H-L introduces a Tracker Platform Charge

principa

gadgetmind wrote: »

Because they add diversity to a portfolio. Under normal circumstances, equities and bonds are diversified so they don't bounce up and down together. This means that when equities go down, your bonds go up, and you rebalance by selling some bonds and buying some equities. When it all swings back, the same happens in reverse.
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Thanks (and dunstonh) - now I understand - but they do not return better than 100% equities in the long term do they?

(trying to decide between Lifestyle 100, 80 and 60)

dunstonh

principa wrote: »

Thanks (and dunstonh) - now I understand - but they do not return better than 100% equities in the long term do they?

(trying to decide between Lifestyle 100, 80 and 60)

In the long term no. you would not expect it. However, in the short term they can. Its more about risk balance. If you accept the high risk of full equity investment and dont want non-correlated or negatively correlated assets on the basis that returns over the long term will be lower then that is a decision for you to make.

In a very simple example, lets say you started 50/50 into bonds and equity. In 12 months it could be 60/40. So, you sell from the higher one and buy in the lower one. You are either selling from the one that has gone up the most or down the least and placing it into the one that has gone down the most or up the least. It allows you to sell high buy low in each other.

Ideally, you work that across each of the major sectors, including property and cash. So, its not a choice of two but a choice of around eight. i.e. UK equity, European, Asia, Japan, property , bonds, gilts, cash, commodities etc

black_taxi_2

new low cost tracker---you have too register before dec 12th

http://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/s/swip-ftse-all-share-index-swip-foundation-growth-accumulation

gadgetmind

principa wrote: »

Thanks (and dunstonh) - now I understand - but they do not return better than 100% equities in the long term do they?

For a simple portfolio with just bonds and equities, the lowest return is from 100% bonds. As you then start adding equities, the return goes up and counter-intuitively the volatility (a word I prefer to "risk") goes down slightly. As you add more equities, return goes up again, and you'll eventually end up back at the same volatility. For there, it's more volatility and return all the way.

Going the other way, adding bonds reduces volatility very quickly, but doesn't reduce return significantly until you start to get to 20-30%.

I'll look up some figures tonight, or you could buy your own copies of Smarter Investing and The Intelligent Asset Allocator.

Note you can also do dynamic rebalancing where you use guesswork, err, sorry, tools like p/e of the market and CAPE, to change your asset mix over time.

(trying to decide between Lifestyle 100, 80 and 60)

Remind me of your time scale?

I'm going for something based roughly around LS80 but with fewer bonds/gilts, more EM/FE exposure, more small caps and FTSE 250, and a bit of infrastructure. However, I'm perhaps unusual in that gilts scare me more than equities right now.

gadgetmind

black_taxi wrote: »

new low cost tracker---you have too register before dec 12th

That's to get in at the entry price, but with a tracker, who cares!

principa

dunstonh wrote: »

In the long term no. you would not expect it. However, in the short term they can. Its more about risk balance. If you accept the high risk of full equity investment and dont want non-correlated or negatively correlated assets on the basis that returns over the long term will be lower then that is a decision for you to make.

Ideally, you work that across each of the major sectors, including property and cash. So, its not a choice of two but a choice of around eight. i.e. UK equity, European, Asia, Japan, property , bonds, gilts, cash, commodities etc

Yes I thought so- my equity risk is simply balanced by the amount I offset my mortgage by. I suppose this offset subsumes all the low returning assets and therefore the Lifestyle 100 would be the best for my situation. thanks again.

black_taxi_2

Thanks to get in an the entry price, but with a tracker, who cares! ??????

gadgetmind

black_taxi wrote: »

Thanks to get in an the entry price, but with a tracker, who cares! ??????

Thanks, typos now fixed.

black_taxi_2

gadget not sure what your saying about the tracker?

good/bad?

gadgetmind

black_taxi wrote: »

gadget not sure what your saying about the tracker?

It's a low-TER FTSE All Share tracker. Only time will tell how well it tracks, but as there is no up-front charge to cover stamp duty, you'd expect it to slowly lag the index as there is nowhere else for this money to come from other than tracking error.

Long-term, I'd still go for Vanguard, but either LifeStrategy with HL due to their per-fund fee, or a selection of Vanguard trackers on (say) Bestinvest. The latter is only for those who will be putting enough into there for the £100+vat pa fee to be insignificant.

As for getting into the tracker at launch price, then I can't see the point.