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  • FIRST POST
    • donmaico
    • By donmaico 10th Jan 18, 10:31 PM
    • 313Posts
    • 38Thanks
    donmaico
    Global technology found.Am I too late?
    • #1
    • 10th Jan 18, 10:31 PM
    Global technology found.Am I too late? 10th Jan 18 at 10:31 PM
    I can't find any threads regarding Global Tech funds and I was wondering why. I have a very cautious portfolio and thought about investing in tech fund as well just to pep things up a bit but the obvious lack of enthusiasm here got me wondering if they are considered far too risky
    Last edited by donmaico; 11-01-2018 at 10:17 PM.
Page 3
    • dunstonh
    • By dunstonh 12th Jan 18, 10:32 AM
    • 90,341 Posts
    • 57,127 Thanks
    dunstonh
    Do you mean that few investors would want to combine a low-volatility investment with a rather high-volatility one? Because that pairing would make a lot of sense to me, and I like to think that I know what I am doing: a core-satellite approach, choosing a core to provide reasonable safety and a number of different satellites to provide the possibility of high returns (and equally the chance of substantial losses). Or have I got it wrong somewhere?
    Originally posted by Voyager2002
    VLS is aimed at people at that believe in the passive philosophy. If you start making management decisions to involve more expensive and niche funds that bust the asset allocation then how does that fit with the passive philosophy?

    I understand the core and satellite approach. However, that would typically involve multiple satellite funds to get you to the asset allocation you are after. I don't see VLS100 plus a tech fund as being similar to a typical core and satellite investor.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • TheTracker
    • By TheTracker 12th Jan 18, 10:34 AM
    • 1,174 Posts
    • 1,156 Thanks
    TheTracker
    I've not read this whole thread, but the parts I did smacked of "this will be big going forward so it will be profitable to buy it now" thinking. This fashion investing totally ignores valuation and makes no adjustment for how big investors think it will be in future which will at least in part be priced into the sector. For instance, if I am to invest in Tesla, the question isn't whether I think Tesla will be big (ok, bigger!) in future, it will be whether I feel the current price under-represents how big it will be in future.

    Technology, in particular, is a pervasive innovation that will have broad effects on non-tech companies, beyond the valuation of technical companies themselves. Growth in retail, media, transport, whatever sector you select, over the last 2 or 3 decades, has been significantly driven by technology. It is great that Tesla might be able create a market of driverless lorries, but I can profit from that by holding transport stocks and not speculating on whether a fashionable subset of companies will supply other sectors. You invest in technology by simply being exposed to and diversified across all sectors.
    • Prism
    • By Prism 12th Jan 18, 10:44 AM
    • 120 Posts
    • 82 Thanks
    Prism
    I agree with you about Amazon not being a technology company, and would argue that the same could apply to Google and Facebook which as far as their profitable business goes major in selling advertising space.

    Is there any reason why an investor should buy funds that have large holdings in these companies in order to benefit from the supposed AI and block chain revolutions? Perhaps there should be a separate sector for companies that do almost all of their business online as they are very different to those that focus on the development of technology.
    Originally posted by Linton
    Its very hard to split these companies into categories. For example Amazon creates most of its revenue from its commerce website, but makes most of its profit from its technology and innovation. Its a world leader in the cloud and AI. Facebook is at the forefront of AI, network and datacenter design. Microsoft is clearly a technology company but its main competitors are Amazon and Google because they are all working in the same area - cloud, AI, software. Alibaba and Tencent are doing the same in China.They are all huge developers of technology and will most likely be the most profitable organisations for many years to come. Thats why I am overweight in technology.
    • TheTracker
    • By TheTracker 12th Jan 18, 10:50 AM
    • 1,174 Posts
    • 1,156 Thanks
    TheTracker
    a core-satellite approach, choosing a core to provide reasonable safety and a number of different satellites to provide the possibility of high returns (and equally the chance of substantial losses). Or have I got it wrong somewhere?
    Originally posted by Voyager2002
    If you wish to mix high and low volatility to maximise returns in a way that stays within your current volatility/risk appetite, well thats what the multi-asset funds like VLS are already designed to do, they usually already contain this mix in their asset allocation. You choose a higher level of multi-asset product if you want to add some more risk.

    Instead, what you are likely trying to convey is an approach some people call "play money" or "mad money" in investing. It works for some but not others, and my feeling is that it is on the whole a dangerous practise.

    It can work, because it can let you get any 'entertainment' buzz out of your system, and might even be profitable. Constrained to a small and fixed amount, it can allow you to think you have some ability to pick stocks or funds or have an edge in a sector, which can feel rewarding. It can even be an advantage if its disastrous, since its helped you not do it to your whole portfolio. And its a really good learning experience about how the market works. Another thing to talk about down the pub, too.

    I suppose in a way even I do it, I invest directly in some EIS-eligible companies and psychologically might be using that tax advantage to lure me into taking higher risk in a sector I know well, but its only a very small part of my portfolio, I'm under no illusions and realise I could lose it all rapidly.

    But it can be a very bad practise. If you do well, you can be tempted to apply it to more of your investments. You can start to believe your own hype that you can pick funds or sectors better than most. You can feel emotionally down if not successful. You can be sucked into doubling down when the price drops and you still believe in the sector, and you can chase what ever the fashion of the day is.

    Whether or not you go down the route of play money is in large part based on your personality and appetite for gambling/risk. And as others have said, that's often inconsistent with the type of person who would choose a multi-asset fund in the first place.
    Last edited by TheTracker; 12-01-2018 at 11:30 AM.
    • BananaRepublic
    • By BananaRepublic 12th Jan 18, 11:26 AM
    • 1,041 Posts
    • 764 Thanks
    BananaRepublic
    VLS is aimed at people at that believe in the passive philosophy. If you start making management decisions to involve more expensive and niche funds that bust the asset allocation then how does that fit with the passive philosophy?

    I understand the core and satellite approach. However, that would typically involve multiple satellite funds to get you to the asset allocation you are after. I don't see VLS100 plus a tech fund as being similar to a typical core and satellite investor.
    Originally posted by dunstonh
    Surely people can choose what they like. Someone might choose the VLS100, not because it is a passive fund, but because it could form a solid backbone for their investments. They might then choose something more adventurous/risky such as a tech fund. It sounds as if the thought processes an IFA goes through would exclude this approach, unless this view is not typical of your trade.
    • Linton
    • By Linton 12th Jan 18, 11:48 AM
    • 8,849 Posts
    • 8,880 Thanks
    Linton
    Surely people can choose what they like. Someone might choose the VLS100, not because it is a passive fund, but because it could form a solid backbone for their investments. They might then choose something more adventurous/risky such as a tech fund. It sounds as if the thought processes an IFA goes through would exclude this approach, unless this view is not typical of your trade.
    Originally posted by BananaRepublic
    The point is I think that having only one satellite fund perhaps chosen solely because media hype leads the investor to believe it will outperform significantly isnt a thought through investment strategy. A coherent core/satellite approach is likely to lead to a set of varied satellites that together create a portfolio more suited to the investors objectives than the core.

    But yes people can choose what they like and hopefully learn from the consequences.
    • firestone
    • By firestone 12th Jan 18, 1:23 PM
    • 108 Posts
    • 40 Thanks
    firestone
    i can understand an IFA not recommending a higher risk satellite fund to somebody who has gone with a lower risk multi asset as that would not look good for them,from a giving advice point of view.But from a DIY point of view i can't see a problem with a small portion of fun money so to speak but it may depend on how much is invested in the main fund/funds in the first place as to how much fun it is.
    But from a picking point of view what apart from tech/AI would people pick that is not covered by a global fund water,timber,gold,cyber crime? there's many to pick from
    • jimjames
    • By jimjames 12th Jan 18, 1:26 PM
    • 12,330 Posts
    • 10,910 Thanks
    jimjames
    But from a picking point of view what apart from tech/AI would people pick that is not covered by a global fund water,timber,gold,cyber crime? there's many to pick from
    Originally posted by firestone
    I agree there are many. Things like private equity, property, healthcare, resources are just a few
    Remember the saying: if it looks too good to be true it almost certainly is.
    • firestone
    • By firestone 12th Jan 18, 1:36 PM
    • 108 Posts
    • 40 Thanks
    firestone
    Should own up -Have property in a pension but i went with Impax environmental markets some while back as "fun" money and looking at a timber etf at the moment from ishares which also has a property edge
    • donmaico
    • By donmaico 12th Jan 18, 1:50 PM
    • 313 Posts
    • 38 Thanks
    donmaico
    Do you mean that few investors would want to combine a low-volatility investment with a rather high-volatility one? Because that pairing would make a lot of sense to me, and I like to think that I know what I am doing: a core-satellite approach, choosing a core to provide reasonable safety and a number of different satellites to provide the possibility of high returns (and equally the chance of substantial losses). Or have I got it wrong somewhere?
    Originally posted by Voyager2002
    I cant see what is so confused about that.Then again I am not an expert
    Argentine by birth,English by nature
    • firestone
    • By firestone 12th Jan 18, 1:57 PM
    • 108 Posts
    • 40 Thanks
    firestone
    I cant see what is so confused about that.Then again I am not an expert
    Originally posted by donmaico
    some do the same with cash and put say 5-10% in P2P
    • BananaRepublic
    • By BananaRepublic 12th Jan 18, 2:27 PM
    • 1,041 Posts
    • 764 Thanks
    BananaRepublic
    The point is I think that having only one satellite fund perhaps chosen solely because media hype leads the investor to believe it will outperform significantly isnt a thought through investment strategy. A coherent core/satellite approach is likely to lead to a set of varied satellites that together create a portfolio more suited to the investors objectives than the core.

    But yes people can choose what they like and hopefully learn from the consequences.
    Originally posted by Linton
    Well obviously when you rephrase it in such terms, it is not a good idea. I was commenting on the idea of having more risky active funds alongside a core VLS100 fund. Those funds could be chosen 'wisely' for want of a better word. I can't say I am aware of any media hype over tech funds, but then again maybe I don't use the same media as yourself.
    • BananaRepublic
    • By BananaRepublic 12th Jan 18, 2:31 PM
    • 1,041 Posts
    • 764 Thanks
    BananaRepublic
    i can understand an IFA not recommending a higher risk satellite fund to somebody who has gone with a lower risk multi asset as that would not look good for them,from a giving advice point of view.But from a DIY point of view i can't see a problem with a small portion of fun money so to speak but it may depend on how much is invested in the main fund/funds in the first place as to how much fun it is.
    But from a picking point of view what apart from tech/AI would people pick that is not covered by a global fund water,timber,gold,cyber crime? there's many to pick from
    Originally posted by firestone
    Surely it is the customer's overall risk profile that matters.

    I think the idea of a specialist fund is that global funds are just that, global. yes they include healthcare and tech, but in modest proportions. Someone might wish to buy an active fund to focus on healthcare, for example, if they believe that healthcare will outperform, or if they have an interest in healthcare, perhaps due to their career.
    • ArchBair
    • By ArchBair 12th Jan 18, 3:20 PM
    • 58 Posts
    • 12 Thanks
    ArchBair
    I did consider a small investment in PCT, but in the end I decided I had enough tech exposure in my portfolio. I hold around 10% in Scottish Mortgage which is quite high tech and my main global holding is the Bankers Investment Trust which also has some technology holdings so I 'm happy with that and, rightly or wrongly, resisted the temptation to add to this with PCT.
    • sixpence.
    • By sixpence. 12th Jan 18, 4:45 PM
    • 59 Posts
    • 15 Thanks
    sixpence.
    Question: The VLS funds are a bit over weight in tech and finance. Do these two sectors tend to go up and down at the same time? In the way that once the US is down EM will be up, for example.

    Question 2: What would counter being overweight in tech and finance in a portfolio? As some sectors balance each other (see above example with geographic locations) in terms of diversification. Is gold? Healthcare? Curious.

    Observation: there are 2 interesting arguments being made here. A) an investment in tech is an investment across sectors because every sector uses tech. B) an investment across sectors is an investment in tech, for the same reason.

    Surely both of these arguments lower the risk of investing in tech? British American Tobacco has done well over the years because generation after generation smokes and the population of the world has obviously increased. Similarly, generation after generation, business after business, will use tech and the role of technology in our lives – through anything from booking a taxi to performing open heart surgery on someone – tech will only continue to advance.

    Therefore, as a sector, doesn't technology have a huge moat around it? Not trying to form an argument here, just asking a question as this seems the case to me. I am not an expert though, I'm someone who is just learning about investing now and trying to make good decisions
    • Jeems
    • By Jeems 12th Jan 18, 4:53 PM
    • 184 Posts
    • 110 Thanks
    Jeems
    Tech has had and it looks like it will continue to have strong earnings. Tech now is VERY different to tech in 2000. Companies are actually generating profits this time and they are growing profits a lot too.

    Also there are different types of tech companies. Amazon is very different to apple which is very different to google. Something like amazon isn't even regarded as "tech" - its a consumer cyclical stock which makes sense as it generates by far most of its revenues through ecommerce.
    Originally posted by economic
    Agreed. Back in the dotcom era, sky high valuations were based on the assumption that relatively large userbases would eventually result in big revenue - but no one really knew how.

    Ironically on the amazon front, they are now very much tech focused - the money they make selling AWS dwarfs their traditional ecommerce business! https://www.usatoday.com/story/money/markets/2017/07/22/a-foolish-take-how-amazoncom-makes-money/103769610/
    • firestone
    • By firestone 12th Jan 18, 4:57 PM
    • 108 Posts
    • 40 Thanks
    firestone
    Surely it is the customer's overall risk profile that matters.

    I think the idea of a specialist fund is that global funds are just that, global. yes they include healthcare and tech, but in modest proportions. Someone might wish to buy an active fund to focus on healthcare, for example, if they believe that healthcare will outperform, or if they have an interest in healthcare, perhaps due to their career.
    Originally posted by BananaRepublic
    i am all for it if thats what someone wants and have done.Think i was looking more from an IFA or even a fund platform Q&A point of view that if they recommend VLS 20/40 they would probably not then offer say PCT as they would think it outside the risk profile and would not see it as a punt/fun which DIY you may
    • donmaico
    • By donmaico 12th Jan 18, 5:04 PM
    • 313 Posts
    • 38 Thanks
    donmaico
    VLS is aimed at people at that believe in the passive philosophy. If you start making management decisions to involve more expensive and niche funds that bust the asset allocation then how does that fit with the passive philosophy?

    I understand the core and satellite approach. However, that would typically involve multiple satellite funds to get you to the asset allocation you are after. I don't see VLS100 plus a tech fund as being similar to a typical core and satellite investor.
    Originally posted by dunstonh
    Isn't the L&G Global technology Index tracker fund passive? Anyway, after reading all the posts I think I have been pretty much convinced myself not to go down the global tech route, particularly in view of the fact the multi-funds I have have some exposure to technology already.
    In view of that, the next question I have is whether it would be prudent to add a substantial lump sum to my 5 multi-funds whilst also adding either a Vanguard LS 80 ( i already have the 30) or a Blackrock Consensus 75?
    Last edited by donmaico; 12-01-2018 at 6:54 PM.
    Argentine by birth,English by nature
    • bowlhead99
    • By bowlhead99 12th Jan 18, 6:15 PM
    • 7,128 Posts
    • 12,932 Thanks
    bowlhead99
    Isnt the L&G Global technology Index tracker fund passive?
    Originally posted by donmaico
    The tracker passively holds all the company equities that qualify to be in that particular index by meeting the industry sector criteria within the qualification limits for liquidity and free float and stock exchange on which they are listed etc.

    But it is only holding stocks from that very restrictive market. If you were a hearty believer in the "don't be active, be passive' cause, you would not be going out and determining for yourself how much money should be in what type of tech stocks relative to health stocks, oil stocks, consumer cyclical stocks, defensive stocks, and all the other industries that you could buy. You'd just buy a world index and take the view that 'the market' will efficiently allocate your capital and that you can't get a better result by second-guessing how much cash to deploy into the "tech companies" sub-index at a point in time.

    The fact that an index tracker allocates its investors' cash among investee companies following a published index rather than by having a fund manager micromanage its list of holdings based on that manager's research and decision-making ability, means it can call itself a tracker, a passive vehicle within its field. But it does not really follow from that, to say that you are embracing the passive mentality when you decide you'll 'top up' your core holdings of multi-industry regional or global trackers by having a punt on the concept that hightech companies at their current prices could be a better place to put your money right now than other types of companies.
    • donmaico
    • By donmaico 12th Jan 18, 8:15 PM
    • 313 Posts
    • 38 Thanks
    donmaico
    The tracker passively holds all the company equities that qualify to be in that particular index by meeting the industry sector criteria within the qualification limits for liquidity and free float and stock exchange on which they are listed etc.

    But it is only holding stocks from that very restrictive market. If you were a hearty believer in the "don't be active, be passive' cause, you would not be going out and determining for yourself how much money should be in what type of tech stocks relative to health stocks, oil stocks, consumer cyclical stocks, defensive stocks, and all the other industries that you could buy. You'd just buy a world index and take the view that 'the market' will efficiently allocate your capital and that you can't get a better result by second-guessing how much cash to deploy into the "tech companies" sub-index at a point in time.

    The fact that an index tracker allocates its investors' cash among investee companies following a published index rather than by having a fund manager micromanage its list of holdings based on that manager's research and decision-making ability, means it can call itself a tracker, a passive vehicle within its field. But it does not really follow from that, to say that you are embracing the passive mentality when you decide you'll 'top up' your core holdings of multi-industry regional or global trackers by having a punt on the concept that hightech companies at their current prices could be a better place to put your money right now than other types of companies.
    Originally posted by bowlhead99
    Thanks, I have pretty much made up my mind not get involved in it.My main concern now is what I do with what I have
    Argentine by birth,English by nature
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