Independent Financial Advisers fees vs Novice Investor!

Ark_Welder

Apologies. I missed out RICA: TER 1.25%

http://www.ruffer.co.uk/cmsfiles/reports/RIC-Annual-Accounts-30-06-11.pdf


So in answer to answer your own question

gadgetmind wrote: »

People need to ensure that their TER+platform comes to way less than 0.5% pa.

Why on earth would someone pay more than this?

and combined with the TERs for the other funds mentioned, you may be you might be able to provide your own answer.

gadgetmind wrote: »

I bought a *lot* of PNL and Trojan back in April, and also a fair whack of RIT and Ruffer. The latter two have held up reasonably well, but PNL/Trojan has performed exactly the job I asked of it, which was to hold/gain value through torrid times.

gadgetmind

Linton wrote: »

"we find that the majority of funds (75.4%) pick stocks well enough to cover their trading costs and other expenses, producing a zero alpha, consistent with the equilibrium model of Berk and Green (2004)."

"Most actively managed funds provide either positive or zero net-of-expense alphas, putting them at least on par with passive funds."

So, 75% have an alpha of around zero, and the rest presumably don't even manage that. How do you avoid picking one of the rest? I guess you could buy a selection of funds in each sector, but wouldn't that end up being an expensive "closet tracker"?

Ark_Welder

gadgetmind wrote: »

Golly, you just happen to choose one of the best performing ITs of the last decade, wasn't that lucky!

No. Quite deliberate.

gadgetmind

Ark_Welder wrote: »

and combined with the TERs for the other funds mentioned, you may be you might be able to provide your own answer.

I've always admitted to being conflicted when it comes to Investment Trusts, particularly those with a capital preservation remit. I'm using them to provide diversity and to act as a fixed income analogue in my portfolio because (to be frank) most bonds and gilts scare me at the moment.

I've also been frank and honest about the fact that I hold some UTs/OEICs, but (along with the ITs) these are slowly being sold down as I increasingly go passive.

Ark_Welder

gadgetmind wrote: »

I've always admitted to being conflicted when it comes to Investment Trusts, particularly those with a capital preservation remit. I'm using them to provide diversity and to act as a fixed income analogue in my portfolio because (to be frank) most bonds and gilts scare me at the moment.

I've also been frank and honest about the fact that I hold some UTs/OEICs, but (along with the ITs) these are slowly being sold down as I increasingly go passive.

Simply because you have decided that going passive is the right thing for you to do, it does not automatically imply that it is right way for everyone else to go.

You may want to avoid infrastructure funds with what you have said.

gadgetmind

Ark_Welder wrote: »

No. Quite deliberate.

In different times, even PNL/Trojan (which I love and hold as both IT and OEIC), would have lagged the index due to its cautious stance.

Who knows what the future will bring? I certainly don't, so I'm going to use a combination of 80% global/UK equities and 20% "something" to reduce volatility. This something is traditionally bonds, but my savings on the equities mean I can afford the TER to get a trifle more adventurous here, and I'm seriously considering going 50:50 between bonds and ITs such as PNL, RCP, RICA and HICL/3IN.

Does this make me a bad person, and somehow a traitor to the tracker faith? Maybe, but I do trust these ITs not to do stupid things in the name of chasing short-term gain, which is more than you can say of the vast majority of active managers.

Lokolo

gadgetmind wrote: »

And a picture can speak a thousand words.



Of course, that's the average of all UK Equity Income UTs, and some will have done better than the tracker, but that also means that many will have done worse. How do we choose a good one? Or maybe we buy a few different ones just to be sure ...

I can't see the picture sorry. However, you are looking at UK Equity Income UTs. Yet you haven't asked me whether I think I should go for a managed fund or a tracker in this area....?

Same for your picture later on (although I can't actually see it but I can assume what it shows!) UK equity all income.

You seem to be falling into the trap of saying "Never go for a managed fund." which is naiive, come on, you can do better than that. Trackers ARE good for some areas, I am not denying that, but managed funds ARE better in other areas. Just because you have found 2 areas (both UK) whereby trackers are better, doesn't mean it's the same across the board does it?

gadgetmind

Lokolo wrote: »

You seem to be falling into the trap of saying "Never go for a managed fund."

What I said was that core (trackers) and satellite (which could also be trackers, but could also be ITs and/or UTs) is a perfectly valid approach.

managed funds ARE better in other areas.

I'm inclined to accept that they can be better for smaller companies (particularly private equity), high income, and capital preservation, but the difficult is (as ever) knowing which actively managed fund to choose as today's star has a strong chance of turning into tomorrow's dog. Pick too few, and all your money could be on a dog, pick too many, and you'll get a high-TER tracker.

Linton

gadgetmind wrote: »

....
Maybe, but I do trust these ITs not to do stupid things in the name of chasing short-term gain, which is more than you can say of the vast majority of active managers.

I thought you were the one demanding evidence. But then you make these wild statements.

You trust the FTSE 100 index not to do stupid things because of short term gain? Remember the tech bubble? Do you really believe the inherent long term value of the world's economy has halved and doubled twice in the past 11 years and if you adjust for UK inflation is less than it was in 1995?

The FTSE 100 index is largely determined by the collective actions of large traders interested in short term gains in the somewhat arbitrary list of shares that happen to be quoted on the LSE. Almost by definition people with a long term viewpoint dont trade frequently and so dont enter the price setting mechanism.

Lokolo

gadgetmind wrote: »

I'm inclined to accept that they can be better for smaller companies (particularly private equity), high income, and capital preservation, but the difficult is (as ever) knowing which actively managed fund to choose as today's star has a strong chance of turning into tomorrow's dog. Pick too few, and all your money could be on a dog, pick too many, and you'll get a high-TER tracker.

Now that's more of a reponse I was originally expecting