Want 5% on £300k

uk1

jamesd wrote: »

uk1,
What other economic situation do you propose that could cause an investor in a broad range of funds, invested in many different countries, to lose all of their money, without also causing an investor in savings accounts to lose theirs?

An even better question for you then.

From the information you have gleaned from confusedsteve - how much of his retirement pot have you decided on his behalf that he can afford to lose?

jamesd

darkpool wrote: »

if i thought active fund managers avoided clangers like BP & banks i would consider the 3% annual fee worth it. But i've not seen any evidence that UTs etc were dumping BP a week before the oil leak. I've also not seen any evidence that active managers were dumping bank stocks a before the banking crisis.

The manager of the Invesco Perpetual Income fund is known for avoiding those sectors both before the banking crisis and now before BP. It's the sort of thing that someone who's really serious about using managed funds should be paying attention to, so they can use a different manager if they disagree.

darkpool wrote: »

If they had been selling who would they sell to? They'd be playing "pass the share parcel" with other financial institutions.

So? That doesn't matter to those who hold the fund that's getting it right, they are the winners in the game and the losers are likely to be the ones holding trackers, which have to hold those shares.

darkpool wrote: »

So it suggests active managers are trading at crazy levels.

Not sure they would agree about it being crazy, though I did see some funds with turnovers of over 600% a year that you'd probably hate. But the Financial Express data presumably covers all funds and their actual turnovers, so it's not likely to have as much in the way of errors as trying to project from the figures you used to funds as a whole.

darkpool wrote: »

be honest, do you think the term Total Expense Ratio is a misleading term?

Yes. It's clearly not the ratio of total expenses and like the "whole of market" term in financial advice it's fundamentally misleading in my opinion. I prefer to rely on final performance figures, which do have to include everything.

jamesd

uk1 wrote: »

From the information you have gleaned from confusedsteve - how much of his retirement pot have you decided on his behalf that he can afford to lose?

I've come to no conclusion about that. For a risk tolerance of low to medium I'd expect a maximum drawdown in the 15-20% range in a bad year for the pot as a whole. Part of the purpose of a risk tolerance is to pick one so that someone won't panic sell and lose their money during one of of those bad years, but will instead hold on and see the capital value recovering over the following years.

That's very different from what you did by selling at a good time, rather than after a big drop.

uk1

jamesd wrote: »

I've come to no conclusion about that. For a risk tolerance of low to medium I'd expect a maximum drawdown in the 15-20% range in a bad year for the pot as a whole. Part of the purpose of a risk tolerance is to pick one so that someone won't panic sell and lose their money during one of of those bad years, but will instead hold on and see the capital value recovering over the following years.

That's very different from what you did by selling at a good time, rather than after a big drop.

But you have presumed he can afford to lose money. You have suggested methods by which he can lose money.

You know that he has actually retired. You do not know what he means by medium risk. You presume you know what he means. All you actually know is what you mean by medium risk. You do not know whether he has other resources and income. You presume that he (and I for that matter) need to increase the pot. As it happens - I do not and so I see no reason to be greedy or take risks.

All I did was offer confusedsteve another philospical approach to thinking about his hard earned fund. I didn't suggest it was right for him and that you were wrong. I offered an alternative.

I think our exchange has now run it's course so by all means take the last word - you're welcome to it.

psychic_teabag

darkpool wrote: »

I've also not seen any evidence that active managers were dumping bank stocks a before the banking crisis. If they had been selling who would they sell to? They'd be playing "pass the share parcel" with other financial institutions.

Isn't that rather the point of trying to beat the market ? It's a zero-sum game, so in order to have winners, there have to be losers too.

Rollinghome

jamesd wrote: »

uk1, what method of investing in equities do you propose that could lose 100% of the money invested?

A third in Northern Rock, a third in Eurotunnel, and the rest in Railtrack would have just about done it.

Or putting the lot in the now defunct 'cautious managed' Arch Cru unit trust funds which someone on this forum recommended in over 20 posts would have been a good second best. http://www.guardian.co.uk/money/2010/feb/07/arch-cru

Now who was that?

jamesd

uk1 wrote: »

But you have presumed he can afford to lose money. You have suggested methods by which he can lose money.

I've presumed that he can accept a level of up and down movement, which he indicated in his risk tolerance and which is also indicated in the funds advised by his IFA. You suggested a way that was certain to lose money, as part of its design.

uk1 wrote: »

As it happens - I do not and so I see no reason to be greedy or take risks.

If he was to use the approach you suggested he'd be taking a substantial risk with inflation and guaranteeing a loss of capital. He's indicated that he's willing to accept the inflation risk, though.

uk1 wrote: »

All I did was offer confusedsteve another philospical approach to thinking about his hard earned fund. I didn't suggest it was right for him and that you were wrong. I offered an alternative.

It's an alternative that can be very good as part of what he does with the money. I mentioned some of the risks involved, just as you mentioned some risks (and some bogus risk) of funds.

Rollinghome wrote: »

A third in Northern Rock, a third in Eurotunnel, and the rest in Railtrack would have just about done it.

Or just one of them would have been sufficient for direct equity holdings. Was really writing about funds though and those are prohibited from having such a concentration.

Rollinghome wrote: »

Or putting the lot in the now defunct 'cautious managed' Arch Cru unit trust funds which someone on this forum recommended in over 20 posts would have been a good second best. http://www.guardian.co.uk/money/2010/feb/07/arch-cru

Now who was that?

Nobody here so far as I know. When writing about an IFA who had done that I wrote that it was reckless and irresponsible for an IFA to use just one investment for the hundreds of thousands involved.

But you're probably referring to some examples I used for how to build portfolios to manage risk, which used 20% of that fund. Last I saw it was expected to return something over 55% of the money and there hadn't been any public comment on whether fraud was involved or not, though the audit had completed. It didn't manage to come close to losing all of the money though - 55% or so is far more than 0%.

darkpool

psychic_teabag wrote: »

Isn't that rather the point of trying to beat the market ? It's a zero-sum game, so in order to have winners, there have to be losers too.

yeah i agree active management is similar to a zero sum game. however by the time you take into account charges it is zero game minus 3%.

of course some funds will beat the market, but i dare say luck has a bearing on this. i know someone that won money in the national lottery, but that doesn't make him skilled in the art of picking random numbers.

do the fund managers not close their poorly performing funds down? so that's why you only hear about the winners.

I see IP high income has 16% of it's holdings in Glaxo/ Astra - not exactly well diversified.

Aegis

darkpool wrote: »

I see IP high income has 16% of it's holdings in Glaxo/ Astra - not exactly well diversified.

Well enough to outperform the FTSE trackers by 9% (i.e. returning almost double) over a 5 year period.

As it happens, the manager likes pharmaceuticals because they represent good defensive non-cyclical shares with good dividends. Therefore he decided some time ago to go overweight in those, and it's worked out pretty well in the long run.

You should also consider that these funds are not supposed to be treated as fully formed portfolios for direct holding as 100% of your investment, therefore having high weightings towards one company is perfectly fine. Within my ISA, for example, where the IP High Income fund is held, Glaxo and Astra represent a combined total of 2.1% of my investment value. Not an awful lot really. My top 10 holdings include Oil & Gas, Healthcare, Telecoms, Technology, Mining and Consumer Goods sector companies spread across Brazil, Russia, Taiwan, Hong Kong and the UK. Between them, less than 10% of my wealth is tied up in those 10 companies, so it's safe to say that my fairly modest portfolio contains several hundred shares, making it considerably more diversified in terms of number of holdings than any personal share portfolio I've ever seen.

The cost of directly holding shares in proportion to my portfolio would be far too high for anyone without millions to invest.

darkpool

Invesco Perpetual, Schroders, Henderson, Scottish Widows and F&C have been named the worst performing fund managers in the industry.


Read more: http://www.thisismoney.co.uk/investing/article.html?in_article_id=505113&in_page_id=166#ixzz1PBzz0jtU

IP manage 37 funds. it is likely by chance alone one of those funds would perform well.

the paradox with active managment is that they say how well diversified their holdings are, but if they want to outrun the market they have to invest heavily in a few shares. your several hundred holdings means you effectively have a tracker?

you don't need millions to have a well diversified portfolio.