Investment Bug

dunstonh

I have read in several paper now that cash heavy people (who rely on high interest rates to supplement their income) like myself are now turning to Equity income in absence of a good return on cash savings.

Yes. It is a concern with the regulator/ombudsman that this is happening and where people don't understand the jump in risk they are taking.

In comparison - VLS 60% against IP HI - IP HI has outperformed in growth but more importantly to me Yeild

That is like comparing a banana with an orange. You cannot compare these funds like that because they are very different. One is designed to be held by itself as it is a portfolio fund. The other is designed to be held in conjunction with other single sector funds in a portfolio with weightings that match your investment strategy and risk profile.

A_Flock_Of_Sheep

I have been wondering that. I mean why do they exist. What type of investor holds them and for what reasons. Neil Woodford has significant sums of cash entrusted to him by investors in his IP HI fund. So people are clearly risk takers.

Seems to me if one doesn't hold the Vanguard life strategy then it's most unusual. I guess I am not as adversed to risk as some people.

grizzly1911

A_Flock_Of_Sheep wrote: »

I have been wondering that. I mean why do they exist. What type of investor holds them and for what reasons. Neil Woodford has significant sums of cash entrusted to him by investors in his IP HI fund. So people are clearly risk takers.

Seems to me if one doesn't hold the Vanguard life strategy then it's most unusual. I guess I am not as adversed to risk as some people.

You are not alone in not holding it as long as you do know the risks.

It is a useful tool there are others. Cats and skinning come to mind.

Don't forget it isn't Woodford's money but ours. A bit like saying Osbourne is spending his money rather than ours.

redbuzzard

noah_herman wrote: »

Hi,
Is there any strategy to have this kind of Funds choice.?

I'm slightly concerned that the strategy is to find funds that have done very well for 3-4 years (since 2009 basically) and buy them in the hope that they continue to be top performers. That's not a great way to choose even if you get the allocations and the risk level right.

My other concern is treating equity investments like a savings account. The idea (as stated) is to make exceptional returns when available, monitor closely, and sell if and when the market turns.

If it was that easy I would have retired years ago.

At what point do you sell? If the OP had sold at a loss in April, when would he have gone back in? At a higher price than he sold at? He didn't sell, but stayed with it and is £1200 up (probably £1300 now).

So if his funds drop on average 2% this week, what does he do? He can't sell every time there is a 2% drop or he will have no money left in a few years. Does he sell at -4%? Maybe he'd better, because he was only 6% up to start with. But if he keeps repeating that exercise he will lose 2/3 of market gains unless he can buy back cheaper.

But let's say he sells anyway, and banks his 2% gain. Say that the market then drops another 4%, and steadies for a day or two, maybe even rises 1/2% or so. Does he buy back in? It might drop another 4%. So maybe he doesn't - but then it could go up?

Need I go on? Lots of people here will have tried this sort of thing and it's a nightmare.

Unless you are exceptionally gifted, lucky or well informed, and even then I wouldn't recommend it, you have to decide whether you are a trader watching the screens with his finger on the trigger, or an investor who is willing to make his choices on a rational basis and make minimal adjustments, mainly rebalancing.

If you decide to be a trader, don't use funds that price once a day where you have to place your order at today's price and execute at tomorrow's.

The cycle is always the same. Investors pile in after the market has had a period of rapid rises, and is nearer the top than the bottom. They hope it will continue long enough to make some money before it turns, when they will sell. It doesn't work. Not for long anyway.

I was going to look for a quote from Smarter Investing, but I can't remember who I lent it to - here's a reference to it in a "Fool" article.

"Time and again, for instance, research shows that private investors pile into a fund or share at a price point that's too high, and then get out at a price point that's too low.
A 2007 study of UK investors over the period 1992-2003, for example, found that as a result of such money‑losing decisions, investors' returns were around two percentage points a year lower than the funds that they were invested in -- a difference in performance that equated to around half the premium for owning equities over cash.
Similarly, as investment author Tim Hale pointed out in Smarter Investing, during the period 1984-2002 -- a bull market when the equity markets turned $100 of spending power into $500 -- private investors succeeded in turning that same $100 into just $90."

I'm not trying to win an argument, or have a go at the OP - I am just concerned that he might have embarked on a risky expedition.

redbuzzard

A_Flock_Of_Sheep wrote: »

I have been wondering that. I mean why do they exist. What type of investor holds them and for what reasons. Neil Woodford has significant sums of cash entrusted to him by investors in his IP HI fund. So people are clearly risk takers.

I have some IP Income. Why? Very simple, I hope for returns close to the FTSE with lower volatility. As the market has risen I have reduced the pure index funds and increased the equity income, mixed funds and AR/flexible style funds (GARS, Newton Real Return, Troy Trojan).

What I want is to be able to stay in the markets overall through ups and downs. I am prepared to trade off some return for lower volatility when the market looks nearer the top than the bottom.

That's not a very theoretically based approach (though it's not unusual for professionally advised pension trustees to so something similar when equities perform better than planned, moving into bonds) so I'm not suggesting anybody copies it.

dunstonh

Seems to me if one doesn't hold the Vanguard life strategy then it's most unusual.

Quite the opposite.

I have been wondering that. I mean why do they exist.

For people that have their own investment portfolio following their chosen sector allocation suited to their risk profile. Vanguard 60% LS is a good enough fund for what it is but it doesnt have full diversification of a typical sector allocated portfolio (only the LS80% does) and many people prefer to mix and match the individual funds rather than having a fettered fund. An unfettered fund is an alternative solution but these are frequently quite expensive.

If you were to invest 100% in Inv Perp High Income then that would be poor quality investing. However, if you wanted 100% of your sector allocation for the UK to be in Inv Perp High Income then that would be fine.

A_Flock_Of_Sheep

Ok so I have obviously made a pigs ear of my choices. So my aim is for income and growth of money invested for income. Recommendations for this objective would be appreciated.

IronWolf

There has definitely been a trend towards amateur investing lately. I am not at all against DIY investing, but think too many people over-simplify what is a complex and time consuming endeavor.

I cringe when I see people say they buy things like GSK because its dividend is 3% and 'it beats a savings account'. The question isnt about does it beat savings, it definitely should because its a lot more risky, the question is by how much should it beat a savings account. If you overpay a fall of 20% is easily possible and how many years of 3% dividends does it take to make back that?

Rule number 1 of investing: Dont lose money
Rule number 2: dont forget the first rule.

A_Flock_Of_Sheep

IronWolf wrote: »

There has definitely been a trend towards amateur investing lately. I am not at all against DIY investing, but think too many people over-simplify what is a complex and time consuming endeavor.

I cringe when I see people say they buy things like GSK because its dividend is 3% and 'it beats a savings account'. The question isnt about does it beat savings, it definitely should because its a lot more risky, the question is by how much should it beat a savings account. If you overpay a fall of 20% is easily possible and how many years of 3% dividends does it take to make back that?

Rule number 1 of investing: Dont lose money
Rule number 2: dont forget the first rule.

I would be interested to see what funds/shares/bonds etc people here are investing in with values invested and investment goals.

Anyone care to set the ball rolling?

socrates

A_Flock_Of_Sheep wrote: »

I would be interested to see what funds/shares/bonds etc people here are investing in with values invested and investment goals.

Anyone care to set the ball rolling?

Now you are looking for free advice - that is not going to happen on here (I found that out myself a while back)

You need to decide if you are looking for income or growth or even a combination of both

What period of time you are looking to invest for

You need to decide your 'risk level'

Personally I have a 15 year plan so all my investments are slowly moving that way - I am looking at growth accumulation

I am also a passive investor so I admit to liking the Vanguard Products and one thing that convinced me about them was when I spoke to an American guy I met on holiday who was an IFA.

His goals were similar to mine - however his retirement was 10 years away (or when he wanted to retire)

In America they have specific Vanguard Retirement Funds split up in years - they do not exist over here

My Vanguard funds have all made around 12.5% (before costs) on a regular basis and thats good enough for me

I have other funds that have made 35% but that was more luck than any skill on my behalf

You really need to tell everyone more about your goals