100% Equity vs Equity/Bond

jdw2000

Is anyone able to say whether these assumptions are along the right lines (ballpark figures, obviously). But I am assuming that the likes of VLS do the following:

- £45K invested = £150pm income
- £90K invested = £300pm income
- £180K invested = £600pm income
- £270K invested = £900pm income
- etc etc etc

I am also assuming that, even if you use the income to live on, you can expect the pot to grow by around 2%-7% annually (assuming there's not a crash etc).

bigadaj

jdw2000 wrote: »

Is anyone able to say whether these assumptions are along the right lines (ballpark figures, obviously). But I am assuming that the likes of VLS do the following:

- £45K invested = £150pm income
- £90K invested = £300pm income
- £180K invested = £600pm income
- £270K invested = £900pm income
- etc etc etc

I am also assuming that, even if you use the income to live on, you can expect the pot to grow by around 2%-7% annually (assuming there's not a crash etc).

That looks as though you don't really understand lifestrategy.

It's not an annuity, or even a managed fund that targets a return or distribution. It's a fettered fund if funds which invests in various vanguard funds in a set way to target a particular asset mix.

Total returns are determined by those markets it invests in, whether these are paid out or not. It may, on average over the long term, generate total returns of say inflation plus x % depending on you preferred flavour. There is no guaranteed income or payout, or indeed any guarantee that the fund will produce positive returns, the latter is just likely over the longer term.

bigadaj

Is t the question not whether passive approaches are better than active, but why so many active funds perform poorly. The relative performance of passive and active funds varies between markets, but even where there is out performance a large number of active funds still fail to beat cheap and basic tracker funds.

In relation to transparency then stock lending is soemthing I have an issue with. As well as basically acting against the interests of the stock being lent in most cases, and the owners of that stock, their clients, the lending fees are pocketed by the fund houses rather than the owners of the assets of the fund.

jdw2000

bigadaj wrote: »

That looks as though you don't really understand lifestrategy.

It's not an annuity, or even a managed fund that targets a return or distribution. It's a fettered fund if funds which invests in various vanguard funds in a set way to target a particular asset mix.

Total returns are determined by those markets it invests in, whether these are paid out or not. It may, on average over the long term, generate total returns of say inflation plus x % depending on you preferred flavour. There is no guaranteed income or payout, or indeed any guarantee that the fund will produce positive returns, the latter is just likely over the longer term.

Cheers for that. Just to be clear, I'm not investing for income, and don't have anything like those funds.

I've been reading a few posts elsewhere and a lady was saying those are the figures she gets as income and from what she was saying her investment sounded like VLS (I've probably misread what she said).

Any idea what investments she might have to generate that sort of income?


Sure would be nice to have £300K invested and be able to quit working.....

fairleads

The F&C MM Solutions consistency ratio
Here we conduct a review of the 12 major market sectors, filtering out only those funds that are consistently above average in each of the last three 12 month periods, and those consistently top quartile. In the 12 main sectors researched, there are currently 1,137 funds with a 3 year track record.

Many top class fund managers temporarily under perform, thus they would be excluded from the F&C survey, which tells me that this survey has little or no value for me.

bigadaj

jdw2000 wrote: »

Cheers for that. Just to be clear, I'm not investing for income, and don't have anything like those funds.

I've been reading a few posts elsewhere and a lady was saying those are the figures she gets as income and from what she was saying her investment sounded like VLS (I've probably misread what she said).

Any idea what investments she might have to generate that sort of income?


Sure would be nice to have £300K invested and be able to quit working.....

Fair enough, the vls fund will just generate a return, and the value will fluctuate with the assets it invests in, shares and bonds. It's performance will be a combination of the income the shares and bonds payout, such as dividends for shares and interest for bonds, together with capital increase (or decrease!) based on the price of the underlying shares and bonds.

People can take money out as and when they want to, which can be just 'natural income', a fixed monthly or annual income; depending in the fund performance the value left in the fund can increase or decrease over the year.

So with a sum of £300k invested mainly in equities past performance suggests that someone might be able to take out £15000 per year and over time the value of the fund will be maintained in real terms, ie inceasing with inflation. No guarantees but a reasonable estimate.

bigadaj

fairleads wrote: »

The F&C MM Solutions consistency ratio
Here we conduct a review of the 12 major market sectors, filtering out only those funds that are consistently above average in each of the last three 12 month periods, and those consistently top quartile. In the 12 main sectors researched, there are currently 1,137 funds with a 3 year track record.

Many top class fund managers temporarily under perform, thus they would be excluded from the F&C survey, which tells me that this survey has little or no value for me.

I'm not so concerned with excluding the fantastic fund managers that have a dodgy quarter now and again, as the fact that even detailed data over three years doesn't really help me if, like most investors, I have a multi decade outlook.

jdw2000

bigadaj wrote: »

Fair enough, the vls fund will just generate a return, and the value will fluctuate with the assets it invests in, shares and bonds. It's performance will be a combination of the income the shares and bonds payout, such as dividends for shares and interest for bonds, together with capital increase (or decrease!) based on the price of the underlying shares and bonds.

People can take money out as and when they want to, which can be just 'natural income', a fixed monthly or annual income; depending in the fund performance the value left in the fund can increase or decrease over the year.

So with a sum of £300k invested mainly in equities past performance suggests that someone might be able to take out £15000 per year and over time the value of the fund will be maintained in real terms, ie inceasing with inflation. No guarantees but a reasonable estimate.

Cheers for that. Much appreciated. What a sweet place in life to get to that would be.

fairleads

grey_gym_sock wrote: »

"In the third quarter of 2016, of 1,137 funds, only 28 consistently produced top quartile returns (i.e. 2.5%). Using blind luck, one would expect 18 funds to achieve this, which leaves only 10 fund managers, 0.9% of a universe of 1,137, who could legitimately claim that their success was down to skill."

The FCA report was based upon a F&C survey, excerpt below
................................................................................................
The F&C MM Solutions consistency ratio
Here we conduct a review of the 12 major market sectors, filtering out only those funds that are consistently above average in each of the last three 12 month periods, and those consistently top quartile. In the 12 main sectors researched, there are currently 1,137 funds
with a 3 year track record.
.........................................................................................

So it appears that the FCA based their assumptions on a short term comparison between consistently performing funds with index funds. Which is next to useless as a reference for long term investing.

jamesd

grey_gym_sock wrote: »

and as i've explained, that's barely significant if you're using the most straightforward passive funds.

jdw2000 made the false assertion that it was only the active funds paying for gains of other active funds. Any amount is sufficient to make it clear that jdw2000's assertion is false.

Of course it's more important for the active funds that do it if they are smaller than the total market size of all of the passive funds that they are front running.

grey_gym_sock wrote: »

i see that vanguard have recently launched a fund tracking the FTSE global all-cap index - see https://www.vanguard.co.uk/adviser/investments/product.html#/fundDetail/mf/portId=8617/assetCode=equity/?overview - that fund covers "large, mid-sized and small company stocks in developed and emerging markets"; it uses sampling, currently holding 4,307 shares, compared to 7,703 in the index. you could hold that as your entire exposure to equities, and then there would be absolutely no issue with front running.

That's a lot of markets where front running can be done as shares move into and out of the indexes of those markets and/or change market cap and get bought or sold. Front running can happen any time there is a subset of the total number of shares involved in the market being held in the fund and that one has a lot of shares not held by it.

The fund aims to track the FTSE Global All Cap index and as FTSE Russell say in its fact sheet "The index uses a transparent, rules-based construction process. Index Rules are freely available on the FTSE website" so it tells people what they need to know to front run it based on those rules. The fact sheet also says that there are a total of 7725 companies in the markets covered. So 7725 total then cut to the 7,400 stocks in the index (see the fact sheet again) and further cut to 4307 in the fund.

Lots of active decision-making going on there in terms of which to include or exclude in both index and fund.