180K Investment

coastline

MonroeM wrote: »

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.

As a guide to what happened in the last major downturn I've set the MSCI World Index and the three portfolios listed in the link below.

https://www.trustnet.com/learn/learnaboutinvesting/The-Adviser-Fund-Index.html

https://www.trustnet.com/Tools/AdviserFundIndex.aspx

Set the Timescale to 1/12/2007 to present day 4/12/2016 to see the effects of 2008.
Investment type set to Indicies then add AFI Aggresive..AFI Balanced and AFI Cautious.
Even the Cautious approach shows a fall of around 20% so its hard for an investor not to take some kind of a hit during market turmoil.

https://www.trustnet.com/Tools/Charting.aspx?typeCode=NM990100

Again on the link below you can set the following to see similar results using the Timescale..
Investment type...IA Unit Trusts & OEIC'S...Sector..IA Mixed Investment 0-35% Shares.. then add sector..IA Mixed Investment 20-60% Shares...add sector...IA Mixed Investment type 40-85% Shares..add sector..

https://www.trustnet.com/Tools/Charting.aspx?typeCode=NM990100

dunstonh

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

No it is not a separate issue. it is a key issue as most managed funds underperform trackers in the US after tax. However, before tax, more outperform. The UK does not have that same tax and managed funds in the UK do better than most other countries.

Since May 2011 for that 5 year period, European funds had 74% of active funds beating the best tracker, while active also gave a strong showing in the UK all companies (68%) and emerging markets (61%). In contrast, active funds that reside in the North America sector struggled to gain an edge, with only 12% managing to beat the best tracker,

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

No you havent. When you read the context of what he said, it was aimed at the average person. The average person is not an experienced investor. And again, it was aimed at the US average investor.

"What most people should do [is] buy a cheap index fund, and slowly dollar cost average into it. If you try to be just a little bit smart, spending an hour a week investing, you’re liable to be really dumb.” - 2008

He is right. Amateur trading is not a good thing. It will almost certainly end in underperformance.

In 2013, he also said about putting 90% into S&P500 and 10% into US gilts. However, putting 80%-100% in an S&P500 tracker is a bad thing to do. Not so much for Americans as they tend to be very inward looking with their investments and taxation is better for them to do it.

Most UK consumers have not got the risk profile or capacity for loss to go 90% equities. Trading is not big in the UK either. Even if you stick to funds and look at what we see on the board frequently with average posters. They buy an almost random selection of funds with no model or strategy. Just what they read in the newspapers. That is bad investing. Trackers are better than these things. Although a good many managed funds would be too. However, when saying trackers it is still a portfolio of trackers that is needed. Not just one. So, what allocations do you use for the regions. That is a management decision. So, either you do that yourself or you buy a multi-asset fund (which can include managed and passives as underlying investments).

jdw2000

dunstonh wrote: »

Since May 2011 for that 5 year period, European funds had 74% of active funds beating the best tracker, while active also gave a strong showing in the UK all companies (68%) and emerging markets (61%).

Those figures are after costs? So even after the greater costs of active funds have been factored in, 74% of European funds still beat the best tracker?

dunstonh

jdw2000 wrote: »

Those figures are after costs? So even after the greater costs of active funds have been factored in, 74% of European funds still beat the best tracker?

They are after costs. That is how these things are measured. No point doing it before costs.

jdw2000

dunstonh wrote: »

They are after costs. That is how these things are measured. No point doing it before costs.

Do you have a link or evidence of this?

MonroeM

coastline wrote: »

As a guide to what happened in the last major downturn I've set the MSCI World Index and the three portfolios listed in the link below.

https://www.trustnet.com/learn/learnaboutinvesting/The-Adviser-Fund-Index.html

https://www.trustnet.com/Tools/AdviserFundIndex.aspx

Set the Timescale to 1/12/2007 to present day 4/12/2016 to see the effects of 2008.
Investment type set to Indicies then add AFI Aggresive..AFI Balanced and AFI Cautious.
Even the Cautious approach shows a fall of around 20% so its hard for an investor not to take some kind of a hit during market turmoil.

https://www.trustnet.com/Tools/Charting.aspx?typeCode=NM990100

Again on the link below you can set the following to see similar results using the Timescale..
Investment type...IA Unit Trusts & OEIC'S...Sector..IA Mixed Investment 0-35% Shares.. then add sector..IA Mixed Investment 20-60% Shares...add sector...IA Mixed Investment type 40-85% Shares..add sector..

https://www.trustnet.com/Tools/Charting.aspx?typeCode=NM990100

Thanks for the links Coastline all very interesting that passive investing has done so well over a long period of time!

Dunstonh has now produced figures stating active funds in the past 5 years have done better than trackers? European funds 74, UK funds 68 and EM funds 61 per cent?

bowlhead99

jdw2000 wrote: »

Those figures are after costs? So even after the greater costs of active funds have been factored in, 74% of European funds still beat the best tracker?

Quoted performance is always after costs otherwise it isn't the right performance figure to quote.

jdw2000 wrote: »

Do you have a link or evidence of this?

Trustnet.com has a decent listing of funds. From front page go to Unit Trusts & Oeics home. You get some drop down filters. Change "All Geographies" to "Europe Ex UK". You'll get a big list of funds. At the top right of the table change it to show 100 per page so you get a bigger list. Then click the top of the 5-yr column to sort them in descending order of performance.

You'll see the 5 yr performance only goes down to position 90 because the other 25 listed after that have not been going the full 5 years.

Then look down the list from the top, and see how soon you get to one that's a tracker.

At position 62 you have Vanguard's tracker (65.1% total return), at position 66 you have HSBC's equivalent (Class C giving a 63.8% return). Those two funds have ongoing charge figures of 0.10-0.12% and are about as cheap as you get.

So in a pool of 90 funds that reported the 5 year track record, Vanguard's tracker was beaten by 61 funds out of the 90 (putting it in the bottom third when ordered by performance) and HSBC - which has a lower OCF than vanguard at the moment - was beaten by 65/90 (72.2% of all the funds)

Vanguard's emerging markets tracker over 5 years is 48th of 62 funds which have a 5 year record in the IA Global Emerging Markets sector, according to the same trustnet site. L&G Global Ending Markets Index (Class I) delivered a couple of percent higher performance, 24.7% versus vanguard 22.0. L&G track the FTSE version of the emerging markets index while Vanguard use the MSCI one, so you would expect small differences over time, despite similar costs, as the two index providers classify certain countries differently.

However, L&Gs extra performance still didn't get it into the top 30 out of 60 in the sector. Blackrock's fund uses a customised index benchmark and beat both of those other big rivals I mentioned., delivering 25.4%. Sounds promising, but that's still more than 2% lower than what it would have needed to squeeze into the top half of the table.

JohnRo

For passive versus active this is interesting from Vanguard
https://personal.vanguard.com/us/insights/article/indexing-myths-062014

and this pdf download is worth a read
https://scmdirect.com/sites/default/files/WhitePaper.pdf

Databases that exclude closed and merged funds limit
the ability of researchers to measure and compare the
past performance of all mutual funds. The average
performance of an actively managed fund portfolio is
skewed higher when closed and merged funds are not
included.

I reckon the debate between passive and active investment can be summarised by a well known quote in Dirty Harry.

I've decided to hedge somewhat by doing both.

jdw2000

bowlhead99 wrote: »

Quoted performance is always after costs otherwise it isn't the right performance figure to quote.



Trustnet.com has a decent listing of funds. From front page go to Unit Trusts & Oeics home. You get some drop down filters. Change "All Geographies" to "Europe Ex UK". You'll get a big list of funds. At the top right of the table change it to show 100 per page so you get a bigger list. Then click the top of the 5-yr column to sort them in descending order of performance.

You'll see the 5 yr performance only goes down to position 90 because the other 25 listed after that have not been going the full 5 years.

Then look down the list from the top, and see how soon you get to one that's a tracker.

At position 62 you have Vanguard's tracker (65.1% total return), at position 66 you have HSBC's equivalent (Class C giving a 63.8% return). Those two funds have ongoing charge figures of 0.10-0.12% and are about as cheap as you get.

So in a pool of 90 funds that reported the 5 year track record, Vanguard's tracker was beaten by 61 funds out of the 90 (putting it in the bottom third when ordered by performance) and HSBC - which has a lower OCF than vanguard at the moment - was beaten by 65/90 (72.2% of all the funds)

Vanguard's emerging markets tracker over 5 years is 48th of 62 funds which have a 5 year record in the IA Global Emerging Markets sector, according to the same trustnet site. L&G Global Ending Markets Index (Class I) delivered a couple of percent higher performance, 24.7% versus vanguard 22.0. L&G track the FTSE version of the emerging markets index while Vanguard use the MSCI one, so you would expect small differences over time, despite similar costs, as the two index providers classify certain countries differently.

However, L&Gs extra performance still didn't get it into the top 30 out of 60 in the sector. Blackrock's fund uses a customised index benchmark and beat both of those other big rivals I mentioned., delivering 25.4%. Sounds promising, but that's still more than 2% lower than what it would have needed to squeeze into the top half of the table.

Cheers for that. Why are we only looking at "Europe ex UK"?

bowlhead99

jdw2000 wrote: »

Cheers for that. Why are we only looking at "Europe ex UK"?

Why look at anything?

It is one of the main regions in which people invest as part of a diversified portfolio, and for which both dedicated regional trackers and active funds exist.

UK
Europe ex-UK
North America
Japan
Asia-Pacific ex-Japan
Emerging markets

Those are the broad regions across which people aim to invest and for which the geographic split is provided for many global funds.

Obviously you can have a France tracker and a Germany tracker and an Italy tracker and a Spain tracker, Greece tracker etc. Most people dont want 20 Europe funds in their portfolio so they lump them as a group. However there is a clear distinction between UK and rest-of-Europe-exUK, because one is the market in which you live and where shares are listed in your home currency, and the other is everything that isn't.

So the developed markets within the continent are split into two distinct markets: "home and away"