Balanced Porfolio - Invest Now or Wait?

gozomark

Rollinghome wrote: »

And yet fund managers are paid to do exactly that: to buy investments that will rise in value and sell those that will fall. .

Only true of absolute return managers - the vast majority of fund managers are relative return managers, so are paid to select a portfolio to beat an index, not a portfolio to make money.

musehead

Just remember that year-to-year (or monthly) volatility doesn't matter much if you timescale is long term.

I made this mistake when I put together my first equity portfolio around October 2007, just before the big crash. Nobody really seemed to know it was coming, at least not on this site. My portfolio lost about 50% at its worse and although my initial plan was to add the same amount every year, I was scared and did not add anything the next year. Some people were saying that equities would NEVER recover. Of course if I had carried on as planned I would be sitting on a much larger profit by now. So lesson learned - i'm going to keep rebalancing annually by adding more money.

jamesd

A reason to invest now is that we've seen large drops and many markets haven't recovered from them yet. We're pretty much certainly in the mid part of an economic recovery process that will result in a few years of generally upwards market movements, though with lots of down times along the way. Lots of risks, like economic policy failures that could slow things down but I doubt that there's much chance of a more major mess than fiscal conservatism that's currently affecting much of Europe and the ongoing currency wars, in spite of which economies are still recovering.

The FTSE isn't where I'd be looking to put a high percentage of money, I prefer more broad diversification than just one UK index.

I'm surprised that there would be a concentration on Standard Life funds.

It's at least 18 months since the ideal time to have switched but it doesn't look like a bad time yet for equities. I'm more uncomfortable with high quality bonds than equities.

dunstonh

The FTSE isn't where I'd be looking to put a high percentage of money, I prefer more broad diversification than just one UK index.

Agreed. However, the OP has mentioned a balanced portfolio. Its only later posts that have focused on the FTSE.

I'm surprised that there would be a concentration on Standard Life funds.

Two possibilities there. Its not an IFA but a multi-tie or it's Standard Life's platform and not their funds (or both).

Totton

Hi,
I wouldn't be so negative towards the IFA, money in the bank is devaluing in most cases.

Mickey

Loughton_Monkey

If you want a balanced portfolio, go to a level-headed IFA.

Mine is level headed. [He dribbles out of both sides of his mouth at once.]

cgzz

WOW thanks everyone for the replies - some great comments. My IFA is definitely independent I have no doubts or concerns about that. The suggestion that Standard Life is a "platform" seems totally reasonable to me and I'll check that. What are the advantages of my IFA using a platform company such as Standard Life?

My IFA is proposing using the Lloyds TSB bank money to purchase a Standard Life "Onshore Bond" which will be distributed over about 15 funds - does that sound like an excessive amount of funds for one bond? The bond will be part of the balanced portfolio the rest being made up of current ISAs and private pension all of which will be invested in different companies/funds within the portfolio. My IFA also talks about "Old Broad Street" monitoring funds within the portfolio - is OBSTR doing what my IFA should be doing in the first place? My IFA's portfolio service is new to the company he works for and therefore to me it is unproven. The initial charge to set up the portfolio is about 4% and therafter 2.17%/annum - 1.17% to the fund managers and 1% to my IFA. Every six months the portfolio will be reveiwed and discussed with me and appropriate changes made (I assume according to OBSTR advice, state of markets at that time etc etc). Also my IFA will take action at any time if there is any market turmoil by moving my investments from volatile funds into cash funds. All sounds very good but I don't like rewarding failure and there is no consequence if the portfolio doesn't perform (i.e. IFA still gets 1% even if portfolio has fallen). If the portfolio is so good, being monitored with investments being moved as and when necessary to try and avoid pitfalls then my IFA should have no problem with a consequence clause in the portfolio service (i.e. doesn't get his 1% annual fee if the portfolio has fallen). Harsh maybe but why reward failure? IFA's incentive is to ensure portfolio does what its supposed to do so that he can get his 1% reward.

My biggest concern about the portfolio is all those who will have a "finger in the pie". 15 fund managers for the onshore bond, more managers for the private pension and existing ISAs once these have been cashed in, transferred and setup, Standard Life, Old Broad Street, my IFA and who knows who else may be lurking in the background. They all need to make their money. Is it all worth it?

blinko

buddy can you simplify the above please

dunstonh

is OBSTR doing what my IFA should be doing in the first place?

No. IFAs typically outsource in a range of areas and governed portfolios are one way of doing that.

The initial charge to set up the portfolio is about 4% and therafter 2.17%/annum - 1.17% to the fund managers and 1% to my IFA.

Thats at the higher end. Typically the annual to the IFA is 0.5% and the initial should be aimed for around £1000-£2000.

All sounds very good but I don't like rewarding failure and there is no consequence if the portfolio doesn't perform (i.e. IFA still gets 1% even if portfolio has fallen).

Investments will go down as well as up at times. So, a percentage of the fund value is the best way as the higher the value, the more they are paid, the lower the value, the less. At least it aligns your interests.

my IFA should have no problem with a consequence clause in the portfolio service (i.e. doesn't get his 1% annual fee if the portfolio has fallen).

In which case you should pay 2-3% when it goes up and nothing when it goes down. As up periods tend to be more than down periods, it will end up costing more for you.

15 fund managers for the onshore bond

Thats a lot of funds. Typically you are looking to be in the hundreds of thousands of pounds with that number. However, investing is all about opinion so if thats what they think and they can tell you why then that is fair enough.

Standard Life, Old Broad Street, my IFA and who knows who else may be lurking in the background.

OBSR are just research providers. The IFA will be paying for that or using a research source that is paying for it. The money we pay out for research software and data suppliers is quite significant. Std Life make on the product charges by taking a portion of the annual charges.

My key questions would be
1 - why investment bond and not mutual funds? You would expect a tax/cost analysis between the bond and mutual funds on a like for like basis. Mutual funds tend to be better in the majority of cases. Yet you have been recommended the bond. So, ask to see the research that did the cost/tax comparison to show that the bond was the better option.

2 - why standard life? I am not a fan of their bond. Its not the best priced. So, what does it offer that the better priced providers cant?

3 - why is the charge 1% p.a. when the typical IFA amount is 0.5%? What extra are you getting that another IFA getting paid 0.5% p.a. wouldnt do?

sabretoothtigger

My biggest concern about the portfolio is all those who will have a "finger in the pie".

Each fund should have a TER total expense ratio which you should know before buying, also know the portfolio of the fund and google each company