180K Investment

ColdIron

cashbackproblems wrote: »

but have a overall gain of 15% using my random methods.

A rising tide floats all boats, just saying

bowlhead99

MonroeM wrote: »

There are quite a lot of people on this form that seem happy with VWRL or a similar All-World tracker and there are so called 'experts' on sites such as Monevator that tend to back up this theory. However, others (and i don't know if this includes you?) prefer to choose their own single sector funds and asset allocation rather than rely on passive trackers and I'm sure there are 'experts' who support this view as well.

There are experts that support lots of different ways of doing things ; plenty of different ways to skin a cat. It is important to be aware that the first voice you hear is not always the most suitable one for your needs.

Many on this forum always give standard advice to 'go and read Smarter Investing by Tim Hale, go and read Monevator, and then you will see that you should buy a passive fund'. Because that is what they did because someone suggested them to do it and it seemed to make sense when they did. To be fair, it is a relatively easy to follow set of reading material and is sensibly written. It is the same on lots of other forums too, e.g. reddit personal finance board is very US-centric, but it is full of 'dump your overpaid adviser and buy a vanguard passive fund' and people who suggest something else are indiscriminately downvoted. However, that doesn't always make it the best thing to do.

So, given a passive strategy will always be advocated at some point and its proponents do not always stop to highlight any weaknesses, it's arguably more useful to pick holes in it than go along with it, whether that's just playing devil's advocate or because it genuinely feels like better advice.

At the end of the day its everybody's personal choice and opinion but I'm sure if anybody on here invested in an All-World passive tracker say 5 years ago then they will be more than happy with their return on this investment.

Absolutely, although just to highlight the obvious again, that 5-year period was a time of significant sustained stock market growth together with a sizeable strengthening of a trade-weighted basket of all world currencies versus our own.

So the absolute best thing to invest in was equities (VWRL is all equities), and the absolute best mix was to have nearly all your equities outside the UK (VWRL has 94% of its equities outside the UK), and the best mix for that small UK component within the total would be to have a large proportion of it be in the biggest UK companies - which have a large portion of their assets and incomes in foreign currencies - such as you get in the UK index (whose allocation ratios are matched by the UK part of VWRL).

So yes if someone invested 100% in VWRL 5 years ago as a UK investor (which is not something that Monevator really advocates for most investors) they'd have had a good time with their holdings.

If they'd invested say 10 years ago they might have been quite disappointed when they saw a 40-50% drop - which they've been fortunate to recover relatively quickly and go on to bigger and better things. As someone else mentioned, the trick is to make sure you're not in a position where this fazes you and you sell out in a panic taking a big hit. Doesn't seem like you yourself would do that. However, there are people on this forum who won't have even looked back further than a 5-year chart to see that it might happen, or who think that after every drop it will always recover quickly because it did in 2009-10 rather than what it did in the early 70s.

jdw2000

MonroeM wrote: »

There are quite a lot of people on this form that seem happy with VWRL or a similar All-World tracker and there are so called 'experts' on sites such as Monevator that tend to back up this theory. However, others (and i don't know if this includes you?) prefer to choose their own single sector funds and asset allocation rather than rely on passive trackers and I'm sure there are 'experts' who support this view as well.

At the end of the day its everybody's personal choice and opinion but I'm sure if anybody on here invested in an All-World passive tracker say 5 years ago then they will be more than happy with their return on this investment.

You also have to factor in people's vested interests and basic psychology.

An anorexic person has made up their mind that they are fat. You can show them evidence that they are thin, and tell them till you are blue in the face, but they will not process that information. But as soon as someone tells them they are fat it goes straight in and reaffirms what they held to be true. Everyone does this.

I'm the same with my house in London. I have made up my mind that London property is my fortress. It has served me well and I want it to keep doing so. I will argue against people who say it's a bad investment and I will agree with people who say it's a good investment. Those who say it's a bad investment I will dismiss, and those who say it's a good investment I will process that in my mind and it will strengthen my belief.

The same is true of investors. They are very invested, in both time and money (and also online and offline reputation) in whatever methods they have chosen. Once someone has gone down a certain path like that it will take a hell of an argument/occurrence to make them alter their views.

But as the posters on this forum keep saying: do your own research and make your own decisions.

For me personally, I am happy with the passive funds for several reasons: they are cheap, they are maintenance free, you don't need knowledge, and they come highly recommended by Warren Buffet, Monevator, and a few others I've seen online. That's good enough for me, particularly as I can't see myself learning enough about all this to be a successful, active investor.

bigadaj

The warren Buffett quote is actually a recommendation for an inexperienced or disinterested investor to go fully passive, he's obviously not following his own advice.

I think the key thing is not to be dogmatic, I have a passive bias but do hold active funds, the latter partially for the fact there are a small number of good fund managers that can outperform, but also because some areas can't or are difficult to access through passive means and some sectors do show Passover being our performed by active.

Being pragmatic also means analysing your strategy and the markets at regular intervals, something may be attractive at a price on one day but far less so at another time and at a different cost. Huge amounts of money are being lent to governments now at minimal or even negative interest rates with a string likelihood that the loans will incur capital losses as well. So a normal bond holding doesn't look attractive currently, personally cash, p2p and infrastructure are replacing bonds for me, partially at least, and the latter of those options is also now very expensive.

ColdIron

bigadaj wrote: »

some sectors do show Passover being our performed by active

Oi vey

jdw2000

bigadaj wrote: »

The warren Buffett quote is actually a recommendation for an inexperienced or disinterested investor to go fully passive, he's obviously not following his own advice.

That is not what Buffett said, and to pass off his advice as being only for those who don't know what they are doing, or can't be bothered, is wrong.

Buffett actually said that 'a passively-managed investment strategy would deliver better results in the long-run than those achieved by most investors – whether individual or institutional – who use high-fee active managers'.


http://www.morningstar.co.uk/uk/news/138585/warren-buffett-backs-passive-funds-should-you.aspx

jdw2000

Obviously Buffett himself doesn't passively invest. He's Warren Buffett. How many Buffetts do we have on this forum?

MonroeM

Although I'm very new to all this and still doing my own research before I invest or change any other of my investment portfolio and pension fund. At the moment (and this may change after further thought/research), I am swaying to holding a balanced mix of both passive and active funds. I think the most important issue is whether you can afford to invest so heavily in equities and see out any significant drop in the markets over time. If not, then I would definitely go for a more low risk investment strategy.

dunstonh

For me personally, I am happy with the passive funds for several reasons: they are cheap, they are maintenance free, you don't need knowledge, and they come highly recommended by Warren Buffet, Monevator, and a few others I've seen online. That's good enough for me, particularly as I can't see myself learning enough about all this to be a successful, active investor.

His statement on that is directed to inexperienced US investors. Remember that the US has a taxation bias towards passives. So, it is more logical there to use them. The UK taxation is different and has no bias on that front.

jdw2000

dunstonh wrote: »

His statement on that is directed to inexperienced US investors. Remember that the US has a taxation bias towards passives. So, it is more logical there to use them. The UK taxation is different and has no bias on that front.

No his quote is not directed towards only inexperienced investors. I have already proved that above.

Buffett's argument is that passsive investing will do better better than "most investors".


The US/UK side of things I don't know. That's a separate issue.