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VLS80% plus what (if anything)?

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  • Ryan_Futuristics
    Ryan_Futuristics Posts: 795 Forumite
    edited 23 November 2014 at 6:51AM
    TheTracker wrote: »
    What % of your portfolio is allocated to this strategy? He says hoping there is no "religious like devotion".

    Well I've got my portfolio in two halves - one full of quality, defensively positioned dividend shares (today's 'no-brainer' funds)

    And the other value and growth shares (where I'm taking a longer view and managing more actively)

    I don't use the GVAL strategy - partly because we don't have the ETFs in the UK to do it cleanly, and partly because Faber's strategy is just an ETF indexing system - but I use the principle
  • masonic
    masonic Posts: 25,504 Forumite
    Part of the Furniture 10,000 Posts Photogenic Name Dropper
    So when you compare the US and Russia in absolute terms (CAPE of 25 vs 5) you're paying 5x more for the same cut of the same hypothetical business just because it's in the US (of course you're moving up the risk/reward ladder, but if you stay in overvalued equities, you can't avoid risk creeping up with you)
    I think it's important not to overlook the fact that investing in Russia is a very different proposition than investing in the US. Russian investors have to put up with a lot of additional risks such as corruption, poor corporate transparency and political risks. These are long term problems and are likely to have an impact on CAPE. So, for example, where CAPE in the US might typically move between 10-45, perhaps the normal range in Russia is between 2 and 10, so when both markets have a CAPE of 10, in fact Russia is terribly expensive, while the US is screamingly cheap. Those are just numbers plucked out of the air, but my point is different markets will behave differently. Historical CAPE ranges could therefore be quite important in putting the current value in context.
  • There's no silver bullet.
  • Well I've got my portfolio in two halves - one full of quality, defensively positioned dividend shares (today's 'no-brainer' funds)

    What funds are they bud?
  • masonic wrote: »
    I think it's important not to overlook the fact that investing in Russia is a very different proposition than investing in the US. Russian investors have to put up with a lot of additional risks such as corruption, poor corporate transparency and political risks. These are long term problems and are likely to have an impact on CAPE. So, for example, where CAPE in the US might typically move between 10-45, perhaps the normal range in Russia is between 2 and 10, so when both markets have a CAPE of 10, in fact Russia is terribly expensive, while the US is screamingly cheap. Those are just numbers plucked out of the air, but my point is different markets will behave differently. Historical CAPE ranges could therefore be quite important in putting the current value in context.

    Yeah, and if all things were equal, and the US were trading at a CAPE of 5, it would be the buying opportunity of the century

    Russia's average CAPE is around 7 point something (although there's not much history to go on because Russia's spent a long time under communism) ... But even if we use relative CAPE, Russia's reversion to mean involves a capital gain of around 50%, and a dividend of about 4.5% ... Still a much more attractive proposition than the US

    But then in a decade or two we may have a completely different world - with China occupying the spot the US are today, with much stronger ties with Russia, and Russia with a transparent and progressive government ... This kind of transformation is almost the norm with emerging markets (or you could ignore Russia and stick to countries like Italy and Brazil, which are also very cheap)
  • Catapult wrote: »
    What funds are they bud?

    For me, my picks are Woodford Equity Income and Murray International

    Two superstar managers, dividends around 4.1%, both positioned to perform well in uncertain markets, and managers with good track records of capital protection ... (And for a third, Newton Asian Income)

    The biggest risk (as I see it) is that they're too defensively positioned ... So if we got another 5 years of stimulus-led market growth, they could under-perform (but they'd probably come out on top when markets inevitably fall back down to earth)
  • Linton
    Linton Posts: 17,925 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Hung up my suit!
    For me, my picks are Woodford Equity Income and Murray International

    Two superstar managers, dividends around 4.1%, both positioned to perform well in uncertain markets, and managers with good track records of capital protection ... (And for a third, Newton Asian Income)

    The biggest risk (as I see it) is that they're too defensively positioned ... So if we got another 5 years of stimulus-led market growth, they could under-perform (but they'd probably come out on top when markets inevitably fall back down to earth)

    Looking at the investments.....

    Woodford
    82% UK, only been active for 5 months.

    Murray International
    27% EM, 24% Asia Pac, 19% Europe, 15% US, 12%UK

    Interesting allocation - it doesnt look very defensive. MI performance over the past 5 years is fairly close to the Global Equity Income sector average so not much evidence of superstar sparkle.

    Newton Asia Income
    Good 5 year performance. 95% Asia Pac

    So it looks like you have basically got a two pronged geographic strategy, UK and AsiaPac&EM (put together because many EM funds have significant AP).

    Interesting to hear your reasoning.
  • Linton wrote: »
    Looking at the investments.....

    Woodford
    82% UK, only been active for 5 months.

    Murray International
    27% EM, 24% Asia Pac, 19% Europe, 15% US, 12%UK

    Interesting allocation - it doesnt look very defensive. MI performance over the past 5 years is fairly close to the Global Equity Income sector average so not much evidence of superstar sparkle.

    Newton Asia Income
    Good 5 year performance. 95% Asia Pac

    So it looks like you have basically got a two pronged geographic strategy, UK and AsiaPac&EM (put together because many EM funds have significant AP).

    Interesting to hear your reasoning.

    Woodford's got a track record of 20+ years delivering an average 12% annualised (with Invesco High Income) ... If you're investing in fund managers, and the UK, it's a no-brainer

    Re: Murray ... I often say the biggest advantage of investment trusts is that the real drag on OEICs is this culture of tracking 1, 3 and 5-year performance, when we know the best investment strategies are long-horizon ... So look at Murray over 10 or 20 years (or 100 years) and its performance pulls away from indexes (which are much more cyclical)

    Murray International's geographical targeting could change overnight ... It's able to grow capital long-term by rotating assets very flexibly - so right now it's positioned to benefit from Asian and EM growth - next year it could be 50% US treasury bonds ... The reason I hold it is to hedge against myself (it's part of my portfolio run by someone else)

    It will be raining elks before VLS outperforms either of those over 10 years


    They're what you'd call defensive because they've got large allocations to defensive sectors, like healthcare and retail, they target giant companies with long track records, and they're dividend stocks (going into an environment where good fixed income is going to be very hard to come by)


    EM and Asia are the two sectors you want to be in over the next 10-20 years - it's no news that developed markets look overvalued with poor growth prospects - and UK large caps like AstraZeneca, Imperial Tobacco are set to benefit from growth in these regions (I'm not really invested in the UK's domestic market)
  • Linton
    Linton Posts: 17,925 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Hung up my suit!
    Woodford's got a track record of 20+ years delivering an average 12% annualised (with Invesco High Income) ... If you're investing in fund managers, and the UK, it's a no-brainer

    Re: Murray ... I often say the biggest advantage of investment trusts is that the real drag on OEICs is this culture of tracking 1, 3 and 5-year performance, when we know the best investment strategies are long-horizon ... So look at Murray over 10 or 20 years (or 100 years) and its performance pulls away from indexes (which are much more cyclical)

    Suggest you look in more detail at the long term Murray data. 1995- 2007 MI pretty well matched the sector and underperformed the FTSE100. 2009-now it also matched the sector. So I would guess that the fund made a good call right at the start of the credit crunch crash to avoid the banks. Almost all its outperformance happened during the 2007-2009 period. Does that tell us what will happen in the next 20 years?

    I suggest that star managers have a style which happens to be appropriate for particular states of the market, not that they can work wonders no matter what. My evidence is Andrew Bolton and China Special Situations.
  • Ryan_Futuristics
    Ryan_Futuristics Posts: 795 Forumite
    edited 23 November 2014 at 6:39PM
    This is what a good investment trust does long term - Murray vs FTSE 100

    mpeYMQH.png

    And this is just capital appreciation
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