Vanguard Life Strategy

Linton

gadgetmind wrote: »

I also have my own equal cap income portfolio alongside, which is performing *very* well.

Ditto!!

Its a bit embarrassing when your income portfolio provides better capital growth than you long term growth portfolio!!

minimumcost

Linton wrote: »

At £1M I dont know 'cos I dont have a £1M portfolio. Perhaps pay a wealth manager.

Well there's the rub. I have $1m and when I talk to a wealth manager he wants to take a fair chunk of my wealth to tell me no more than I'm hearing from you good chaps.

black_taxi wrote: »

isn't the percentage of bonds you hold the real call

Not necessarily. All the theory assumes you retire on a certain date and need bond cover for the state the equity market on that day. But if you have a couple of years’ flexibility around the date it has a big impact on your risk capacity and your ability to be heavier in equity.

Incidently, if you do the numbers on index investing, as an average professional earner getting to £1m NPV by the time you retire is a slam dunk. My mother’s 84, an ex middle manager in the public sector and is still putting away money from her pension.

Linton wrote: »

Ditto!!

Its a bit embarrassing when your income portfolio provides better capital growth than you long term growth portfolio!!

But isn’t it the case that this strategy is subject to the black swan events so many people cannot avoid when markets crash?

black_taxi_2

My longterm

51%-equity
34%-bonds
15%-cash

ruperts

Linton wrote: »

I wouldnt touch a Global Small Caps Tracker.

Interesting one, I kept my EM in active but moved to the VG Global Small Cap tracker a while back.


And, well, against its actively managed competitors over 3 years it has done fine by me:


Vanguard Global Small-Cap Index Acc GBP 42.4
Schroder ISF Global Smaller Companies 39.8
McInroy & Wood Smaller Companies 39.4
Invesco Perp Global Smaller Companies Acc 36.6
Legg Mason Royce Global Smaller Companies 5.5


Short time-span of course but hardly looking repulsive.

black_taxi_2

Why has legg mason performed so badly

minimumcost

Because it's their turn.

gadgetmind

Linton wrote: »

Its a bit embarrassing when your income portfolio provides better capital growth than you long term growth portfolio!!

My growth portfolio is quirky (to say the least!) and has lost 50% of its value over the last 12 months (it's a bit, um, narrow) but is still beating my income portfolio over most sensible time frames.

My daughter has a similar portfolio but I sold most of her high p/e shares in 2010-2012 and put the money into NS&I linkers and bank preference shares. She now (unfortunately) maybe thinks that S&S is an easy way to turn a few groats into a 25% house deposit. I keep telling her I/we/she just got lucky, but it isn't taking.

minimumcost

gadgetmind wrote: »

My daughter has a similar portfolio but I sold most of her high p/e shares in 2010-2012 and put the money into NS&I linkers and bank preference shares. She now (unfortunately) maybe thinks that S&S is an easy way to turn a few groats into a 25% house deposit. I keep telling her I/we/she just got lucky, but it isn't taking.

Does this help... In the best years 60% of all active managers under perform their index. Funds that perform above their index have never managed to sustain this level of performance for more than a few, single digit years. No one has work out how to identify a high performing manager in advance. If you invest through a manager that is above average, due to ‘regression to the mean’ they’re more likely underperform in coming years.

Linton

minimumcost wrote: »

Does this help... In the best years 60% of all active managers under perform their index. Funds that perform above their index have never managed to sustain this level of performance for more than a few, single digit years. No one has work out how to identify a high performing manager in advance. If you invest through a manager that is above average, due to ‘regression to the mean’ they’re more likely underperform in coming years.

Highly contentious assertion.

1) I particularly question it in so far as it applies to specialist funds. In such areas there is usually no meaningful index. Specialist funds have certainly outperformed general indexes for sufficiently long periods for the investor to take great advantage. Look at Smaller Companies funds over the past 10 years.

2) Suggest you look at the Trustnet data. In a broad area such as UK All Companies you will find the FTSE Allshare trackers pretty near the middle of the performance charts even over lengthy time periods. If your assertion of 60% of managers failing to beat the index in even the best years was correct you would expect them to be rising well to the top.

3) You assume that any fund associated with an index is trying to do the same thing and is investing in the same companies. This is far from the case. You cant lump the poorly performing ethical funds along side something that can invest in anything. Some funds will deliberately sacrifice performance to achieve better consistency. Others will do the reverse. An investor should choose which is most appropriate for his objectives.

minimumcost

Linton wrote: »

Highly contentious assertion.

1) I particularly question it in so far as it applies to specialist funds. In such areas there is usually no meaningful index. Specialist funds have certainly outperformed general indexes for sufficiently long periods for the investor to take great advantage. Look at Smaller Companies funds over the past 10 years.

2) Suggest you look at the Trustnet data. In a broad area such as UK All Companies you will find the FTSE Allshare trackers pretty near the middle of the performance charts even over lengthy time periods. If your assertion of 60% of managers failing to beat the index in even the best years was correct you would expect them to be rising well to the top.

3) You assume that any fund associated with an index is trying to do the same thing and is investing in the same companies. This is far from the case. You cant lump the poorly performing ethical funds along side something that can invest in anything. Some funds will deliberately sacrifice performance to achieve better consistency. Others will do the reverse. An investor should choose which is most appropriate for his objectives.

1. OK over 10 years, but over all average investment lifecycle since WW2 and before they are similar, with small caps being depressed by higher trading costs. If you could predict a coming successful 10 year cycle and when to get out you'd be in the money.

2. The manager performance I refer to is their performance against the index their particular assets contribute to. Again over the average investors lifecycle asset classes even out. On occasion they die out 'cause they can't keep up (tulip bulbs). If they didn't all that 'efficient market' stuff they teach in business schools is nonsense. Google... "More than half of active funds underperform, study shows" article on Trustnet. I'm being kind at 60%. Mind you a lot of what they teach at business school IS nonsense.

3. You use an interesting choice of words 'fund associated with an index'. An index is a consequence of trading activity, so it might be more appropriate to say that an index is associated with a set of trades. As far as I know all mutual funds cite an index they contribute to with the trades the execute. Any and all trades on all the various stock markets are represented in some index. There is a ethical index and a small cap index. If you wanted to you could define your own index... all companies with a z in there names. Fact is the data says that active managers have to date under performed indexing for every average investor lifecycle in every asset class since records began.

Investor lifecycle is the key constraint. If you could pick a 1 to 5 year investment period in which you did all your investing, when the variance is high and that variance is positive you'd be OK, but you can't.