Isa -Shares

Colincbayley

dunstonh wrote: »

I would like to know in context what the OPs risk profile is and why it has moved up higher during the course of this thread before offering funds.

Simple, How am I supposed to know which funds are low, med or high risk?

dunstonh

Colincbayley wrote: »

Simple, How am I supposed to know which funds are low, med or high risk?

Research, knowledge and understanding the asset classes and the relative risk of the different types within those.

Learning and understanding is part of the process if you want to DIY.

JamesU

dunstonh wrote: »

Research, knowledge and understanding the asset classes and the relative risk of the different types within those.

Learning and understanding is part of the process if you want to DIY.

Dunstonh, For risk profiling and asset allocation, seem to remember financial analytics with 0-9 risk profiling is a professional tool used. How reliable and accurate are the results obtained from the software used by IFAs? Presumably the results obtained are only as good as the quality of the data criteria (e.g. on funds) streaming to the software. From a technical standpoint how does the software accurately crunch an asset allocation vs risk profile. I find this a grey area and would be interested in your views on this.


JamesU

pqrdef

nrsql wrote: »

Would be nice but the tracker will give performance depending on the index

That's what worries me. It doesn't seem to be written anywhere that the index will necessarily go up.

nrsql wrote: »

The managed fund will depend on the manager - a lot more possiblility for over/underperformance (+charges). I would say you need to pay a lot more attention to the manager anf fund house or ifa than you would in the tracker situation.

So you worry about the man who's in charge of your money, but if nobody's in charge of it at all, there's nobody to worry about.

Seems a bit like worrying about the competence of the bus driver, but if the bus sets off with no driver in it, then that's fine.

pqrdef

jimjames wrote: »

Looking at the UK All companies sector on Trustnet, over the last 5 years the sector average is 25.2% growth, the FTSE AS was 30%

But over 10 years, the FTSE AS is down.

jimjames wrote: »

for UK/US I believe a tracker is a very good way of long term exposure to these markets.

May well be, but I was querying whether one really wants long-term exposure to any single asset class and market.

nrsql

pqrdef wrote: »

That's what worries me. It doesn't seem to be written anywhere that the index will necessarily go up.


So you worry about the man who's in charge of your money, but if nobody's in charge of it at all, there's nobody to worry about.

Seems a bit like worrying about the competence of the bus driver, but if the bus sets off with no driver in it, then that's fine.

If the index doesn't go up then that's likely to affect the managers performance too. Need to be more careful about choosing a manager in a bear market. The whole point of a tracker is to avoid the poor funds.

If there's no manager you expect average performance - do you expect average performance from a bus witout a driver? Don't think you understand what an tracker is (or maybe how a bus works).

dunstonh

Dunstonh, For risk profiling and asset allocation, seem to remember financial analytics with 0-9 risk profiling is a professional tool used. How reliable and accurate are the results obtained from the software used by IFAs? Presumably the results obtained are only as good as the quality of the data criteria (e.g. on funds) streaming to the software. From a technical standpoint how does the software accurately crunch an asset allocation vs risk profile. I find this a grey area and would be interested in your views on this.

There is much debate on how some risk profile questionnaires come out with their actual risk position. Sometimes a question answered in one way can shove someone up the risk scale despite the bulk of their answers suggesting lower. Its more a case of looking at the answers and then analysing that to decide the risk profile. At the end of the day, if someone is investing for 40 years (i.e. retirement planning) it doesnt matter if they should be higher up the scale if they are going to complain the minute a 40% stockmarket crash comes along.

Sector allocation tools I am much happier with. At the end of the day they ensure that a diverse portfolio is used and the tools that update the sector allocations based on economic events and potential returns add value to the process in my opinion. The software does take into account the higher risk/lower risk funds in each sector and gives warnings as such. The tools vary in quality. Some are quite basic and I dont think add much value (although probably still better than a random hit and hope). Others are quite advanced but are still an opinion. Investments are always about opinion. The tools cannot predict a crash as no-one can (those that may say the predicted the last one probably missed the one before or had been predicting a crash for years and would be right sooner or later). However, they can often adjust the sector allocations to reflect potential bubbles. It was noticeable how property allocations were significantly reduced before they downturn but increased before their recovery.

jamesd

Colincbayley wrote: »

Simple, How am I supposed to know which funds are low, med or high risk?

Two ways. One is to use statistical tools that analyse up and down movements to see how much the variation has been in the past. You'll find various measures used for that. Another, one I tend to prefer myself, is to look at the manager and management company's own views and preferences. Both require research and experience, so don't be surprised if you don't know it all at the start, the people relying to you have have been doing it for longer and should be expected to have more thoughts at the tip of their fingers today than you do today.

Some examples are for UK, with large international company loading:

Defensive viewpoint: Invesco Perpetual Income or High Income
Neutral: FTSE All Share Index tracker
Growth view point: M&G Recovery

For Asia-Pacific:

Defensive viewpoint: First State Asia-Pacific Leaders
Neutral: a tracker
More aggressive: Fidelity SE Asia

This is me using my knowledge of the approaches of the fund houses and managers together with their past performance. All of the options are good, just good in different ways.

Take Invesco Perpetual Income. Last year and still today the manager has taken a cautious view. That limited growth in 2009 compared to the tracker or M&G Recovery. Today it might be interesting to be a bit more defensive after market growth, with a manager who still has an excellent long term record of beating the index. These Invesco Perpetual funds are some of the most popular in the UK for retirement and general investing, the manager has done a superb job. But superb doesn't mean best in all possible conditions, just overall. It's up to you to take a view and decide which stance you want to take in each area.

Don't worry about not knowing everything on day one. There's always more to learn and the knowledge grows over time as you do the research.

pqrdef

nrsql wrote: »

Need to be more careful about choosing a manager in a bear market.

If you insist on keeping your money in diversified UK large-cap equities in a bear market, the best manager in the world won't save you. And yet my grandmother can outperform the Footsie in a bear market, just by not being in it.

nrsql wrote: »

If there's no manager you expect average performance

No I don't, I expect the performance of the index. But the average of the options available to my money includes things that are not in the index.