180K Investment

jdw2000

Slightly off topic, but I'd be careful about looking at European funds right now with what's going on.

bowlhead99

jdw2000 wrote: »

Slightly off topic, but I'd be careful about looking at European funds right now with what's going on.

The answer to that is that whatever is "going on", you don't know exactly how it will affect markets, and everything the market has an opinion on, is already priced in.

A person who implemented a strategy of roughly fixing the exposure they would like to each asset class and region, would not be perturbed. If Europe has risen significantly or dropped significantly and those external market forces have changed their exposure by the time they next come to rebalance, they will be simply be selling some Europe at high levels, or buying more at low levels, to revert their portfolio back to their preferred allocation weighting. They would likely do that whether they had chosen a passive or active fund for their Europe exposure.

By contrast, someone who was 100% equities and within that was 100% global equity tracker like VWRL, would not have any opportunity to re-weight their portfolio back to a preferred ratio of European stocks vs everything else.

Say European stocks fall and become cheap and a relatively small portion of the overall portfolio. The 100% VWRL holder has no other asset classes such as bonds or property to sell to top up their equities. And within equities they have no ability to top up the Europe piece, because they are not controlling the asset mix. They just have to accept only having a relatively small exposure to Europe for a while, until Europe has fully recovered or everything else has gone through some some similar falls.

Someone who declared themselves a fan of passive investing shouldn't be affected by any political, financial or economic news at all as they are happy to simply track the market down or up, whether that is decent gains or large losses.

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.

So how do you go about choosing yours then? Do you first decide what percentage split you want between Europe/UK/NA/etc, and then select the best performing of the funds?

Also: Did you say that costs/OCFs were already priced into those returns on the trustnet site? as you said before, wouldn't be much point in that table otherwise as it's all out of kilter with reality.

darkidoe

jdw2000 wrote: »

So how do you go about choosing yours then? Do you first decide what percentage split you want between Europe/UK/NA/etc, and then select the best performing of the funds?

Also: Did you say that costs/OCFs were already priced into those returns on the trustnet site? as you said before, wouldn't be much point in that table otherwise as it's all out of kilter with reality.

Monevator has a very good series of post about Rebalancing your portfolio.


Makes investing into something of an alogarithm, like a thermostat, if its too hot, cool it, if its too cold, heat it! That makes sure you are buying low and selling high in small steps. You can't do that with a simple All World Tracker only.

***Asset Allocation. Asset allocation Asset Allocation*** That's the big decision. At the end of the day, I think its an arbitrary decision.

jdw2000

Rebalancing is something I am considering... at the moment I am 90% equities across the board.

Pension and S&S ISA are both 90% (BlackRock volatility), and my investments are evenly split between VWRL (100%) and VLS80 (80%).


I'm not really fazed about the pension and ISA side of things. Those pots add up to £60K and need to grow. And at the age of 40 I feel that I can take that risk.

My VWRL and VLS80 add up to about £30K. £20K of of that will be going into my ISA in April 2017 (bringing my pension and ISA to a total of £80K). This will only leave me with £10K invested outside the ISA and pension. I am thinking though that this £10K perhaps shouldn't be in a high risk place as I might need it at some some. I am thinking putting all of it in VLS80 (or even VLS60) might be a better fit.

Linton

jdw2000 wrote: »

So how do you go about choosing yours then? Do you first decide what percentage split you want between Europe/UK/NA/etc, and then select the best performing of the funds?

Also: Did you say that costs/OCFs were already priced into those returns on the trustnet site? as you said before, wouldn't be much point in that table otherwise as it's all out of kilter with reality.

After trying various other approaches I am now happy with my current strategy....

1) Compare my current geographic allocation %, sector allocation %, and large/medium/small % with that of my base (MorningStar Global Flex Cap Equity values when I set up my portfolio with a larger tilt towards small companies). Determine the optimum characteristics for my new investment to reduce the differences.
2) Look at the performance data of all funds for the last 5 individual years from Trustnet for my chosen geography and company size. Choose a shortlist of funds with consistent out-performance. I find 1,3,5 year figures are less useful as they are strongly biased towards the current year as this is included in all 3 performance values.
3) From the shortlist choose the fund with best match for my desired optimum characteristics.

For some sectors (eg tech, biotech, raw materials) it is worth choosing the sector first and then choosing the best fit on the other factors.

Once having selected a fund for a particular geography/company size/sector balance I am unlikely to change it and would never buy an additional fund with the same characteristics. Every fund must have a clear and unique purpose. So almost all changes now are occasional minor rebalancings to keep all the %s roughly constant and to provide an annual lump sum income.

Trustnet performance data is what a real investor would achieve except for platform and advice fees.

MonroeM

darkidoe wrote: »

Makes investing into something of an alogarithm, like a thermostat, if its too hot, cool it, if its too cold, heat it! That makes sure you are buying low and selling high in small steps. You can't do that with a simple All World Tracker only.

***Asset Allocation. Asset allocation Asset Allocation*** That's the big decision. At the end of the day, I think its an arbitrary decision.

'Asset Allocation'! Yes, I tend to agree with you although its taken me a while to get there and I'm still going to continue with my own research before I make any other decisions with the rebalancing/asset allocation of my remaining ISA funds. They have to be suitable for my risk profile and requirements. I'm not even contemplating touching my pension fund at this stage!

As you may have read I moved my UK/European/Multi-Asset funds into the All-World VWRL tracker, so I now understand that I need to take my time and not rush in head first to ensure I rebalance the remaining funds over my preferred asset allocations. I am now 'looking' at some active single sector funds whose fund managers tend to specialise in various asset classes from property (UK/Global), bonds, small cap etc. etc

If you have the 100% risk profile and can ride out any downturns in the market then the All-World VWRL is fine. However, I'm not sure whether you should compliment this with other passive tracker funds because, as mentioned in previous post's, it has been pointed out that active funds performed better than passive funds over the past 5 years in the European, EM and UK markets. This is not to say that this will continue but to have some overall control it may be best to hedge my bets and diversify between active and passive funds?

JohnRo

...it has been pointed out that active funds performed better than passive funds over the past 5 years in the European, EM and UK markets.

Some do, the fictitious average, whether they will continue to do so is undetermined. Whether survivor bias is accounted for is unclear.

jdw2000

You've all seen this many times, I'm sure.

Monevator has been doing a passive investing case study for the past 5 years. £20K has been put in. It's now worth £29K.

How does that stack up with the returns of our active investors here?


http://monevator.com/the-slow-and-steady-passive-portfolio-update-q3-2016/

MonroeM

Linton wrote: »

After trying various other approaches I am now happy with my current strategy....

1) Compare my current geographic allocation %, sector allocation %, and large/medium/small % with that of my base (MorningStar Global Flex Cap Equity values when I set up my portfolio with a larger tilt towards small companies). Determine the optimum characteristics for my new investment to reduce the differences.
2) Look at the performance data of all funds for the last 5 individual years from Trustnet for my chosen geography and company size. Choose a shortlist of funds with consistent out-performance. I find 1,3,5 year figures are less useful as they are strongly biased towards the current year as this is included in all 3 performance values.
3) From the shortlist choose the fund with best match for my desired optimum characteristics.

For some sectors (eg tech, biotech, raw materials) it is worth choosing the sector first and then choosing the best fit on the other factors.

Once having selected a fund for a particular geography/company size/sector balance I am unlikely to change it and would never buy an additional fund with the same characteristics. Every fund must have a clear and unique purpose. So almost all changes now are occasional minor rebalancings to keep all the %s roughly constant and to provide an annual lump sum income.

Trustnet performance data is what a real investor would achieve except for platform and advice fees.

Sounds like a strategy and good viewpoint to me.