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  • FIRST POST
    • Not Me Officer
    • By Not Me Officer 3rd Sep 17, 10:21 PM
    • 280Posts
    • 49Thanks
    Not Me Officer
    Diversifying portfolio & gaining knowledge - advice for a beginner?
    • #1
    • 3rd Sep 17, 10:21 PM
    Diversifying portfolio & gaining knowledge - advice for a beginner? 3rd Sep 17 at 10:21 PM
    To kick start me off i was recommended a book by John Edwards called DIY Simple Investing. I thought it was a great book because of the way it simplified things. It didn't baffle the newcomer with look how many fancy words i can use type jargon. It kept things nice & simple, easy to understand & from that i had the confidence to at the very least have a go myself (as opposed to paying an IFA which is what i was going to do immediately before the book - who i found was going to use St James' Place which i've read not so great things about).

    From that i decided that i wanted to begin with a fund that didn't need a lot of maintenance & was already reasonably diversified. I read a bit about index trackers & story a little short i decided i was going to go with the Vanguard LifeStrategy range. As at 34 i have 30-35 years left in me (hopefully not the latter) i ended up going with the VLS100 to get me going. Only time will tell whether i really do have the stomach for the ride but i'm confident i will.



    So the idea while that is in motion is to keep learning. Keep trying to understand because i'm very much a beginner.

    I know what i want - i want a well diversified portfolio. VLS100 doesn't cover everything so i've read but at the same time i'm not totally sure what it's weak or non existent in.
    Then i'd have to decide whether all additional funds remain as trackers or whether i have anything 'managed' (even though everything i've read seems to say that trackers consistently outperform managed funds over the long haul).
    And once that is decided on i'd need to decide on a ratio. How much weight/money do i put in one fund, and another and another & so on.



    So the last time i asked for this kind of advice the feedback was good. So once again can anyone recommend a good book to read that deals with that side of investing? Or can anyone just post up how they came to be comfortable dealing with the steps after just starting up? Basically i'd just like to kick on from here but at the moment i don't have the knowledge to do that.
Page 2
    • grandst
    • By grandst 5th Sep 17, 11:51 AM
    • 35 Posts
    • 22 Thanks
    grandst
    I am not allowed to post any links to the matrix however between 2000 to 2002 a diversified portfolio suffered only a small loss while 100% equity index tracker investor would have lost a huge amount and many would have given up.
    • bostonerimus
    • By bostonerimus 5th Sep 17, 12:40 PM
    • 1,133 Posts
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    bostonerimus
    Don't worry about "total diversification", as a beginner it's more important to understand your capacity for risk, choose a suitable equity/fixed income/cash allocation and start investing. VLSxxx is a good start as are many other low cost multi-asset tracker funds. You have plenty of time to add to your portfolio, but for now keep it simple and get going.
    Misanthrope in search of similar for mutual loathing
    • bowlhead99
    • By bowlhead99 5th Sep 17, 1:41 PM
    • 6,905 Posts
    • 12,421 Thanks
    bowlhead99
    I am not allowed to post any links to the matrix however between 2000 to 2002 a diversified portfolio suffered only a small loss while 100% equity index tracker investor would have lost a huge amount and many would have given up.
    Originally posted by grandst
    Very true. Largest peak-to-trough drawdown of the the FTSE all world index in the last decade was 2007-2009's "credit crunch" when 58.9% was lost from top to bottom (measured in US dollars).

    http://www.ftse.com/Analytics/FactSheets/Home/DownloadSingleIssue/GAE?issueName=AWORLDS

    Granted, in the UK we were not measuring in US dollars, but the US investors were. So, no theoretical reason why a global 100% equities portfolio couldn't do that to GBP investors next time. Also, markets recovered relatively quickly from March 2009 when QE kicked in. Again, not a guarantee that next time it will be a quick rebound instead of long drawn out slump.

    Food for thought if you generally think you are a medium to high risk investor but have never actually seen your life savings decline by over 50% on paper. Some will panic once down 33 or 40% , sell up, realise the loss. Ouch.
    • JustAnotherSaver
    • By JustAnotherSaver 5th Sep 17, 2:12 PM
    • 2,565 Posts
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    JustAnotherSaver
    Audaxer - yes I was having log in trouble with my account a while ago so had to create a new one. I was able to get the JAS acc working again. The reason behind the switch in account on this thread is because I'm at work on my phone and only know the password to this account as the password to the thread opener account is scrambled and I just copy it from KeePass if I need it so haven't actually memorised that one.

    I really should've waited until i'd got home to reply as the switch would only cause confusion.

    Apologies.

    • mollycat
    • By mollycat 5th Sep 17, 5:48 PM
    • 950 Posts
    • 1,911 Thanks
    mollycat
    Audaxer - yes I was having log in trouble with my account a while ago so had to create a new one. I was able to get the JAS acc working again. The reason behind the switch in account on this thread is because I'm at work on my phone and only know the password to this account as the password to the thread opener account is scrambled and I just copy it from KeePass if I need it so haven't actually memorised that one.

    I really should've waited until i'd got home to reply as the switch would only cause confusion.

    Apologies.
    Originally posted by JustAnotherSaver

    Bet Smed/Anthorn wished they'd thought of that excuse!
    • JustAnotherSaver
    • By JustAnotherSaver 5th Sep 17, 7:06 PM
    • 2,565 Posts
    • 410 Thanks
    JustAnotherSaver
    Who?

    Regardless, I'm not here to convince or prove. I'm only here for information. I'll leave all that silly stuff to others who are interested in that kind of thing.

    • JustAnotherSaver
    • By JustAnotherSaver 5th Sep 17, 7:48 PM
    • 2,565 Posts
    • 410 Thanks
    JustAnotherSaver
    It does worry me sometimes when people boast about 100% equity exposure, I think more from a cojones type boast than from a rational assessment of their risk tolerance or sensible asset allocation.
    Originally posted by bigadaj
    Do you think this is a big problem of going DIY? That what people think of themselves (their attitude to risk) can be a world away from their own reality?

    Going for the VLS100 myself i am currently happy with my decision. In 10 years time maybe i will be maybe i wont.

    Maybe if i'd gone for say VLS60 i'd be wondering if i should've gone higher or lower too. That's the problem when you don't have the answer i suppose.

    • JustAnotherSaver
    • By JustAnotherSaver 5th Sep 17, 7:50 PM
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    JustAnotherSaver
    Third, you may have your own ideas about what's going to do better in the very long term and may wish to tilt your portfolio that way. For example, you might think that over the next 30-40 years healthcare or Far East or emerging economies or whatever will do better in general that the average equity and so add some funds that specialise in these areas. It's hard to have trackers that work in specialist areas, I think there's a good argument that active funds are better for these.

    So hopefully that answers your question about diversification.
    Originally posted by AnotherJoe
    I actually don't have any ideas tbh.

    If you was to ask me what i thought would do well and would do badly i'd say in a Scooby Doo voice - iuno based on the fact that iuno anything about it all.

    So how do you/people form their ideas then? I suppose they keep their head in the news which is something i don't do.

    • JustAnotherSaver
    • By JustAnotherSaver 5th Sep 17, 7:55 PM
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    JustAnotherSaver
    I think it was "smarter investing " that I read a few years ago when I was trying to understand more. I am afraid it was not helpful to me. I think I can relate to what you are trying to achieve. I would not call it "diversifying " but probably " fine tune beyond most crude" or "understand more" so that the steps beyond the first one ( VLS) can be taken. I concluded that this was knowledge that would take me years to acquire and not a book aimed at general public but some serious information on economics and finances which can not be googled in a few minutes. Something like knowing how all asset classes and all types of investments work, how to understand fund's and other vehicle's structures , how to analise financial information of an entity etc. So I accepted my limitations, in a few years of reading these forums understood a bit more about different multiasset funds, continued with my original choice of 5 hsbc tracker funds and dabbled in p2p.
    Originally posted by justme111
    p2p?

    Why 5 tracker funds and not 1 or 2?

    I can understand what you're saying there but there's a problem with reading on a forum or at least there is for me - eventually (usually at the start for me) you have questions. These get answered and you have more questions & repeat repeat repeat.

    Some people stick with you as they understand you're just trying to learn.
    Other people seem to think you should only ask x-amount of questions & seem to get upset when you ask beyond this number, which is annoying.

    It's like when i was reading how tos when it came to doing some jobs on the car. I THOUGHT i understood it but i wanted to ask questions to make sure i did. Sometimes i did & sometimes i didn't. When asking though y ou would get some people happy to help, go in to detail (bowlhead would be one such person) but then others would give you minimal detail & get narky when you asked further. How dare you not know.

    And that can be offputting.

    • JustAnotherSaver
    • By JustAnotherSaver 5th Sep 17, 7:59 PM
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    JustAnotherSaver

    In an earlier thread you asked about options for putting £20k into a low risk fund. You now seem to have changed your risk tolerance dramatically by going for a VLS100. Maybe if you do diversify further you should consider some lower risk options like bonds.
    Originally posted by Audaxer
    This is the problem when you go searching through peoples previous posts & assuming.

    I ask a lot of questions, so don't assume ... ask.

    The money i have in the VLS100 fund is for something totally different to the £20k. If you assumed it was for the same thing then that's probably why it didn't make sense to you. I never said they were for the same thing - because they're not. They were in separate threads - because they're separate.

    • justme111
    • By justme111 5th Sep 17, 10:29 PM
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    justme111
    Well I suppose some people sometimes are in the mood for explaining and others are not. Probably expectation to learn everything you would want to by asking questions is nonrealistic. What can I compare it with May be reading ( not so much news but just baseline information articles and books ). Sorry I do not have an answer , I accepted that I am not going to learn beyond very basics. I sippose you can compare it to one trying to learn a profession or skill or trade by asking questions - may be people get narky about your questions because they see that you trying to achieve unachievable.
    Why 5 instead of 1 - different regions (hsbc tracker USA, hsbc tracker europe and so on). P2p- peer to peer.
    • bigadaj
    • By bigadaj 5th Sep 17, 11:09 PM
    • 10,736 Posts
    • 7,025 Thanks
    bigadaj
    This is the problem when you go searching through peoples previous posts & assuming.

    I ask a lot of questions, so don't assume ... ask.

    The money i have in the VLS100 fund is for something totally different to the £20k. If you assumed it was for the same thing then that's probably why it didn't make sense to you. I never said they were for the same thing - because they're not. They were in separate threads - because they're separate.
    Originally posted by JustAnotherSaver
    Though they are never totally separate, your whole financial situation has a bearing on each element.

    You may well have multiple pots for different purposes, from cash to isas, pensions, unwrapped equities, p2p, maybe property etc etc, but your holdings in one area are quite likely to affect those in other areas, for good and bad.
    • Audaxer
    • By Audaxer 5th Sep 17, 11:12 PM
    • 589 Posts
    • 258 Thanks
    Audaxer
    This is the problem when you go searching through peoples previous posts & assuming.

    I ask a lot of questions, so don't assume ... ask.

    The money i have in the VLS100 fund is for something totally different to the £20k. If you assumed it was for the same thing then that's probably why it didn't make sense to you. I never said they were for the same thing - because they're not. They were in separate threads - because they're separate.
    Originally posted by JustAnotherSaver
    I was feeling sorry for you when you said some people get narky with you for asking questions, then I read the above and find that you are getting narky with me!! I didn't go searching through your previous posts and started assuming anything ... I remember you posting that you were looking for a low risk investment and was just surprised that you were now investing in a VLS100. All you needed to do was clarify it was for something different rather than having a go. I thought I was being helpful suggesting if you diversify further you should maybe consider low risk options like bonds.
    • bigadaj
    • By bigadaj 5th Sep 17, 11:13 PM
    • 10,736 Posts
    • 7,025 Thanks
    bigadaj
    Do you think this is a big problem of going DIY? That what people think of themselves (their attitude to risk) can be a world away from their own reality?

    Going for the VLS100 myself i am currently happy with my decision. In 10 years time maybe i will be maybe i wont.

    Maybe if i'd gone for say VLS60 i'd be wondering if i should've gone higher or lower too. That's the problem when you don't have the answer i suppose.
    Originally posted by JustAnotherSaver
    Anecdotally then diy investors are far higher up the risk scale than those using advisers. There no doubt various reasons for that, from being straight gung Ho, to potentially better knowledge (not necessarily true) to different age profiles or expectations.

    What and how you invest will depend on other assets as well, more risk in one area can be counter balanced by cash or lower risk elsewhere.

    Vls100 is quite extreme on the risk scale, I hold some vls80 and my overall equity exposure is a fair bit lower than that, people have been lulled into a false sense of security by continuously rising markets, it's ine thing saying drops don't bother me but seeing £100k or more wiped off your nominal wealth is enough to make many panic.
    • JustAnotherSaver
    • By JustAnotherSaver 6th Sep 17, 6:30 AM
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    • 410 Thanks
    JustAnotherSaver
    I was feeling sorry for you when you said some people get narky with you for asking questions, then I read the above and find that you are getting narky with me!! I didn't go searching through your previous posts and started assuming anything ... I remember you posting that you were looking for a low risk investment and was just surprised that you were now investing in a VLS100. All you needed to do was clarify it was for something different rather than having a go. I thought I was being helpful suggesting if you diversify further you should maybe consider low risk options like bonds.
    Originally posted by Audaxer
    That's the problem with words on a screen rather than face to face conversation - people often get the wrong end of the stick and assume people are being funny about something when they're not.

    I was just saying that it was a common issue I've seen on this board when others go looking for posts like that and that in this case they are not connected.

    I also frequently post on this board on behalf of other people when they've asked me questions and I don't know the answer - so I come here and ask for them. Just trying to be helpful. So when I say the £20k is separate to my VLS100 I really do mean it's separate - because it's not even my £20k.

    Like with the last post no upset is meant with this one, just trying to clear things up.

    • justme111
    • By justme111 6th Sep 17, 8:46 AM
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    justme111
    Sorry my last night post turned out to be gibberish, it has been written in about 5 starts and stops while getting distracted with offline life
    • JustAnotherSaver
    • By JustAnotherSaver 6th Sep 17, 11:29 AM
    • 2,565 Posts
    • 410 Thanks
    JustAnotherSaver
    No worries

    I ordered the 3rd edition of that book last night. £16something. Hopefully I can pick up something from it at least.

    Out of curiosity, is there any point in putting money into one VLS and then another?
    For example I have £9k in VLS 100 as part of my retirement.
    For examples sake (I stress again: example) if I decided maybe VLS100 was too high, let's try VLS60, leave the contributions in VLS100 but all future contributions in VLS60, is there any point to that, does anyone here run 2 VLS for the same purpose (I.e. Retirement)?

    • Ed_Zep
    • By Ed_Zep 6th Sep 17, 12:53 PM
    • 331 Posts
    • 259 Thanks
    Ed_Zep
    Just keep it simple.

    Warren Buffett recently:

    "The trick is not to pick the right company, the trick is to essentially buy all the big companies through the S&P 500 and to do it consistently and to do it in a very, very low cost way," he added.

    Buffett points to the fee savings built into low-cost index funds. The largest such S&P 500 fund, Vanguard's 500 Index Fund, boasts expense ratios of less than a percentage point.

    "Costs really matter in investments," said Buffett, who in the past has taken aim at costly funds. "If returns are going to be seven or eight percent and you're paying one percent for fees that makes an enormous difference in how much money you're going to have in retirement."

    He mentions just one index.

    The Vanguard VLS100 invests in the S&P500 but also a lot of other indexes.
    Last edited by Ed_Zep; 06-09-2017 at 2:16 PM.
    • justme111
    • By justme111 6th Sep 17, 1:04 PM
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    justme111
    I supose if you decide that 60/40 split is the right one than there is no point in keeping 100 pot , you sell it and buy 60/40. How are platform charges structured may play part as well , if you charged per holding it will be more expensive to keep 2 of them plus unnecessary paperwork.
    • AlanP
    • By AlanP 6th Sep 17, 1:04 PM
    • 967 Posts
    • 685 Thanks
    AlanP
    Just keep it simple.

    Warren Buffett recently:

    "The trick is not to pick the right company, the trick is to essentially buy all the big companies through the S&P 500 and to do it consistently and to do it in a very, very low cost way," he added.

    Buffett points to the fee savings built into low-cost index funds. The largest such S&P 500 fund, Vanguard's 500 Index Fund, boasts expense ratios of less than a percentage point.

    "Costs really matter in investments," said Buffett, who in the past has taken aim at costly funds. "If returns are going to be seven or eight percent and you're paying one percent for fees that makes an enormous difference in how much money you're going to have in retirement."

    That's why I bought Vanguard VLS100.
    Originally posted by Ed_Zep
    Just for those who may read this at a later date, or as part of their first investigation into "what should I invest in" - VLS100 is a very different beast to a S&P 500 Tracker.

    VLS100, as do all the VLS range, provides a broad global spread which will include all of those in the S&P 500 plus many more.

    Investing in just 1 Index, in just 1 of the world economies is not a sensible, diversified approach (unless you are the US possibly).

    If a UK investor went 100% into the S&P 500 the £:$ Exchange Rate could well have more impact on returns than the movement of the underlying Index.
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