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Want 5% on £300k
Comments
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mike88,
Your comments echo my sentiments exactly.
One presumption seems to overtake all discussions in these threads, and that presumption is that everyone needs to make a return that is greater than inflation and that it follows that everyone must therefore take a risk to do so. More people who have retired should be asked the simple question "can you live with and on the wealth you have already accumulated".
That question needs to have with it some fairly deep probing and realistic review because many people, even perhaps by making a small sacrifice in their standard of living could find that they need not take any further risks with their wealth when they retire but instead, live carefully but without worry. I don't think I have ever heard the question asked or even posed in these forums. As it happens, many very highly financially literate and sophisitcated people who have seen my "life spreadsheet" believes that recognising when you "have enough" is highly enabling and empowering in deciding what you will and will not do with your life including being the precursor to all of your investment plans. Recognising when you have "options" that you hadn't previously realised is highly empowering.
My wealth has some pensions, some property and sufficient cash that has not been reduced in the many years I've been using it - even though I'm a touch younger than you. The presumption always seems to be "you must make your money more" or "you must protect it against inflation. Some people do not need to and I believe the number of people in that position is more than many people - including the actual people themselves who often do not realise how wealthy they are - think.
I appreciated your very cogent reminder that what is presumed to be an essential approach to all ins't necessarily so.0 -
While the rest discuss returns, charges and TERs in their minutia I am happy to luxuriate on my holiday home terrace in the sunshine with a bottle of Chablis at my side.
i can see your viewpoint, if you have millions in the bank and you have simple tastes there is no point worrying about money. however a lot of pensioners don't have that much. are you really happy that you'll have enough income in 30 years time? you don't think 200billion of QE will lead to inflation?0 -
There are plenty of debates and studies done about this, but depending on the way the data is interpreted the results can give favour to either side of the debate.
Over here it's a lot rarer to find active managed funds investing like tracker funds, which is exactly why almost all the research done on US active vs passive funds is meaningless over here.
I think it's more because it's not really news and there's no clear winner in the debate.
yes, i think the case studies provided by the fund management industry are flawed. the data produced by mike88 on IP high income assumed bid/ bid. If they ignored the bid/ offer spread for the sample what else have they ignored? have they ignored the initial fees? have they ignored the dealing costs and TER?
the fact that one of the most profitable industries on the planet can't provide solid evidence that active management is better for the consumer is damming.0 -
yes, i think the case studies provided by the fund management industry are flawed. the data produced by mike88 on IP high income assumed bid/ bid.
Did you actually read the explanation I types out for you? Do you understand where the prices on unit trusts come from and where they end up? It really sounds like you're having difficulty with the concept, so let me explain again: for unit trusts the bid/offer spread is basically the same as the initial charge on an OEIC: it is almost all paid out as commission to an adviser. Therefore if you are comparing portfolios, it makes sense to compare them without including the adviser charges - i.e. comparing like for like The final difference left over might end up being somewhere in the region of 0.25% as a set-up fee, which is not going to have an enormous effect on the end performance.
i.e. £120k return would result in £300 reduced performance due to the 0.25% remaining initial charge.
Not necessary in this case because this fund is mono-priced and the entire initial charge is rebated.
The initial fee IS the bid-offer spread in the case of the IP High Income fund.If they ignored the bid/ offer spread for the sample what else have they ignored? have they ignored the initial fees? have they ignored the dealing costs and TER?
See here for what happens when you buy it without advice:
http://www.h-l.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/i/invesco-perpetual-high-income-accumulation
Zero initial charge, zero bid-offer spread, reduction of 0.25% in the annual management charge.
If you wanted to compare advised portfolios, you'd need to apply some form of advice fees to the tracker funds or the share portfolio too, otherwise you're distorting the statistics.
The industry is divided. Some are solid proponents of trackers, others prefer active. You act like it's a single entity that agrees on everything, and that simply isn't the case.the fact that one of the most profitable industries on the planet can't provide solid evidence that active management is better for the consumer is damming.
Why doesn't the automotive industry agree on the best type of vehicle? Surely one of the most profitable industries on the planet ought to be able to provide solid evidence that family saloons are better than people carriers?I am a Chartered Financial Planner
Anything I say on the forum is for discussion purposes only and should not be construed as personal financial advice. It is vitally important to do your own research before acting on information gathered from any users on this forum.0 -
i can see your viewpoint, if you have millions in the bank and you have simple tastes there is no point worrying about money. however a lot of pensioners don't have that much. are you really happy that you'll have enough income in 30 years time? you don't think 200billion of QE will lead to inflation?
You don't need millions as long as you are not extravagent. If you want to drive a Rolls Royce, eat regularly in the Fat Duck or holiday frequently at Sandy Lane in Barbados then that is a different matter.
Investment decisions depend on what you want out of life and whether you are prepared to compromise your future by taking undue risks or whether you really want to be studying investments when there are better things to do.
When you reach retirement your outlook changes and so does the realisation that you may own assets that are no longer appropriate to your needs. Many own houses that are to big for two, have more land than they can manage and posess more cars than they need. Trading down in the property market is of course one way of raising cash should you need to and if you live in London (which I don't) and decide to move elsewhere where property is cheaper you can do very nicely. And do you really need three cars when two or even one might do?
My take is that you need to worry more about money when you are in work where your concerns should centre on whether you will be able to retire at your chosen age with an acceptable income. Taking risks to achieve your financial aims is acceptable when you are younger but when you finally achieve your end aim you should become less aggressive investment wise in my view.
Consolidating your investments a couple of years before you intend to retire seemed to me to be a good plan. A balanced portfolio of assets in a range of unit trusts (50%) and cash (50%) was my plan - and I can sleep at night - by leaving it to unit trust managers to achieve returns that satisfy me. Paying charges is fine as it removes the hassle of pouring over the financial press while the rest of the family are on the beach.
When you retire your houses should be paid for and the fruits of your pension and investment planning should have borne fruit. Your financial concerns should be more about where you are going to spend your next holiday than eeking out every last percentage from your investments and thereby risking the prosperity you have spent a lifetime accumulating.
That is my take but I realise not everybody thinks like me. That is where this discussion has possibly gone off message because not everyone seems to accept that there is no right way or wrong way as we all are prepared to accept different degrees of risk and that we all want different things out of life.
Finally, with regard to the figures I produced on IP High Income which darkpool queried below is an extract from one of my previous posts which I think is self explanatory:
"As it happened I had some figures for IP High Income calculated on a mid to mid basis net of annual management charges and all other fund expenses so I drew attention to them in order to advance the debate".Take my advice at your peril.0 -
i can see your viewpoint, if you have millions in the bank and you have simple tastes there is no point worrying about money. however a lot of pensioners don't have that much. are you really happy that you'll have enough income in 30 years time? you don't think 200billion of QE will lead to inflation?
Why ruin your own posts and credibility by exagerating and mistating?
He didn't say he had millions and he specifically said "I am happy to luxuriate on my holiday home terrace in the sunshine with a bottle of Chablis at my side. "
The point you (and others) seem unable to grasp is that one solution does not fit all.0 -
I also answered that: the higher tax tax on holdings of less than a year doesn't exist in the UK.jamesd said that american active fund managers underperform the market after tax. why do you think uk managers are any better?
Of course they are bid-bid, that's how you buy them from fund supermarkets.the data produced by mike88 on IP high income assumed bid/ bid.
The initial fees are in the bid-offer spread. If you aren't paying that spread you're also not paying initial fees to their fund manager.have they ignored the initial fees?
The funds report the net asset value. That's after all of those costs have been paid. If you look at bid-bid performance you're seeing the real performance that people like me would see.have they ignored the dealing costs and TER?
I bought six funds on Friday 25 March. Here are the prices quoted for that day's fix and what I paid, including all costs from the fund and my broker:
Sell : 1,008.70p | Buy : 1,008.70p Paid 108.6746
Sell : 351.36p | Buy : 351.36p Paid 351.357998
Sell : 243.00p | Buy : 243.00p Paid 243.000000
Sell : 351.36p | Buy : 351.36p Paid 351.357998
Sell : 1,118.00p | Buy : 1,118.00p Paid 1118.0001
Sell : 509.63p | Buy : 509.63p Paid 509.63
As you can see, the difference between the quoted bid price and what I actually paid is just rounding. It happens that all of these were OEICs, so no bid offer spread was involved. I also paid no dealing charges.
The last unit trust (as distinct from OEIC for this paragraph) I bought and sold had a 5% initial charge. All 5% was discounted by my broker so again I paid approximately the bid price.
That would be every day. The charges are expressed as an annual rate but taken daily. Trail commission, when present, is charged daily, reflected in the days' fund bid and offer prices, and paid monthly to whoever gets it. At Hargreaves lansdown their customers will be used to seeing monthly payments into their Loyalty Bonus account, except in their SIPP, from these funds because HL rebates part of this commission to their customers. From other channels the funds might be purchased with no commission, paying a one off fee to the sales channel instead.DavidHayton wrote: »Then when the management charges are levied the fund inevitably underperforms.
That's the problem with the tracker side of the discussion: it is possible to reject the consistent under-performers and pick from the consistent over-performers. By eliminating the assuredly bad ones you've shifted the average result from the population average to the average of the decent choices.DavidHayton wrote: »However, I do have some money in Neil Woodford's funds because he appears to have the ability to outperform consistently over a long period. Maybe it is skill, maybe it is luck, but it is serving me well either way.0 -
. Therefore if you are comparing portfolios, it makes sense to compare them without including the adviser charges - i.e. comparing like for like The final difference left over might end up being somewhere in the region of 0.25% as a set-up fee, which is not going to have an enormous effect on the end performance.
The industry is divided. Some are solid proponents of trackers, others prefer active. You act like it's a single entity that agrees on everything, and that simply isn't the case.
Why doesn't the automotive industry agree on the best type of vehicle? Surely one of the most profitable industries on the planet ought to be able to provide solid evidence that family saloons are better than people carriers?
yes your right i don't understand some of your posts. so the difference in charges between a tracker and AM is only 0.25%? you think it reasonable to compare funds before the fees applied?
with cars people know that you get what you pay for. ie a range rover is better than a fiesta. however with fund management it's not really clear that the fees are benefiting the consumer. you also don't know if you have had a good deal from your IFA until 20 years later.
if i walked into an IFA and said i wanted to invest a £1m and the IFA said the TER plus other charges were 3% a year i would want to know what i was getting for that £30k a year. so far the reasons given for AM seem to be "well if you ignore all the dog funds AM is quite good". but unless you have a crystal ball you don't know what the dogs will be.0 -
It's still not clear whether fund values were being accurately reported. We're now well beyond the time when the results of an audit of those values was expected to report. That makes it a little difficult to comment, since there's a chance that one or more crimes may have been committed.Rollinghome wrote: »Nor does it make any sense to try to minimise the problem at Arch Cru and why it occurred.
Unlike some here, I prefer to use real funds in examples of how to combine funds in portfolios. One of the negative aspects is that it opens the door to sniping if there's a problem with one of the funds I mention. I don't think you've quite reached the point of mentioning it more often than I mentioned the fund but you must be getting close now.Rollinghome wrote: »So infatuated with Arc Cru were you that you recommended it not once but in around 30 different threads.
Rubbish. Mentioning only a few funds does not mean recommending that only those funds should be used. They were given as examples.Rollinghome wrote: »In some posts you suggested that 50% of a portfolio was spread between Arch Cru and Blackrock UK Abs Alpha (another terrible investment since your recommendation) while in others you suggested that 100% be put in those two funds.Rollinghome wrote: »A few reminders of what you said:
“I'll just try tempting you with stable looking investments to see if you bite and accept that those are worth having now... These two, for example:
BlackRock UK Absolute Alpha
CF Arch Cru Investment Portfolio (see more details).”
http://forums.moneysavingexpert.com/showpost.php?p=10413429&postcount=239
Posted 23-04-2008, 5:18 PM UK Abs Alpha price: 116.50 Latest: 125.50 Up 7.7%, a bit over 2.5% a year compounded.
I don't have prices for the Investment Portfolio, unfortunately.Rollinghome wrote: »
Posted 21-04-2008, 7:20 AM UK Abs Alpha price: 116.4 Latest: 125.50 Up 8.1%, about 2.7% a year compounded.
Here's all I wrote in that post:Rollinghome wrote: »You sometimes suggested investing in those two funds rather than pay off debt:
“And that expectation of more than 9% a year is why it's likely to beat overpaying the mortgage." http://forums.moneysavingexpert.com/showpost.php?p=10505563&postcount=12 “You rmortgage is cheap and you seem to have a decent pension so I'll say it's stocks and shares ISA time. The advantage of the ISA is that you have access to the full lump sum at any time, so it's good as a complement to the pension income. If you become a higher rate tax payer that would be the time to look at putting more money into the pension.
If you're unfamiliar with stocks and shares ISAs take a look at these investments that can be held in one to give you some idea of the range available:
30% BlackRock UK Absolute Alpha
20% Cru Investment Portfolio
20% Invesco Perpetual Monthly Income Plus
20% Invesco Perpetual Income
10% Neptune Global Equity
The first three are quite stable and invest in different ways while the last two are one of the most popular UK funds and a fairly aggressive global fund. The proportions are selected so that it's unlikely you'd lose capital over a year or more, but at the expense of substantially reduced long term growth potential. Still likely to be more than 9% a year though.
And that expectation of more than 9% a year is why it's likely to beat overpaying the mortgage.
This is just a place to get started - it's not really adequate long term, just something that's a fairly safe way to start out and show the benefit of combining different types of investment with different properties.
Note the explicit statement that these are examples of the range of funds available and that it's not adequate but is an example of how to combine investments.
Posted 27-04-2008, 10:34 AM prices:
30% BlackRock UK Absolute Alpha Price 116.4 Latest 125.5 up 7.82%
20% Cru Investment Portfolio Prices not available, about 55% used.
20% Invesco Perpetual Monthly Income Plus Price not available, 3 years +32.55% used
20% Invesco Perpetual Income Price 1698.51 Latest 1832.75 up 7.9%
10% Neptune Global Equity Price 297.1 Latest 309.7 up 4.24%
Overall result for the combination in proportions mentioned: up 1.86%. Not very dissimilar from tracker mortgage rates over the period.
What that shows is part of why diversification is useful, even though one of the funds is caught up in one of the more unpleasant fund controversies in the UK in recent years. In spite of that it still gained and did it with less volatility than the FTSE, which was one of the objectives.
Little to add to previous calculations covering posts at about the same time, though do note "No guarantees that these returns will continue" and "don't just use the 12% one".Rollinghome wrote: »Your expectation of more than 9% presumably. And again:
“Good plan but you might consider these in a stocks and shares ISA as well if you like the idea of predictability and 12% or 8.5% gains a year:
BlackRock UK Absolute Alpha, about 12% growth in the last year.
CF Arch Cru Investment Portfolio (see details), about 8.5% growth in the last year.”
http://forums.moneysavingexpert.com/showpost.php?p=10344553&postcount=227Rollinghome wrote: »In many other posts you suggested them as a wider p/f but still 50%:
“…those two examples are some of the best around… They don't lock you in but do provide nice stable growth.” https://forums.moneysavingexpert.com/discussion/comment/10337941#Comment_10337941
Around the same time as the other posts, also note "That's just an example to show you how you set the proportions of the different investments so that the stable growth ones mean you won't lose capital if the less stable ones lose all of their money (which is really unlikely - those examples are some of the best around)."
Well, none lost all of their money but notice how anyone who'd used that would still be up even after the Arch Cru scandal. What it did, which you don't seem to value, was protect against one of the key risks it was supposed to protect against: a major problem with one fund. Shame I used that fund but it shows what it was supposed to show: part of why you diversify.
You still seem to be missing the point from the last time we discussed this: the combinations of investments provided the protection that they were supposed to provide, through a major fund scandal and one of the worst drops in UK stock market history.Rollinghome wrote: »Despite your track record you still seem to be recommending investments which really isn’t a good idea.
My own investment performance is fine: my net spending on living is zero over the last few years because I've been more than covering my spending with gains. That's not the risk tolerance those combinations were intended for, though.
People are supposed to pay attention and do research. While I give examples, those are only examples.Rollinghome wrote: »What makes it dangerous on forums like these is that other people are liable to assume you understand these things and have done some research.
I picked the Arch Cru fund because it was at the time the only retail fund available that invested in the types of investments it said it was investing in, as part of deliberate diversification of types of investment. Seems you've forgotten or are ignoring the last time when we discussed this.Rollinghome wrote: »Clearly you hadn’t and appear to be very susceptible to industry hype and fashion investing. You seemed to be recommending those funds on recent performance alone without any real idea of where the returns were coming from.
I used the funds that were appropriate for my risk tolerance and investment needs at the times. That included three of the five mentioned. My own risk tolerance is high to speculative and the mixtures were intended for a far lower risk tolerance so it would be surprising if I used them all - it wouldn't be appropriate for me. I didn't use the one which has gained most or the one which has lost most.Rollinghome wrote: »I assume you invested in them yourself and weren’t repeatedly recommending funds you wouldn’t touch.
I also stopped mentioning the Arch Cru fund well before it had problems. I'm particularly unhappy with the cases I've seen here where an adviser used just the Arch Cru fund for hundreds of thousands of Pounds of investment, something that I don't think is appropriate.Rollinghome wrote: »Whereas as most experienced investors would have avoided those funds many like yourself were less sceptical and others bought on the advice of advisers.
Some also know that however good you are, you're never going to be right all of the time, so there will always be the opportunity to snipe at past posts where funds have been mentioned. That's sad but the sadness isn't providing examples, it's the people who resurrect three year old posts for sniping.Rollinghome wrote: »Some on this board quite possibly bought on the strength of your repeated recommendations. Which illustrates how difficult forecasting the next outperforming market or funds is. Those who believe otherwise tend to know the least.0 -
Finally, with regard to the figures I produced on IP High Income which darkpool queried below is an extract from one of my previous posts which I think is self explanatory:
"As it happened I had some figures for IP High Income calculated on a mid to mid basis net of annual management charges and all other fund expenses so I drew attention to them in order to advance the debate".
what does mid to mid mean? does it mean they have assumed that when they have reinvested income they have assumed a price between bid and offer? should they not really use the offer price? after all that's what the investors would pay?
t does nottheir distributions.
include any initial (sales) charge and
investors may be subject to tax on
i got this from IP. so the projections don't include initial fees? why would they not include initial fees?
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