Passive Investing

Mr_Curious

Again thanks all.

Plenty for me to start getting my teeth into!

Mr_Curious

Any advice available?

I've had a look at some low fee options and HSBC Gbl look to have some good offerings. (AMC of .25% and a rebate of .10% available)

My question is how I should plan on splitting up a portfolio, Not only between equities and gilts for example but what equities. For example what would a portfolio like below look like?:

HSBC American Index Ret Acc 15%
HSBC European Index Ret Acc 15%
HSBC FTSE All Share Idx Ret Acc 20%
HSBC Japan Index Ret Acc 10%
HSBC Pacific Index Ret Acc 10%
HSBC UK Gilt Index R Acc 30%

Again this is just a play around with low cost funds so any advice would again be welcome.

Thanks

wriggly

Mr_Curious wrote: »

Any advice available?

I've had a look at some low fee options and HSBC Gbl look to have some good offerings. (AMC of .25% and a rebate of .10% available)

My question is how I should plan on splitting up a portfolio, Not only between equities and gilts for example but what equities. For example what would a portfolio like below look like?:

HSBC American Index Ret Acc 15%
HSBC European Index Ret Acc 15%
HSBC FTSE All Share Idx Ret Acc 20%
HSBC Japan Index Ret Acc 10%
HSBC Pacific Index Ret Acc 10%
HSBC UK Gilt Index R Acc 30%

Again this is just a play around with low cost funds so any advice would again be welcome.

Thanks

The most important question is how much in shares vs how much in bonds. Your above allocation is 70%/30%, which is reasonable.

As to how much to allocate to any geographical region, best to spread it around in a fixed proportion - what you suggest is fine - and rebalance occasionally to keep the proportions the same. Don't be tempted to change the proportions because you believe a particular region will do really well/badly - that's not passive investing. See the Tim Hale book for reasons to avoid this.

The suggestion of Vanguard Life Strategy 80% was a good one. (Or VLS 60% for a more conservative approach). Either of these is a one-fund solution that provides a geographically diversified mix of shares and a fixed proportion of bonds at a super-cheap price.

However, I believe the HSBC funds you propose would be cheaper in your case, since investing in Vanguard funds usually entails some form of platform charge, and for £15,000, the platform charge increases costs significantly.

BLB53

My question is how I should plan on splitting up a portfolio, Not only between equities and gilts for example but what equities.

It may well depend on how long you are intending to invest. Tim Hale suggests putting 4% in equities for each year - so eg 20 yrs is 80% equities and the rest in bonds. Also, you may want to invest way past retirement as we are all living much longer (apparently) so don't just take investing up to 66 yrs - it may be more like 80yrs.

Here's a link to asset allocation on DIY Investor which may help? http://www.diyinvestoruk.blogspot.co.uk/2013/03/asset-allocation.html

The spread you have looks OK but you may want to reduce the percentage to gilts depending on time scale etc.

ccbrowning

wriggly wrote: »

<small snip>

The suggestion of Vanguard Life Strategy 80% was a good one. (Or VLS 60% for a more conservative approach). Either of these is a one-fund solution that provides a geographically diversified mix of shares and a fixed proportion of bonds at a super-cheap price.

However, I believe the HSBC funds you propose would be cheaper in your case, since investing in Vanguard funds usually entails some form of platform charge, and for £15,000, the platform charge increases costs significantly.

It does depend, though. Vanguard charges a monthly fee for most if not all index funds that are below something like .57% TER. HSBC charges a flat amount on your entire fund balance (if you invest via them at least), from May 2013:
The annual percentage rate for the Account Fee will be 0.39% per annum.

Mr_Curious

Any other thoughts from you passive investors out there?

brasso

Mr_Curious wrote: »

Any other thoughts from you passive investors out there?

15K is pushing it a bit for effective diversification, but you could go for 5 x 3K or 4 x 3.75K or 3 x 5K.

If it was me I might go for something like:

- Invesco Perpetual High Income
- Vanguard Lifestrategy 80%
- iShares Small Cap S&P 600 ETF
- A big China/Asia fund
- Troy Trojan

Troy Trojan is quite defensive, with a fair proportion of bonds and gilts, but it also has a broad geographical and asset-class spread. It's very steady and does well even during market downturns (i.e. it might well go down, but less than the market average).

These choices are not going to make you unexpectedly wealthy, as is possible if you gamble all on a single obscure share, but equally, they are very unlikely to put a big dent in your capital, and should keep pace with, or even outperform, the market. I have all of these in my SIPP, and they have been steady performers.

Perelandra

Mr_Curious wrote: »

Any advice available?

I've had a look at some low fee options and HSBC Gbl look to have some good offerings. (AMC of .25% and a rebate of .10% available)

My question is how I should plan on splitting up a portfolio, Not only between equities and gilts for example but what equities. For example what would a portfolio like below look like?:

HSBC American Index Ret Acc 15%
HSBC European Index Ret Acc 15%
HSBC FTSE All Share Idx Ret Acc 20%
HSBC Japan Index Ret Acc 10%
HSBC Pacific Index Ret Acc 10%
HSBC UK Gilt Index R Acc 30%

Again this is just a play around with low cost funds so any advice would again be welcome.

Thanks

I hold the first five of these in my ISA, but not the gilt one- I simply cannot bring myself to buy gilts at the current prices/yields (this is a personal decision, and certainly not advice!). My allocation to Japan and Pacific is slightly lower than yours, and slightly higher in the US, otherwise this is similar to mine.

One thing that may be missing from your choices is Emerging Markets- is there any reason why you've left this out? EM is a difficult one for me. I do invest passively, but EM is one area where I think there may be advantages to more active management.

Perelandra

brasso wrote: »

15K is pushing it a bit for effective diversification, but you could go for 5 x 3K or 4 x 3.75K or 3 x 5K.

If it was me I might go for something like:

- Invesco Perpetual High Income
- Vanguard Lifestrategy 80%
- iShares Small Cap S&P 600 ETF
- A big China/Asia fund
- Troy Trojan

IP High Income, Troy Trojan and (probably) the big China/Asia fund are actively managed, though, so not necessarily what the OP is looking for (since he specifically talked about passive investing).

But yes, they've done well.

Mr_Curious

Hi,

Thanks for the input.

The reason why I have suggested these funds is because of the low cost. Also regarding emerging markets, where would be a good suggestion for a low cost fund and what is the reasoning behind it? Obviously places like India and Brazil are said to be on the up?