New to investing - Robbins Money - Master The Game - How to apply in the UK?

Malthusian

In addition to the investment recommendations - 15% is too much to have in commodities. Especially with half in one single commodity of limited practical use.

Depending on your outlook you may feel that commodities are worth a punt given recent falls (in any given year they are usually either one of the best asset classes to invest in or the absolute worst) but 15% is too much unless you are a pure speculator.

To be brutally honest it is an awful portfolio, to put 15% into commodities you would have to be a highly risk-seeking investor, and if you are a highly risk-seeking investor it doesn't make sense to have only 30% of your portfolio invested in equities, especially in the current economic climate.

redux

Actually, I would say HL isn't bad for some circumstances.

Two investment trust managers were closing down their own admin schemes, and both had made an arrangement with HL, though you could choose anywhere else. So I looked around ...

For investment trusts and other shares outside an ISA HL has no annual charge, so for me for the time being it looks like just over £3 a year fees for reinvestment of dividends

Their one off dealing charge is higher than some rivals, but some charge 2% rather than 1% for dividend reinvestment, or a minimum or flat fee, or don't do it, then some have annual fees, so a decision which platform can rest on the likely amounts invested and how often

TheTracker

Malthusian wrote: »

If 90% of fund managers are underperforming, they must be deliberately looking for shares that they know will do badly. 90% is far beyond what could be ascribed to randomness. Why would they do this - especially given that the better they do, the more their 0.75%pa is worth? So they can twirl their moustaches and laugh about how they're screwing over the mugs that haven't read Robbins' book?

Actually 90% isn't too far of the mark, especially when you look across multi year periods and in the US. The US Spiva Scorecards are probably the source of such claims. For example according to them in 2014 87% of active funds underperformed the all domestic benchmark indices. On some measures it was 90%+. You can find the reports online. They report on other markets too, like India and Australia, and once again you find between 55% and 85% underperformance even in short periods. Of course, the index tracker is the sum of all these against the assets under management, but apparently there are a lot of poor performing smaller funds out there that skew what the "average fund" achieves versus "the average invested dollar". Oh, and fees, man, fees.

As a passive tracker I don't really give much credit to such scorecards. It doesn't matter if 25% or 75% or 5% or 95% beat the index. The average index tracker does slightly better than the average monetary unit under active management, and over a ten year period the vast majority of funds will underperform a buy and hold portfolio of index trackers. Fact.

Froggitt

90% underperform because even if the find rises by 5%, they take say 1%, meaning you're paying them 20% of the increase in value. A tracker that rises 5%, they take say 0.25%.

All those fees compounded over say 10 years, few funds beat a tracker.

Linton

TheTracker wrote: »

....
The average index tracker does slightly better than the average monetary unit under active management......Fact.

Here we go again!!!

Non fact. It depends on the sector. Many sectors dont have viable index funds. Looking at those that do, for the US where most of the research is done it is fact. A passive fund makes sense there. For Europe ex UK it isnt fact. Look at the highest Europe ETF and compare it with the IA Index Europe Small Companies sector returns (which one can take to be the the average of all funds in that sector). The fund index beats the best ETF for each of the standard 3,5 and 10 year periods. For 1 year it is only beaten by a couple of ETFs specialing investing in Futures. There are plenty of other examples.

A suggestion - please can we keep evangelical passive advocacy or evangelical advocacy of any other focussed investing style away from most of the threads. It seems a shame that so many seem to get diverted.

Malthusian

Look at the highest Europe ETF and compare it with the IA Index Europe Small Companies sector returns (which one can take to be the the average of all funds in that sector). The fund index beats the best ETF for each of the standard 3,5 and 10 year periods.

Perhaps your post is missing a few words but of course the average European Small Companies fund is going to beat a European (presumably all companies) ETF. Smaller companies are supposed to give higher returns (and higher risk), if the average smaller companies fund hadn't managed to beat an all-companies index in the long term then something would be seriously wrong.

The IA sector indices are also distorted by the fact that underperforming funds are regularly closed and merged into other funds, which removes them from the record. This means Investment Association indices consistently appear higher than the stockmarket index because the people unfortunate enough to invest in funds that underperformed the index are erased from history.

Max_Antax

I’ve read the 90% claim in a book (How to build a Share Portfolio) by Rodney Hobson, who seems a decent bloke.

He says that they have compared performance of share portfolios picked at random (using such techniques as throwing darts to the listing pages of the FT) with the performance of investment funds.

The 90% underperformance is calculated after manager’s fees are taken into account. It’s important to note that “underperformance” doesn’t mean “losing money” but “making less money”.

Hobson conclusion was that, on the basis of the available evidence, paying fees to some expert to pick shares for you does not return value for money.

Max_Antax

I’ve read the 90% claim in a book (How to build a Share Portfolio) by Rodney Hobson, who seems a decent bloke.

He says that they have compared performance of share portfolios picked at random (using such techniques as throwing darts to the listing pages of the FT) with the performance of investment funds.

The 90% underperformance is calculated after manager’s fees are taken into account. It’s important to note that “underperformance” doesn’t mean “losing money” but “making less money”.

Hobson conclusion was that, on the basis of the available evidence, paying fees to some expert to pick shares for you does not return value for money.

dunstonh

I’ve read the 90% claim in a book (How to build a Share Portfolio) by Rodney Hobson, who seems a decent bloke.

Do not mistake US based data with UK. In the US, its virtually impossible for a managed fund to beat a tracker due to taxation. That taxation issue does not exist in the UK.

If you look at discrete annual performance (UK), you tend to find trackers are mid table. They are typically consistently mid table. Exceptions will be focused trackers which can be more volatile in a general sector.

Consistency will mean that over time, the cumulative performance will see the trackers rise from mid table. So, when researching where you want to invest, you need to think about managed funds that offer increased potential and eliminate the ones that are no good (which is a lot of them). However, to eliminate every managed fund because it is managed is just silly. Picking the best from both is far more sensible.

Linton

Malthusian wrote: »

Perhaps your post is missing a few words but of course the average European Small Companies fund is going to beat a European (presumably all companies) ETF. Smaller companies are supposed to give higher returns (and higher risk), if the average smaller companies fund hadn't managed to beat an all-companies index in the long term then something would be seriously wrong.

The IA sector indices are also distorted by the fact that underperforming funds are regularly closed and merged into other funds, which removes them from the record. This means Investment Association indices consistently appear higher than the stockmarket index because the people unfortunate enough to invest in funds that underperformed the index are erased from history.

I am afraid you need to think again on both points...

The average European Small Companies Sector Index returns exceed all european ETFs including any that focus on smaller companies Please feel free to check it. Trustnet has a section on passive funds. Again the same thing applies. No passive fund, including those that follow the MSCI EMU Small Cap Index, exceeds the Europen Small Companies managed fund average for 1, 3 and 5 years. Over 5 years the IA Index shows a 45% return, the MSCI Index shows 32%. I cant find any 10 year data.

The IA index is an ongoing index of the average OEIC/UT on any particular date and so includes all funds that subsequently disappear. There would be no point in recalculating the indexes for the whole of past history each time a fund disappears. So its no different to say the FTSE100 - the value in say 1990 is based on all companies in the FTSE100 at that date, not just the ones that happen to be still around tioday.