Significant money to invest.

guymo

KPLpard wrote: »

One product that grabbed me is a kick-out FTSE tracker. Max 6 years but if after 2 years it is at or above starting level it pasy ~8%. Capital only at risk if level goes beneath 50% of starting value (something that didnt even happen in 2008)

I don't think anyone has responded to this part of your post, so here's one response: products like this are usually poor value for money. From the investor's point of view, they are quite complex "bets" on the performance of the market whose true value is hard to see. That is what makes it possible for the provider to offer them and to profit from doing so. The provider sets up the product by purchasing various bonds and shares that will deliver the necessary returns and then some; the difference ("and then some") is their profit.

There's a slightly facetious article about these things on monevator which explains how to set up something similar for yourself:
http://monevator.com/guaranteed-equity-bond/

Linton

Bastiat wrote: »

I had a run with financial advisers provided by my employer for my pension. All you get is their very unbalanced generic allocation and the obvious tax wrapper like ISA and pensions. You are better off asking a monkey to allocate your funds. At least you can pay it with bananas.
Similarly with active funds you are just overpaying for leveraged beta.

If you just use an advisor provided by your company I would have thought they would be most unlikely to go into your detailed circumstances and objectives. It is only when these are defined and understood can an appropriate asset allocation between different asset classes be set up by someone with appropriate knowledge and experience. That is what you pay for with an IFA.

The decision to use an IFA is not too different from the decision as to whether to use a plumber. Why should you pay £40 call out for the plumber to fit a 20p washer in 10 minutes? If you know that's what is needed and have the right tools and the experience to do the job, why indeed. If you dont, doing it yourself could cost a lot more than £40.

Onto active/passive....

With passive funds you get the index (does it matter which index?). If that index meets your objectives, fine. Otherwise why buy it? What justification is there for buying the FTSE100 index? What does it actually invest in? A broad range of industries? - no. UK's major industries? - only partally. A motley collection of third world miners? - yes.

dunstonh

So you are suggesting that passive funds are the way forward?

You have to be careful of suggestions on the internet. That poster clearly has a bee in his bonnet about something and has a strong opinion. That doesnt mean he is right (or wrong). His opinion on what advisers do is wrong (sounds like its based on employer based adviser dealing with workplace schemes which is effectively adviser-lite and aimed at basic guidance more than full advice). So, are his views elsewhere wrong? Maybe, maybe not. This is what the internet is like.

The thing with investing is that it is about opinions. Only time will tell what is best. Some people focus on cost as their primary driver. Others focus on where they want to invest and how as their primary driver (with cost secondary).

Tracker is not the be all and end all and managed isnt either. Both have pros and cons and for many people with bespoke portfolios, you will find both managed and tracker funds in their holdings. A tracker fund is an investment strategy. There is little point using a managed fund with the same investment strategy as a tracker as the tracker will win. But what if you want a different strategy? What if you feel the economy is in a part of the cycle that makes you think value/special situations etc offers best potential. Or you feel you want a more defensive strategy. What if there is no tracker in that area, do you not invest in that area at all?

Nowadays the cost differences between managed and trackers is not as different as it once was. Trackers have largely lost their cross subsidy from managed funds in the unbundling of pricing via platforms. It used to be that you were talking about differences of 0.2% vs 1.8%. Now its more like 0.1x% vs 0.7%.

If you want to DIY then DIY. However, anyone telling you trackers are best is wrong. Anyone telling you managed funds are best are wrong. Anyone telling you cheapest is best is wrong. You need to retain a balanced viewpoint.

Bastiat

Linton, I strongly disagree with the notion that a financial adviser is like a plumber. A plumber has very demonstrable and objective skills. He either fixes the problem or he doesn't. The adviser on the other hand cannot demonstrate his skills because the results are so far out into the future. A financial advisor is more akeen to an astrologist or an economist.
Regarding passive funds no one is suggesting investing all in one index. You should have a diversified portfolio across asset classes. The academic research in favour of passive investing is overwhelming. Furthermore if you don't think you have the skills and time for stock picking what makes you think you can do better at fund manager picking?

lozzy1965

Hi, just skimmed through most of these posts. Lots about various funds, so here's an alternative:

First, off, max out the 'high interest' current accounts. That should be a safe emergency nest egg, and take care of about 30K or so, maybe more.
Now the alternative. With that amount of money, I would (and do) invest in individual shares. My opinion is that you can be very safe - in stock market terms - by going for top 100 and top 250 FTSE high yield shares. People will bring out stories of the 'safe shares' that have plumetted over the years, but there are many more that just plod on, churning out handsome dividends and growing slowly over time. For the novice, the trick is finding the consistent payers. I use these links for potential candidates:

http://www.topyields.nl/Top-dividend-yields-of-FTSE100.php
http://www.topyields.nl/Top-dividend-yields-of-FTSE250.php

Then I google each share I may be interested in suffixed with "digital look", I look for:
Last 5 years dividend percentage - want it to be consistent.
Next 2 years predicted dividend - consistent again.
Share price position with last year and last 5 years - is it on a downward trend, recovering from a fall, steady rise or fall?
Broker recommendations - recommended as a buy/sell/hold.

Then I have my potential buys I would buy at least 10 shares with 100K+, maybe 15 or 20. Maybe in tranches of 2-5 at a time when the price looks appealing. Watch share price movements before buying to get a feel for how they move.
Make sure you diversify into different companies and different market sectors. Maybe invest half your money to start with and see how it goes before committing it all.

Not sure I've covered everything there. Ended up as a bit of a brain dump I'm afraid, but it is an alternative to the other posts.
And as an aside, I do all this in my lunch hour at work.
Lastly, iWeb is a cheap dealing platform!

Hope this gives you some interest, and food for thought.

Your_Hero

Bastiat wrote: »

Linton, I strongly disagree with the notion that a financial adviser is like a plumber. A plumber has very demonstrable and objective skills. He either fixes the problem or he doesn't. The adviser on the other hand cannot demonstrate his skills because the results are so far out into the future. A financial advisor is more akeen to an astrologist or an economist.
Regarding passive funds no one is suggesting investing all in one index. You should have a diversified portfolio across asset classes.

Someone's clearly got the hump about financial advisers and your degrading comments are unwarranted.

The work an of adviser is not just results orientated, and if you think it is then you've mistaken by a mile. Advisers don't and can't guarantee results of any investments.

Applying your logic, I would conclude that a Teacher cannot demonstrate his/her skills either because the results of their students are also so far out in the future. Clearly this is wrong.

Furthermore if you don't think you have the skills and time for stock picking what makes you think you can do better at fund manager picking?

Individual stock picking is very different to choosing the right fund managers and you can't even compare the two.

Archi_Bald

Individual shares are inherently more risky than the spread you get with various funds. That is fine if this suits your risk profile but the majority of people have a much lower acceptance treshold.

Archi_Bald

Your_Hero wrote: »

Someone's clearly got the hump about financial advisers and your degrading comments are unwarranted.

It's just fine for people to stick out their necks and say an IFA isn't needed if you opt straight for passive investing. It is also fine to say there is no evidence that active investments outperform passive ones - because that is true.

All of you FAs and IFAs laying into people who have decided to DIY doesn't actually do the FA/IFA community a lot of favours.

samcrawford

One thing that may work for you would be to find an IFA that is willing to give you fixed-fee advice on an ongoing basis, but you manage the implementation yourself. I've done exactly this for a pretty large sum and have been happy with the results so far.

lozzy1965

I've a feeling we argue a lot about funds vs shares here

Archi_Bald wrote: »

Individual shares are inherently more risky than the spread you get with various funds. That is fine if this suits your risk profile but the majority of people have a much lower acceptance treshold.

Indivdual share picking can be very diverse, spanning form AIM - very risky - to FTSE100 - relatively safe. Fund picking can also cover a wide range of risk tollerance. However, you can get a relatively safe portfolio of shares if you have enough money to diversify. As the OP does.
You may say that 10 to 40 top 250 UK companies does not compare to the diversification from available funds in the world. I say, it's still pretty safe, and to buy and hold for many years, is a lot cheaper than paying a fund operator every single year, and the OP stated an interest in managing their own portfolio.
Funds are fine, individual shares are fine, that's my opinion of some of the differences.

And funnily enough, an IFA I saw said I had a very low risk tollerance