope in search of similar for mutual loathing
    • aroominyork
    • By aroominyork 6th Jul 17, 6:55 PM
    • 96 Posts
    • 7 Thanks
    aroominyork
    bostonerimus got it right in saying you start not seeing the wood for the trees; it is good advice to keep it simple, minimising stress levels as much as for any other reason! My starting point in this thread was to base the portfolio on multi-asset funds (which I wrongly called managed funds), adding other funds where I want to be overweight (India and possible Europe) and then balancing with bonds. The way I was going about it was too complex and my expectations too high, though I think the weighted FE scores do give some useful pointers so long as I am aware of the limitations bowlhead pointed out.

    Re multi-asset funds, how sound is it to compare performance based on the last five years? That is all that seems available other than for funds in Hargreaves Lansdownís Wealth 150 (which traces the fund manager back further although sometimes to funds with different briefs).

    Iíd appreciate views on a few options I have looked at, partly to help me decide what levels of fees to accept. I know past performance in no guide to the future, but it is difficult to overlook say 2% better annual performance even if fees are a full percent higher. I am aware of course that in a flat market higher fees become more important as they erode your capital.

    I am in the middle of transferring my funds into Hargreaves Lansdown. I know the criticisms but HL suits me for now; once I have a settled strategy I can decide whether to move some or all the portfolio to a platform with lower fees.

    1. Vanguardís fees are low and five year performance was 61% on 60/40 equity/bond and 77% on 80/20.

    2. HLís Portfolio+ Balanced was (in April) 68% for Balanced, which includes 69% equities; Adventurous returned 86% performance with 95% equities. I find it curious that the latter comprises 80% in HLís multi-manager special situations; I doubt HL has the Ďunloved and undervaluedí approach as say Fidelity Special Situations.

    3. HLís Master Portfolios are the hybrid offer where name about six funds and you can adjust the default weightings. Itís impossible to assess five year performance in the Balanced option because too many of the funds have only been running two or three years. In the Adventurous, five year performance with the default weightings is around 15.5% BUTÖ Iíve no idea which funds they were suggesting in previous years so they could have included dogs they subsequently removed.

    4. That takes me to multi-asset funds from the wider market (by the way, I downloaded data on 8 June). The following are a cross-section based on strategy and equity component; interestingly, they follow three different models. The first model is investing mostly in its own funds, eg Baillie Gifford Managed with 86% performance based on about 70% equities (FE 77, 0.45% fee). The second model is a stock picker, eg Royal London Sustainable World with 113% performance based on about 83% equities (FE 83, 0.78% fees). The third invests mostly in funds from across the market, eg Premier Multi-Asset Distribution with 65% performance from 50% equities (FE 44, 1.36% fees); or Hawksmoor Vanburgh Fund with 58% performance from 37% equities (FE 32, 1.61% fees).

    It seems a case could be made for all of them so before I tie myself in more knots I would appreciate othersí views. (All I am sure of is that I would limit exposure to Royal London as I would have one man investing all my money with over 30% of my funds in just ten companies.)
    • bostonerimus
    • By bostonerimus 6th Jul 17, 7:03 PM
    • 514 Posts
    • 252 Thanks
    bostonerimus
    I stopped worrying about performance a long time ago..........no jokes now........by just choosing to follow broad indexes and looking for the cheapest way to do that. In my case that turned out to be Vanguard. I've basically owned the same 3 funds for the last 20 years and I'll probably own them for the next 30 as well. I don't bother with active funds and I stick to straight market cap weighted indexes. This removes the paralysis of too much choice.
    Misanthrope in search of similar for mutual loathing
    • Eco Miser
    • By Eco Miser 6th Jul 17, 8:36 PM
    • 2,896 Posts
    • 2,682 Thanks
    Eco Miser
    I've done that with a 3 fund portfolio for 30 years and it has allowed me to retire at age 52 with a net worth large enough that I'll never need to spend any of my pension pot.
    Originally posted by bostonerimus
    Very good ... but is that result due to the growth of the funds or the amount that you invested over those 30 years?
    Eco Miser
    Saving money for well over half a century
    • bostonerimus
    • By bostonerimus 6th Jul 17, 11:49 PM
    • 514 Posts
    • 252 Thanks
    bostonerimus
    Very good ... but is that result due to the growth of the funds or the amount that you invested over those 30 years?
    Originally posted by Eco Miser
    Well a bit of both.....obviously an 8% annual return isn't exactly right as it's made up of some big gains and a few big loss years....still 8% for 30 years would see 10k grow into 100k. I saved aggressively for those 30 years too, around 20% of salary early on, but higher percentages after I paid off the mortgage. When you combine compounding with regular saving things start to multiply quickly.
    Misanthrope in search of similar for mutual loathing
    • Thrugelmir
    • By Thrugelmir 7th Jul 17, 7:25 AM
    • 54,402 Posts
    • 47,234 Thanks
    Thrugelmir
    .still 8% for 30 years would see 10k grow into 100k.
    Originally posted by bostonerimus
    That's a statement not a fact though. Suggest an investment that offers that potential rate of return currently.
    ď ďBull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria. The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell.Ē Sir John Marks Templeton
    • aroominyork
    • By aroominyork 7th Jul 17, 10:41 AM
    • 96 Posts
    • 7 Thanks
    aroominyork
    All of Vanguard's four LifeStrategy funds - from 20/80 through to 80/20 equity/bond allocation - returned between 10.5% and 11.5% in 2015/16 when most multi-asset funds struggled to produce a positive return. What does that tell us about their strategy and how it will (edit - might) play out in future equity downturns?
    Last edited by aroominyork; 07-07-2017 at 10:53 AM.
    • badger09
    • By badger09 7th Jul 17, 11:43 AM
    • 5,090 Posts
    • 4,287 Thanks
    badger09
    All of Vanguard's four LifeStrategy funds - from 20/80 through to 80/20 equity/bond allocation - returned between 10.5% and 11.5% in 2015/16 when most multi-asset funds struggled to produce a positive return. What does that tell us about their strategy and how it will (edit - might) play out in future equity downturns?
    Originally posted by aroominyork
    I don't know which multi-asset funds you're referring to, but the VLS range is made up of various Index Funds. So they will perform in accordance with the performance of those Indices
    • bostonerimus
    • By bostonerimus 7th Jul 17, 12:39 PM
    • 514 Posts
    • 252 Thanks
    bostonerimus
    That's a statement not a fact though. Suggest an investment that offers that potential rate of return currently.
    Originally posted by Thrugelmir
    It is a fact that my 60/40 portfolio averaged 8% over the last 30 years, the trick, as you point out, is to get that in the next 30 years. VLS80 or VLS60 has the potential to return 8% over 30 years........but will it and what are the chances? You might do better to plan on a lower return of maybe 6% given the current outlook., I certainly don't expect bonds to do as well over the next 10 years as they did in the last 10 years. I'm going to a 75/25 allocation because I can take the risk and don't mind the volatility of an equity heavy portfolio. I'm just reinvesting dividends and allowing my equity allocation to increase in my simple 3 fund index portfolio. Over the last 12 months it's up almost 13% and I've done nothing apart from replenish my cash buffer because I had to do some renovations on a rental property. When the market falls I'll rebalance.
    Last edited by bostonerimus; 07-07-2017 at 1:56 PM.
    Misanthrope in search of similar for mutual loathing
    • aroominyork
    • By aroominyork 7th Jul 17, 3:29 PM
    • 96 Posts
    • 7 Thanks
    aroominyork
    bostonerimus, sicne you are a VLS man can you explain why all four equity/bond combinations returned between 10.5% and 11.5% in 2015/16? Looking at a couple of L&G global trackers they returned c.17% on equity and c.5% on bonds, so how do the numbers add up?
    • bostonerimus
    • By bostonerimus 7th Jul 17, 4:18 PM
    • 514 Posts
    • 252 Thanks
    bostonerimus
    bostonerimus, sicne you are a VLS man can you explain why all four equity/bond combinations returned between 10.5% and 11.5% in 2015/16? Looking at a couple of L&G global trackers they returned c.17% on equity and c.5% on bonds, so how do the numbers add up?
    Originally posted by aroominyork
    I'm not really a VLS man......I use individual indexes.

    Look at the underlying assets of these funds and the reasons for their relative returns will be apparent. It's often informative to look at the relative returns over longer times scales as well. What L&G funds are you looking at.....we need to make sure we are comparing like to like or we take account of different assets and amounts of risk.
    Misanthrope in search of similar for mutual loathing
    • TBC15
    • By TBC15 7th Jul 17, 5:40 PM
    • 144 Posts
    • 35 Thanks
    TBC15
    I'm not really a VLS man......I use individual indexes.

    Look at the underlying assets of these funds and the reasons for their relative returns will be apparent. It's often informative to look at the relative returns over longer times scales as well. What L&G funds are you looking at.....we need to make sure we are comparing like to like or we take account of different assets and amounts of risk.
    Originally posted by bostonerimus
    You have obviously been a seasoned investor for a number of years.

    Is there any reason you have picked the last couple of months to share your wisdom with this particular forum.

    I would have thought US forums would be the obvious place to share your thoughts?
    • bostonerimus
    • By bostonerimus 7th Jul 17, 6:20 PM
    • 514 Posts
    • 252 Thanks
    bostonerimus
    You have obviously been a seasoned investor for a number of years.

    Is there any reason you have picked the last couple of months to share your wisdom with this particular forum.

    I would have thought US forums would be the obvious place to share your thoughts?
    Originally posted by TBC15
    I've been investing for 30 years, whether that makes me "seasoned" or worth listening to over anyone else is debatable. I do have strong opinions though based on what's succeeded for me.

    I've been on some US forums and I hadn't really bothered about the UK. But I was looking into retiring back to the UK and did some research......that coupled with all the news in the UK press about the pension changes got me interested in how things are done in the UK. Frankly I was shocked at the fees and the lack of strong DIY and investor voices.
    Last edited by bostonerimus; 07-07-2017 at 6:47 PM.
    Misanthrope in search of similar for mutual loathing
    • username12345678
    • By username12345678 7th Jul 17, 11:58 PM
    • 73 Posts
    • 31 Thanks
    username12345678
    The link is for Brewin Dolphin's guide to understanding your appetite for risk along with a suggested portfolio and the historical performance/drawdowns for that particular mix of assets.

    It may provide a useful starting point but I should add that their clients active portfolios look nothing like the suggested ones - unsurprisingly.

    https://www.brewin.co.uk/brewin-portfolio-service/discover-your-risk-profile
    • bostonerimus
    • By bostonerimus 8th Jul 17, 2:41 AM
    • 514 Posts
    • 252 Thanks
    bostonerimus
    The link is for Brewin Dolphin's guide to understanding your appetite for risk along with a suggested portfolio and the historical performance/drawdowns for that particular mix of assets.

    It may provide a useful starting point but I should add that their clients active portfolios look nothing like the suggested ones - unsurprisingly.

    https://www.brewin.co.uk/brewin-portfolio-service/discover-your-risk-profile
    Originally posted by username12345678
    In the UK people really like to use a lot of funds and slice and dice.
    Misanthrope in search of similar for mutual loathing
    • Thrugelmir
    • By Thrugelmir 8th Jul 17, 8:44 AM
    • 54,402 Posts
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    Thrugelmir
    In the UK people really like to use a lot of funds and slice and dice.
    Originally posted by bostonerimus
    As a % of the population more of the UK holds a passport. It's a cultural thing. Not least the sheer size and scale of the US markets. Far harder to dominate than on this small Island. Why the need to look elsewhere one might say.
    ď ďBull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria. The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell.Ē Sir John Marks Templeton
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