vanguard 40 vs 100

Eco_Miser

ggb1979 wrote: »

Off topic in my own thread but an interesting point; if 20% tax is taken off at point of acc dividends being 'paid' should i do anything to recover that deduction? (When fund is held in isa wrapper)

While your platform knows you hold the fund in a cash isa the fund manager doesnt so how does this deductiin get corrected (obvious answr i guess is that your platform does this for you but is that correct?)

Dividends aren't taxed - except for what higher-rate taxpayers pay through self-assessment on unwrapped shares/funds. For everyone else, the tax credit is purely notional, repaying the purely notional 10% tax notionally paid on the sum of the dividend and the notional tax.

It's done that way because there used to be real tax paid on the dividend by the company paying the dividend, and non-taxpayers could reclaim their share of that tax.

For interest paying investments 20% tax is deducted at source, but your ISA manager (the platform) will reclaim it for you.

Whether the reclaimed money is automatically reinvested, I don't know, as I've always taken the income.

Ryan_Futuristics

TheTracker wrote: »

What is the difference between "the views of the market" and "the market"?

If there is a difference, where can I find it quantified?

If it can be quantified, where can I see these historical "views of the market" to test them against "the market" at the time to establish whether "the views" held any utility at the time they were made?

If historical views were quantifiable, available, and able to be tested and shown to be accurate and profit making, then wouldn't "the market" follow those views and in effect become "the view" and they'd be one and the same?

Welcome to Logic 101.

Ahhhh I see. "The views" are by some superb fund managers who won't tell you what their view was until it's happened. Come give me your money I have "the view" for just 1%pa. If I'm right you'll make more money. If I'm wrong you'll make less money. But I made more money recently so I know "the view" more than others do. No, of course I can't guarantee "the view" is accurate, it's not always correct, other influences may disrupt "the view". What do you mean if I can't prove my view them you don't want to invest with me? You do realise Bob and Jane and Ryan invest with me and you like them. You read the newspapers and they wrote about me. Newspapers even know why the market went up or down the previous day so you know they are right. Do you think they'd have given me money if I didn't have a great idea of "the view of the market"? Do you think I'd have gotten where I am today if I didn't have "the view"? Don't believe me? Ask an IFA. They're independent. And advisors. Yes yes financial too. Do you think they'd advise to buy my fund if I didn't have "the view". What do you mean they like to convince themselves there is a "view" so that they can also pick up another 1%pa for telling you I have "the view". I'm done with you, all these passive investing vanguard semi-religious zealots are so negative. Just you watch. Just you watch.

I think the problem is you've taken an idea and you've kind of run with it a bit too far


"If historical views were quantifiable, available, and able to be tested and shown to be accurate and profit making, then wouldn't "the market" follow those views and in effect become "the view" and they'd be one and the same?"

It does ... Market data and market forecasts are the link between the deep fundamentals of a business (and by extension a whole economy) and the price it trades at ... Every day in the markets, new data is released - the IMF changes its growth forecasts, Deutsche Bank upgrades a stock to Buy, etc - and this is principally what moves the markets


Why doesn't the view become completely stable?

Because there are two forces at work ... On the one side, economists are very good at assessing risk and growth prospects (which is why the US trades at the valuations it does today)

On the other, when everyone reacts to the same data, it changes the data ... Say there are two ice cream vans looking for investment: one does 30% more trade than the other, and has better prospects ... Investors naturally pile into that one ... But as they do, the share of the business you get for your money gets smaller and smaller

At some point, it makes more sense to own a bigger piece of the smaller business ... And then of course when the popular ice cream van has a bad season, and there's a tidal wave of investment into the other (now it really does look cheap)


The real debate is whether it's better to go with the crowd or against it ... Passively investing in an index is a good strategy for this ... In the beach case, it would mean you invested in both businesses - you'd get the upside of the popular van when things were good (75% of your investment), and the surge of growth for the unloved one when things were bad (with a smaller share of your investment)

Over the long-term, an investment strategy like this would beat the herd (who just piled into the popular one)

But an equal-cap investment into both businesses would probably beat the cap-weighted index over a longer period (with more volatility) ... E.g. £100 in the FTSE 100 and £100 in the FTSE 250 would almost always beat a FTSE All Share over 10-15 years

None of this means any forecasts and risk assessments weren't accurate ... The difficult thing to predict is actually investor behaviour (which is the crux of why some people are raising the risk rating of bonds)

Mistermeaner

Eco_Miser wrote: »

For interest paying investments 20% tax is deducted at source, but your ISA manager (the platform) will reclaim it for you.

Whether the reclaimed money is automatically reinvested, I don't know, as I've always taken the income.

Id be really interested to see if someone can clarify and explain further the treatment of tax for dividends and interest in a multiasset acc fund held within an isa wrapper

Mistermeaner

Ryan_Futuristics wrote: »

The difficult thing to predict is actually investor behaviour (which is the crux of why some people are raising the risk rating of bonds)

For me this is a very important point; something, indeed anything, is only worth in monetary what someone is willing to pay for it - there are plenty of rational and logical ways to determine the value of something and often the human behaviour will follow the same logic as the rational value and thus things are sold for an appropriate price..... but lots of things are sold at a price that is irrational and bares no relation to what theyre actually worth.

I believe there is a strong possibility that because enough people believe bonds will drop in value / be difficult to sell in the event of interest rising that the prophecy will come true - regardless of the underlying fundamentals.

It is correct to say that noone has the right 'view' but i think you can tell to a point which 'views' alot of people hold and therefore predict their behaviour given a certain set of events.

Guess thats slipping into market timing territory?

Colours to mast my 2 main concerns for Q1/2 2015 is US equity falls and bond price falls. Where the money will go as it leaves these is anyones guess but my guess would be that the Uk will be vaguely ok and also the eu in general.

When i say guess that is in part based on what i read and learn on here but also on what i hope is a vaguely informed view on global economics and politics.

guymo

I think there is some exaggeration of the potential effect of investor behaviour on bond funds here.

Assuming we are talking about bonds for which default risk is and remains relatively low, there is only so far the price can drop. As the price drops, the yield rises, and at some point the bond becomes an extremely attractive instrument for generating income / preserving capital. Moreover, ignoring default risk, one can always hang on to a bond until it matures, so capital losses are never realised and the investor captures the maturity yield.

There is therefore a bit of a damping effect on the extent to which investors will exit their bond holdings en masse.

(Things are not quite so simple of course. In turbulent times, default risk goes up so bond prices can be adversely affected. In a bond fund, as opposed to the case of an actual bond, when investors sell units the fund manager is forced to sell bonds and realise losses. Nevertheless the main driving force behind the price will be the yield that the market demands.)

Ryan_Futuristics

ggb1979 wrote: »

For me this is a very important point; something, indeed anything, is only worth in monetary what someone is willing to pay for it - there are plenty of rational and logical ways to determine the value of something and often the human behaviour will follow the same logic as the rational value and thus things are sold for an appropriate price..... but lots of things are sold at a price that is irrational and bares no relation to what theyre actually worth.

I believe there is a strong possibility that because enough people believe bonds will drop in value / be difficult to sell in the event of interest rising that the prophecy will come true - regardless of the underlying fundamentals.

It is correct to say that noone has the right 'view' but i think you can tell to a point which 'views' alot of people hold and therefore predict their behaviour given a certain set of events.

Guess thats slipping into market timing territory?

Colours to mast my 2 main concerns for Q1/2 2015 is US equity falls and bond price falls. Where the money will go as it leaves these is anyones guess but my guess would be that the Uk will be vaguely ok and also the eu in general.

When i say guess that is in part based on what i read and learn on here but also on what i hope is a vaguely informed view on global economics and politics.

Yeah that's it - and in a sense, any investing decision you make will be somewhat time-dependent ... (People have gone too far with some of these ideas that markets run on pure unfathomable chaos and you should just keep your eyes closed)

The idea of predicting whether a market will rise or fall puts you in gambling territory ... But assessing risk and return against where the markets are, and what's likely to happen, is just sensible investing

I couldn't begin to predict the chances or extent of any negative impact on bond funds, but the 'worst case scenario' is now a slightly different proposition

In a sense what it comes down to is: Would I buy individual bonds now? And I think at current yields, with any risk of default, they just don't look attractive

guymo wrote: »

I think there is some exaggeration of the potential effect of investor behaviour on bond funds here.

Assuming we are talking about bonds for which default risk is and remains relatively low, there is only so far the price can drop. As the price drops, the yield rises, and at some point the bond becomes an extremely attractive instrument for generating income / preserving capital. Moreover, ignoring default risk, one can always hang on to a bond until it matures, so capital losses are never realised and the investor captures the maturity yield.

There is therefore a bit of a damping effect on the extent to which investors will exit their bond holdings en masse.

(Things are not quite so simple of course. In turbulent times, default risk goes up so bond prices can be adversely affected. In a bond fund, as opposed to the case of an actual bond, when investors sell units the fund manager is forced to sell bonds and realise losses. Nevertheless the main driving force behind the price will be the yield that the market demands.)

As you say, bond funds are a different beast to actually holding bonds ... If you don't mind the low yields, and think it's worth the default risk, a short-term bond ladder should be a relatively safe way to invest in bonds through a rising rates environment

But I just think with the way the media is these days, the prospect of any small move for the exits becoming a stampede, and a hundred funds all trying to offload at once, it's hard to predict what could happen to capital

I'm not expecting it - I think rates will go up so slowly, any effect on funds will probably be absorbed quite unnoticeably ... but ... every investment is risk vs return, and I'm just not sure (with individual bonds or funds) that the current risk vs return makes them an attractive investment

dunstonh

But I just think with the way the media is these days, the prospect of any small move for the exits becoming a stampede, and a hundred funds all trying to offload at once, it's hard to predict what could happen to capital

You mean the way it reports any increase as rocketing and any drop as plummet. Or how they say the "worst since records began" without mentioning that records only began say 15 years ago (saw that phrase used a lot during the credit crunch with measures that started after the mid 90s property crash and therefore had no period of decline recorded).

Some people read the headline not the content.

Ryan_Futuristics

dunstonh wrote: »

You mean the way it reports any increase as rocketing and any drop as plummet. Or how they say the "worst since records began" without mentioning that records only began say 15 years ago (saw that phrase used a lot during the credit crunch with measures that started after the mid 90s property crash and therefore had no period of decline recorded).

Some people read the headline not the content.

"Stocks soar after Scottish No vote" (I think they were up a point or so for a couple of days)

And I think the online journalism potentially amplifies the headline effect

The lifeblood of online journalism is ad-clicks, so now you get subeditors who know nothing about fact-checking or journalism, but who can attach big, dumb headlines to pieces which scare or shock us into clicking when we see them popping up on our social media feeds ... (and it's almost a rarity that any of the 100 comments underneath show any signs of having read the content)

DUS

dunstonh wrote: »

Also consider the L&G Multi-index funds which are similar in using passives but a wider range and will make active management decisions on the allocations and not fixed like some of the others.

I like the idea of active decisions on the allocations. Unfortunately, it seems HL do not offer the L&G multi-index funds.

Mistermeaner

They are available on charles stanley

I like the look of the '5' fund as a way of adding a bit of property and other diversity to a pot. Reckon I'll have a bit of that alongside the vls and woodford.

Bit of passive, bit of managed, bit of mix, all of the world and all of the asset classes (I think)

What could possibly go wrong