Buy to let is for amateurs

System

Bowl -

So, you have a fund with hundreds or thousands of holdings and no more than 0.15% in one company. If one of them is a rising star which you catch as it quintuples in value

True though I assume it'd gain weighting in the index and therefore in the fund as it grows. It might buy out its rivals who I'd also own

. The micro /nano / fledgling / venture capital arena is where you actually get the opportunity to 'catch a rising star' before it has risen, rather than when it is already a solid small-cap or mid-cap within the type of fund you've chosen. It is also the area where there are a lot of failures and mediocrity so you really would need to catch the stars to afford the losses and also-rans.

True but on the road to becoming a large cap these companies must go through small/medium, and I'm filtering out a fair few failures by avoiding micro/nano

.You had said the big institutions don't invest in tiny companies which is true to an extent, but now you are saying you are ignoring those tiny companies yourself anyway.

Yes a good point again, that micro/nano have even more accumulation potential, I must admit I couldn't find a decent cheap fund in them, as well as liquidity and fraud concerns, so I'm trying to find a good compromise, and I'm not greedy enough to take too big a risk in trying to beat what small cap gives. Small cap is still small enough to put a lot of people off, so there is in theory a trading discount there

.you were not interested in actually getting a balanced portfolio for your pension, just buying the one thing that you hoped would go up the most.

I know, I'll tell you a secret, the real reason behind the "am I balanced" thread was to see if anyone would use it as an opportunity to judge my mental balance, as happens sometimes in other parts of life. Nobody took that easy snipe, and that restores some of my faith in Hugh manatee

I don't know why you're so keen to keep going back to the point of telling us that you have some reprobate mates who will never amount to anything and don't even care about saving or investing and just want their instant gratification from fags.

Because I was defending that my income was comfortable, and that being "on a low income" doesnt actually mean low cashflow. other people feel comfortable on that income and spending

To be continued

System

Bowl continued -

But just because the risk of loss is slim on your fund over the long long term, does not mean it is the optimum solution

So I am open to convincing cases that a long term buy&hold accumulation strategy will be better elsewhere. If I see something that I see as "yes in 30 years time I'd have more with that" then I'd go for it. I am flexible on my drawdown date, you have to be with the risk of crash

.Do you somehow think that developed world smallcaps (concentrated 57% in USA, per the Vanguard factsheet) are 'due a rise'?

Short term; no, because i think they had a brexit boost with the weaker £ making it more expensive to me, and that has minorly overvalued it, but that's short term and quite minimal in the scheme of things, I'd still buy now to avoid having to sell something later and trying to time a market change that might never happen. That overvaluation is why its flailing about right now

Long term, all things staying similar, I'd anticipate something like its past trajectory

.If you think that emerging markets are 'due a rise' why would you not invest in those alongside the developed smallcaps you hold which have gone on a monster run in sterling terms?

It'd be a short term rise and then I'd have to sell a much more volatile fund in the short term. I dare not predict what "emerging" means in 30 years time and I also wanted to stay smallish cap, which emerging wouldn't guarantee.

I also theorise that developed countries have more money to facilitate growth, more opportunities. Going poorest doesn't mean they will have the means or the market

. So by saying that BoE won't put rates up, you are saying that property will maintain momentum and be harder to beat with your equities portfolio, and beating property is what you need your equities to do.

Indeed it will, most things do well from low rates, but property has inefficiencies that will always hold it back, and are more sensitive to policy
And if it really did well then I could buy shares in landlording companies

.For example, the US is looking to increase its rates rather than keep them low indefinitely, which is why your smallcap fund would have had a blip a few days ago when the market got temporarily spooked

Good point. I suppose all central banks though don't want a housing crash

I appreciate the discussion and I do hope to learn/ be convinced

System

Cory's -

I’ve resisted contributing to this thread as I was at a loss to understand why you started it other than as an act of hubris.

Partly. Hubris, boredom, hoping to steer people away from difficult and less rewarding investments, and hoping to learn in the process. I enjoy discussions and do learn from them

has been repeatedly pointed out to you in other threads.

Well I try to give my reasons but negativity doesn't automatically make it right, its just a matter of opinion

Banana-

. Your plots are for the last five years which is after the great crash

Ive looked up the index for 15 years, its harder to find data before that. The funds themselves never have much history info on those websites

I do see the spread of risk point, I am across many companies and sectors and countries even, just not across many sizes. Perhaps there can be a broader range of companies that can be small?

coyrls

MatthewAinsworth wrote: »

Cory's -
Partly. Hubris,

Expect nemesis to follow.

bowlhead99

MatthewAinsworth wrote: »

I do see the spread of risk point, I am across many companies and sectors and countries even, just not across many sizes. Perhaps there can be a broader range of companies that can be small?

There are companies of all types that can be privately owned, supported by venture capital, or set up as listed fledgling, nanocap or microcap companies. Including your mate's garage or computer repair shop or your favourite adult massage centre. There is extreme variety at that level. But you have rejected all the really small stuff that has all the variety. And you've rejected all the big stuff too.

Looking at all the big stuff you don't want for some reason: by going for a global developed world smallcap tracker -

You are not in the major national monopoly utilities that keep churning out reliable profits year after year all around the world and have no real competition.

Neither are you in the huge cash cows that are tobacco companies, who are raking in billions from new markets even while old ones decline.

You are not in the energy giants like Exxon, BP, Shell, Texaco, PetroChina who control the world's oil resources

You are not in the car manufacturers like BMW or VW or Toyota or Nissan or Ford or GM.

You are not in Tesla who dare to threaten the dominance of the above.

You don't hold shares in any of the big banks who have the capacity to make huge profits in periods of market growth.

You are not in the ubiquitous tech or consumer brands like Apple or Samsung or Microsoft which are so embedded in our consumer or business society that they basically have a licence to print money worldwide.

By turning your back on emerging markets because for some reason you feel they're due a bit of a value increase but not much, you are missing out on the growth from regions such as China, India, Africa who are bringing literally billions of new consumers and investors into the marketplace and growing their GDP significantly to become major global players with significant wealth.

As you chose developed world smallcap rather than largecap, you don't have exposure to any of that emerging markets growth via the giant multinational businesses selling into those markets like Unilever, Procter & Gamble, Glaxo, Nestle etc, because you chose not to own any of those.

No, you chose to invest in small companies of the developed world, so you only get access to the fast-growing Chinese or Thai markets when a chinaman visits WHSmiths and buys some sweets for his flight home at Heathrow. As an aside, Heathrow itself is owned by Ferrovial, the spanish group who you also don't own because it's not smallcap.

You would have missed the growth from the major new disruptive firms of the last decade:

- Google IPO'd with a market cap of a little over $20bn so was too big for your smallcap tracker, and you would have missed out on it becoming a $500bn monster over the following decade.

- Facebook traded at $60-90bn during its first week after IPO so you would have missed that, now it's 5x the price.

- Amazon would have been bought by your smallcap tracker for a billion or so in 1997 and sold once it left smallcap status which would have been maybe $4-5bn back in the day. So, well done on that one, quadrupling your money. You might think you could have had a second bite of the cherry as it got below $5bn again after the dotcom bubble burst, but then it would have been exited the following year as it rebounded and ceased to qualify as small. For that 2001 to 2002 period your tracker fund would have bought it at 'top of smallcap' value when it fell out of the midcap index, watched it decline, watched it rise again, and sold it at 'top of smallcap value' again when it went back to mid/largecap. Thus taking no actual profit, and no dividends.

Meanwhile having exited Amazon at the single digit billions level, you've missed it turning into a $350bn monopoly in the decade and a half that followed.

I am sure you can find some examples of smallcap companies that joined a smallcap index at the very bottom and left at the very top having made some good money for investors in the tracker. But it also happens in reverse.

By all means go with your instinct to cut yourself off from huge swathes of company type and a bunch of emerging markets. Who knows, you might be right and your smallcap portfolio will somehow deliver 15% compound for the next three decades, even though it didn't for the last three decades and when it managed it for the last five years, largecap did too.

As you say, you do "hope to learn / be convinced". You could start by listening to the logical reasons posted by people here about why you should not focus your life savings on one small asset class when so many other asset classes have things to offer.

What does your wife think about you putting all the family's pension money into a single asset class and being defensive when knowledgeable investors offer constructive criticism? Perhaps you have not shown her this thread or the previous 'balanced portfolio' one...

I'm out.
:beer:

System

Whilst what you say is true it is too anti-small cap, as if I shouldn't touch them and should have everything except them, there's no acknowledgement of its strengths or the degree to which, and that's why I sing a positive tune back, that to you may appear defensive, because the positive side should be included in any counterargument to make it seem unbiased and valid

I have large cap UK & international in my isa, which is basically there to help my son buy a house when he's older, access to that needed before the sipp.

Wife puts into the isa but not the sipp, the sipp is my own money and she received the extra tax credits, not me, so she is better off for it. Wh have some joint money and some personal money, so she is free to do her spending without my interference and I can do my investing, even though I plan to find her early retirement too. She is a homeowner only because of my saving before (I provided 3/4 of the deposit but gave 50% ownership to her), and even if she only gains capital gains, she's in the money

coyrls

MatthewAinsworth wrote: »

Whilst what you say is true it is too anti-small cap, as if I shouldn't touch them and should have everything except them, there's no acknowledgement of its strengths or the degree to which, and that's why I sing a positive tune back, that to you may appear defensive, because the positive side should be included in any counterargument to make it seem unbiased and valid

Nobody has said that small cap shouldn't form part of a balanced portfolio. There is only one person sounding defensive in this and other discussions. If something isn't positive it doesn't mean that it's wrong (regardless of what Brexit campaigners might have told you).

bowlhead99

MatthewAinsworth wrote: »

Whilst what you say is true it is too anti-small cap, as if I shouldn't touch them and should have everything except them, there's no acknowledgement of its strengths or the degree to which, and that's why I sing a positive tune back, that to you may appear defensive, because the positive side should be included in any counterargument to make it seem unbiased and valid

I've acknowledged the basic points where smallcaps are good as part of a long term portfolio. There is no point me listing your favourite things about smallcap because you already know what they are (although are deluded about the long term likely returns).

The point is not to say your portfolio should be 0% smallcap like you shouldn't touch them. I'm sure 20% or more is fine for some people and I use them myself. The point is to mention a bunch of other lucrative investments which are out there to be used as part of a retirement portfolio, which you are ignoring in perhaps blissful ignorance as you run towards your single-minded goal.

I have large cap UK & international in my isa, which is basically there to help my son buy a house when he's older, access to that needed before the sipp.

As you mentioned on your other thread, the ISA money is only a quarter of what you are putting away, with the rest going into the SIPP. And the ISA is for an entirely different goal and not being used for the same purpose as your SIPP.

So, the fact you have something approaching a proper spread of investments in that pot does not really address the deficiencies in the other larger pot.

Wife puts into the isa but not the sipp, the sipp is my own money and she received the extra tax credits, not me, so she is better off for it. Wh have some joint money and some personal money, so she is free to do her spending without my interference and I can do my investing, even though I plan to find her early retirement too. She is a homeowner only because of my saving before (I provided 3/4 of the deposit but gave 50% ownership to her), and even if she only gains capital gains, she's in the money

So you put your money into your SIPP and your wife gets extra tax credits from your doing that and spends them on household expenditure or current consumption rather than putting them in her own SIPP, because in your household the tax credit money is needed for day-to-day spending or the ISA. So, the family is relying on your SIPP for retirement.

So it is still valid to pick apart the flaws in your single-asset-class pension plan and say it is poor quality investing, even if your wife does not know or care how you are investing the family SIPP money because she blindly trusts you not to invest it in a naive way and leaves you alone because it's "your money".

System

If you merge all my pots together, as I do in my head, as they are all held under me, it all looks very different, overwhelmingly in our house, our equities need to increase, I take on the point of there should be more large cap, but a lot of the sipp I don't even plan on drawing at all, its also there as an inheritance pot for my boy, so its even longer term than my retirement, perhaps 30-40 years longer - with that in mind growth makes sense.

We need to not allow cash+isa balance grow too much, as if we get switched to universal credit in the future it'll be loss making. Note that wifi's contribution to the isa now is increasing the rate of that

Wife is kind of against us using the isa to help our boy onto the property ladder, and wants him to fend for himself (it probably won't even be needed as we'll advise him to save while at home, and to use large cap or property to save against house price rises - he might even choose to rent and invest, I wouldn't encourage that but I wouldn't be overly against if the numbers worked out)
So really the wife's plan is the isa is our age 57 retirement pot, to tide us over till our dB+state pensions come in

System

I'm trying to liberate that isa from that assignment and make my boy a millionaire
When it comes to giving him money, I'd prefer giving him a pension in case he ever gets divorced, but more immediate help may be needed, I wouldn't want him living in a damp ridden flat like I used to