Pension pot fund opinions

bigfreddiel

fuelcrusher wrote: »

I have got hold of the Tim Hale book so will make a start there.

good choice and you should read:

The Coffeehouse Investor: How to Build Wealth, Ignore Wall Street, and Get On with Your Life

and also

The Little Book of Commonsense Investing by John Bogle

John Bogle runs the Vanguard Investments and the simple way into a balanced portfolio is via their Lifestrategy funds - the 60% one would be ideal for you

In a nutshell a balanced portfolio consists of equities and bonds

they are at either end of the risk spectrum - equities high risk high return-bonds low risk low return

the longer you can stay in the market the more risk you can take on

in fact adding bonds to your equity portfolio can increase your annual return.

so 60% equities and 40% bonds/gilts will give you a good return 10%+ which over many years will work well

final point cut your costs - use trackers or ETFs -exchange traded funds

funds can cost you 2%/annum - you can see that if they only return 4-5% then inreality it's only 2-3% - again over many years this will add up to tens of thousands paid over to the fund managers

trackers and etfs cost between 0.1-0.5% that is one tenth to one half of a percent

also checkout the monevator site for their lazy portfolios

and my final tip a portfolo of 4 or 5 trackers/etfs will perform just as well as a more complex one of 10-12 funds and be cheaper as well

my simple 4 etf portfolio is up 7.5% in six months but there again so would any portfolio - equities are racing up

hope that helps

fj

jamesd

The UK is only about 8% of global equity markets so you seem very overweight in the UK compared to its general significance. It's probably not the place where there will be most growth in future years. That implies benefit from replacing some of the 60:40 fund with a global fund with no UK component, or perhaps to one with a much lower UK part.

There seems to be minimal emerging markets presence there, just a tiny bit possibly in a global fund. 15-20% or so in this area would be roughly in keeping with your age. This will significantly increase volatility.

Not a lot of smaller companies either and those tend to do better than large ones, at the cost of more volatility. Like emerging markets this is an area where active management is more suitable than passive trackers.

In equities you seem to have largely holdings where the amount in each company is weighted just by how big the company is (its market cap), even though this is known not to be the best way to run an index fund, with approaches like weighting by dividends (equity income funds, say) or by profits expected to out-perform pure cap-weighted indexes. There's a fairly limited selection of tracker funds that use non-cap indexes in the UK so to get such exposure you'll probably have to use managed funds, which is also likely just because of the place where you're holding our investments at the moment.

Of possible concern with your global fund holdings are their fairly high US weighting, over 55% generally in a global tracker. The US markets are at quite high valuations compared to their historic averages at the moment and that implies in turn that it's not the best of times to be buying more there and that some reduction in weight in the US would be a good idea compared to your long term target. Similar for the UK that is also at quite high valuations. The opposite for Europe and to some extent Japan, while emerging markets have not shared in recent growth in equity markets, so might be worth some extra weight. You might consider reducing the global holding and adding some regional ones for say Europe, Asia, Latin America and emerging markets to boost the relative proportion of those less peaky areas in the mixture.

Natural resources (metals, minerals) has been an area that's suffered over the last 18 months or so as hopes of global recovery faded. Prices in this area for funds have dropped back to their 2009 sort of level and that makes this an area that's perhaps worth investigating, maybe with the Investec Enhanced Natural Resources fund if it's available to you.

Don't pay excessive attention to cutting costs, maximising performance can gain you more than cost cutting, though a good global tracker fund is an excellent core choice.

It's unlikely that a portfolio of a few trackers will match or out-perform more funds because it's not really possible to adequately cover all the desired areas with so few funds.

A 60% equities and 40% bonds mixture is a poor choice at the moment because of the run-up in bond prices that currently makes buying them bad value. Long term it's OK but now's a poorer time to be buying those than selling them. Good to increase the proportion after prices have fallen back a bit. Commercial property is a decent alternative to bonds/gilts at the moment, it hasn't had a similar long increase in value so there's no need to be concerned about it being in bubble territory, as there is with higher qualify bonds/gilts.

grey_gym_sock

assuming that "FL BlackRock Lg Tm (60:40) Idx (Aq HP)" means this fund - http://www.trustnet.com/Factsheets/Factsheet.aspx?fundCode=LMF64 - then it's 100% equities, of which 60% is UK, and the rest split equally 3 ways among USA, europe ex-UK, and asia (with asia split half in japan, half in the rest).

60% UK does seem a bit excessive to me. the other 40% is quite a good spread over the rest of the world, though. big equities in UK and rest of the world are quite highly correlated with 1 another anyway, so i wouldn't worry too much about the high UK weighting.

it is all big companies, though, and adding smaller companies or emerging markets would give more diversification. it would also dilute the UK weighting (unless adding UK smaller companies - though that would also diversify). big companies are fine as the core of equity holdings, but adding a few side-orders can improve returns while also spreading your bets a bit.

Sobryma

Interested in this post as I may be about to move from a final salary scheme to Friends Life DC scheme a New Generation plan I believe. The fund list I've seen isn't actually that extensive (70 or so) and you can only hold a maximum of 10 but does include some 'star funds' and our proposed plan is very cheap.

I am looking at Blackrock Market Advantage which I think is quite an interesting fund attempting to gain equity style returns with lower volatility - I am also considering Investec Cautious and Std Life GARS.

You might also have a SIPP option, we are to have one with Selftrade. I am pondering this route but not bowled over by Selftrade, with a £100k our proposed plan would allow full discretionary management by Barclays. This is obviously expensive but if you are uncertain it might be a good route to get to an asset mix you happy with.

I would recommend the Tim Hales book, a very good and compelling read; however my main pension is discretionary managed by Bestinvest..........simply as its really important and discretionary managed stops me messing with it.