180K Investment

jdw2000

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.

Many thanks indeed for that. Good post. Please could you clarify a couple of things:

- What do you mean by "my base - MorningStar Global Flex Cap Equity?

- also, what optimum characteristics would you look for?

jdw2000

I've been reading Slow & Steady on Monevator (the 20 year passive portfolio example he is doing which is currently in year 5). Vanguard LS is an alternative to this strategy, so it applies to me too.

He started out with 80/20 equity. He is reducing the equity on his portfolio by 2% each year and will end up with 60/40 or 50/50 (can't remember which).

Currently, with mine being split between VWRL (100% equity) and VLS80 (80%) mine split is 90%.

I have decided that this is too much risk and that I want to bring my portfolio in line with Monevators. I will therefore be switching my VWRL holdings to VLS60.

Between my VLS80 and VLS60, this will mean that I have an average equity exposure of 70%, rather than 90%.




(On a separate issue, I was reading the Monevator site last night vis a vis the "Best Performing tables" we were discussing and the dearth of trackers on the table. There is an article from last week where he addresses why trackers aren't on there. Worth a read: http://monevator.com/fund-ratings-and-best-buy-lists-are-useless/ )

Linton

jdw2000 wrote: »

Many thanks indeed for that. Good post. Please could you clarify a couple of things:

- What do you mean by "my base - MorningStar Global Flex Cap Equity?

- also, what optimum characteristics would you look for?

Morningstar have their own set of fund categories that only partially correspond to the standard sectors used by other websites. The Global Flex Cap Equity average was chosen as an initial baseline because it was the one that most closely represented what I was trying to achieve. It doesnt matter much what the initial baseline is as long as it is well diversified to your satisfaction.

By "optimum characteristics" I mean those that best move the overall allocations towards the baseline. For example I am currently over the baseline in US and raw materials and below the baseline in UK and technology. So I may look for a fund that is low in the former and high in the latter with a consistently good performance record. Maintaining an allocation on 4 factors rather than just the simple one of say geography is obviously impossible to achieve exactly, so just moving things in the right direction is sufficient. In practice this rarely leads to buying a new fund as the current set is normally sufficiently distinct to achieve the desired result by buying and selling existing funds.

MonroeM

jdw2000 wrote: »

I've been reading Slow & Steady on Monevator (the 20 year passive portfolio example he is doing which is currently in year 5). Vanguard LS is an alternative to this strategy, so it applies to me too.

He started out with 80/20 equity. He is reducing the equity on his portfolio by 2% each year and will end up with 60/40 or 50/50 (can't remember which).

Currently, with mine being split between VWRL (100% equity) and VLS80 (80%) mine split is 90%.

I have decided that this is too much risk and that I want to bring my portfolio in line with Monevators. I will therefore be switching my VWRL holdings to VLS60.

Between my VLS80 and VLS60, this will mean that I have an average equity exposure of 70%, rather than 90%.

(On a separate issue, I was reading the Monevator site last night vis a vis the "Best Performing tables" we were discussing and the dearth of trackers on the table. There is an article from last week where he addresses why trackers aren't on there. Worth a read: http://monevator.com/fund-ratings-and-best-buy-lists-are-useless/ )

Thanks for the link, it made interesting reading and appears to contradict other peoples opinions on trackers and their fund ratings?

bowlhead99

jdw2000 wrote: »

Is it best to do accumulator, or income?

If you are going to use the income to spend or help you rebalance and invest in other things, income.

If the answer to 'do you have a use for the income' is 'not really', then: I would say if you are doing it inside an isa or SIPP tax wrapper, use accumulation, whereas if you're doing it outside a tax wrapper use income.

Reason being, if you need to keep tax records to prove what gains you made or didn't make and what income you made, it's much easier to do that when you can see the cashflows into and out of the account, rather than have the fund manager both pay you income and reinvest it all for you inside the fund without you noticing.

MonroeM

jdw2000 wrote: »

I've been reading Slow & Steady on Monevator (the 20 year passive portfolio example he is doing which is currently in year 5). Vanguard LS is an alternative to this strategy, so it applies to me too.

He started out with 80/20 equity. He is reducing the equity on his portfolio by 2% each year and will end up with 60/40 or 50/50 (can't remember which).

Currently, with mine being split between VWRL (100% equity) and VLS80 (80%) mine split is 90%.

I have decided that this is too much risk and that I want to bring my portfolio in line with Monevators. I will therefore be switching my VWRL holdings to VLS60.

Between my VLS80 and VLS60, this will mean that I have an average equity exposure of 70%, rather than 90%.

You seemed to have juggled with your investments and changed your mind several times (since you joined the forum) on your strategy and asset allocation for your portfolio. Nothing wrong with that I'm just pleased you now seem happy with your decision to reduce your overall risk exposure to 70/30.

jdw2000

MonroeM wrote: »

You seemed to have juggled with your investments and changed your mind several times (since you joined the forum) on your strategy and asset allocation for your portfolio. Nothing wrong with that I'm just pleased you now seem happy with your decision to reduce your overall risk exposure to 70/30.

Yes, it's been a very steep learning curve for me (and will continue to be for a long time).

Just a matter of weeks ago I didn't even know what investing was. I knew you could buy shares in companies, but I had no idea how. And I didn't know what a fund even was (let alone a "fettered fund of funds"!).

I didn't even come on to this forum a few weeks ago to find this stuff out. What I actually came on here for was to find out the highest paying bank accounts to put my savings in. I then went about setting 6 bank accounts up so as to rotate the money around and claim a piddly amount of interest.

When it was suggested by a few people that I could "invest" the money instead I had no idea what they were referring to.

It's taken a hell of a lot of reading, and a lot of patience from some good posters on this forum, for me to have got to the rudimentary level of understanding I now have.

In terms of the juggling since I invested the money, there hasn't been too much. I whacked the full £15,240 allowance into my S&S ISA, and that's where it'll stay. The rest (£30K) I split between VWRL and VLS80. The only change I have made is to take the money out of VWRL and put it into VLS60 instead. This means that my exposure to equities has been reduced from 90% to 70% in my investments, which I think is more sensible.

I do still have 90% exposure in my pension and ISA, but I'm fine with that. They are lagging behind where they should be and I am 40 years old, so I have time for them to do their thing over the next 20 years.


With regards the whole passive v active thing - I am more than happy at the moment to just go with Monevator's advice/model. Their Slow & Steady model is working very well. And they say that if you want to make things even easier, then just go for VLS. Monevator seem to think 70% equity is enough exposure and so I will follow their lead (my money is evenly split between VLS80 and VLS60 for a 70% overall split).

So that's where I will stay until I learn a hell of a lot more about investing.


(And thankfully there was no stock market crash in the last couple of weeks, because I was 90% exposed to it had there have been! : )

JohnRo

Investing is not a science despite the best efforts of some pundits to make it sound that way.

DIY is about finding what best works for you in your current circumstances, which takes time, mistakes and learning as it evolves along the way before you feel settled.

As you become familiar with investing and gain some insight into your own relationship with it, your attitude to risks and potential rewards on offer, things will settle down somewhat.

jdw2000

Is there such a thing as leveraged investing in shares/funds? (ie, getting out mortgages to buy more as you would with a house).

btw, I am not tempted by this, just asking!

atush

Investment trusts