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DIY or IFA?
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It's an old article from October 2013. I was meaning his more recent performances with his own company over the past 3 years compared to some of the other funds in the UK Equity Income Sector not past performances with Invesco Perpetual.0 -
I know it's an old article, it doesn't make it irrelevant. That's a commentary on his record up to the point he set out on his 'new' career.
https://www.trustnet.com/managers/factsheet/Neil-Woodford/utoeic/U/00000WOO04/
https://www.trustnet.com/managers/factsheet/mark-barnett/utoeic/U/00000264DW/'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB0 -
Excellent - but did you note that this data demonstrating that Vanguard UK Equity Income outperforms Invesco Perp High Income since the Vanguard fund started in 2009 was presented in October 2013?
If you look at the performance since then, the IP fund has significantly outperformed the Vanguard fund (approx 31% vs approx 17% reading the graph from Trustnet Charting) to the point where they both show the same performance since 2009. Looking at the graphs it appears that the Vanguard fund is more volatile than the IP fund doing better in the good times but worse in the bad, dropping below its Oct2013 value in Feb 2016. The IP fund never fell below its Oct2013 value.
Perhaps we need to wait an few more years before coming to any conclusion.0 -
It's always a varied discussion on the passive/.active point and many of you have already decided on which to invest in! However, some of us also think there is room for both passive and active funds in a portfolio?
For instance, as we've been discussing the VLS funds in this thread as well as the OP's FTSE All World tracker then I personally feel there is always room for both types of funds in a portfolio. With VLS why not have for example 5% of your portfolio in mid/small cap companies and property plus maybe a smaller percentage with any specialist companies you take a fancy to?
Yes, if you thought the VLS funds are not covering all the markets you are interested in then obviously it is good to add some complimentary funds and, I agree we should look at active as well as passive funds!0 -
It's always a varied discussion on the passive/.active point and many of you have already decidd on which to invest in! However, some of us also think there is room for both passiveand active funds in a portfolio?
For instance, as we've been discussing the VLS funds in this thread as well as the OP's FTSE All World tracker then I personally feel there is always room for both types of funds in a portfolio. With VLS why not have for example 5% of your portfolio in mid/small cap companies and property plus maybe a smaller percentage with any specialist companies you take a fancy to? /QUOTE]
So, please can you suggest what I could add to my HSBC FTSE Tracker other than the 2 Strategic Bonds and Property Fund I already have?0 -
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So, please can you suggest what I could add to my HSBC FTSE Tracker other than the 2 Strategic Bonds and Property Fund I already have?
You could remove the HSBC All World fund and the bonds and property funds and then add all the ones your friend's IFA set her up with
In seriousness if you are happy with the country allocation, yield profile and volatility of the FTSE All-World, it is hard to recommend anything with equities in, because it will wreck that specific industry sector and company size and geographical allocation and developed world/emerging split, which you currently have and which you currently like.
Similarly if you are happy with your ratio of debt to property to equities, and the method of using two strategic bond managers to do the debt piece, and a tracker of closed ended property companies around the world (REITs) to do the property piece, it is quite difficult to say where to go from here. If an IFA was writing a plan, he wouldn't start with what you have and try to add "some other stuff she might like" around the side. He would start with a blank slate.
But as some "for examples"
What doesn't the all world tracker have a lot of?
1) Medium and small companies. The tracker by necessity is heavily weighted to the biggest companies. Is that the best mix of company types you could get? You could add active or passive funds in those areas.
2) Emerging markets. The tracker by necessity is weighted on "free float" and so countries where companies shares are privately held or are not available, do not feature highly. China is the world's second largest economy. They and India have a billion people each. Are they the second biggest thing in your portfolio? You could add active or passive funds in developing and frontier markets.
3) Home bias. The tracker by necessity is allocating your money to the biggest global stockmarkets, maybe 6-7% in UK at most. In retirement are you planning to spend 93% of your income and stored wealth on the imported elements of goods and services? You could add funds with more domestic UK exposure.
4) Private equity. The index by necessity only buys things listed on the stock market and not the other companies that are outside public ownership and owned by private investors and institutions such as other companies, wealthy families, pension funds, insurance companies and governments. No real trackers here but you could get global exposure diversified by sector, region, vintage year of investment etc by holding a fund-of-funds. Also helps with reducing the problem at point (1) where lots of your existing equities are mega caps.
What about your non-equity exposure?
1) Your commercial property exposure is mostly overseas and through listed vehicles which go up and down with the stock market. In the last credit crunch when equities fell 35-40%, REITS fell something like 30%. So much for diversification. So, you can change it up and add a UK-focused direct property fund. Beyond generalist exposure, if you want to try to get overly complex you could think about your future needs and look at a super specialist UK fund such as one that owns care homes. You may be a customer one day - and if not, in the meantime those businesses pay decent rent and the customer base isn't shrinking. Just throwing out ideas here, you don't have to like 'em!
2) "Absolute return" funds try to generate some absolute positive level of return every year through up and down markets, by using investment techniques that are not too heavily correlated with the main stock and bond market movements. They don't always succeed; some people say they are stupid and an equity tracker will always beat them in the long term. They may be right. However, from year to year, a fund that is less obviously correlated with your other main holdings, is a good thing. That is how diversification works, to help lower the overall volatility in your portfolio and to give you something from which to top up the bits that have performed poorly. You mentioned you are looking to de-risk a bit as you get older.
3) What isn't plain vanilla equities and properties and bonds? There's that "real assets fund" I mentioned in an earlier post when talking about your friend's portfolio; holds stuff from timber and infrastructure to some complex credit instruments which aren't caught by mainstream trackers. Really just another bunch of diversification that isn't captured by passive funds and isn't really needed, but adds something different if you are looking at what you have and don't have. Different is good.
I was originally going to do 4 ideas on the equity side and 4 on the non equity side. However, the existing idea of using a couple of strategic bond funds is good, if you've picked ones that truly roam all over the bond spectrum looking for returns, but don't get hung up on ekeing out a high income at any risk.
For example, for the long run you don't want funds that are purely strategic corporate bond stuff, packed with high yield opportunities that crash with the equity markets and never holding any government stuff. Even if you don't want some countries bonds now, you are likely to at some point in the next three decades. So if you are going "active management, strategic" , and not buying any specific bond types yourself for the bond allocation, don't just buy and forget; make sure the bond manager has a broad remit to buy all types and is not simply focussed on highest potential gain, if you are trying to use bonds to take the edge off your equity tracker risks. Consider how it is that you came to the conclusion that these particular bond funds were a good match for your needs, and what it is in your research that helped you to know you'd made the right choice.0 -
bowlhead99 wrote: »You could remove the HSBC All World fund and the bonds and property funds and then add all the ones your friend's IFA set her up with
In seriousness if you are happy with the country allocation, yield profile and volatility of the FTSE All-World, it is hard to recommend anything with equities in, because it will wreck that specific industry sector and company size and geographical allocation and developed world/emerging split, which you currently have and which you currently like.
Similarly if you are happy with your ratio of debt to property to equities, and the method of using two strategic bond managers to do the debt piece, and a tracker of closed ended property companies around the world (REITs) to do the property piece, it is quite difficult to say where to go from here. If an IFA was writing a plan, he wouldn't start with what you have and try to add "some other stuff she might like" around the side. He would start with a blank slate.
But as some "for examples"
What doesn't the all world tracker have a lot of?
1) Medium and small companies. The tracker by necessity is heavily weighted to the biggest companies. Is that the best mix of company types you could get? You could add active or passive funds in those areas.
2) Emerging markets. The tracker by necessity is weighted on "free float" and so countries where companies shares are privately held or are not available, do not feature highly. China is the world's second largest economy. They and India have a billion people each. Are they the second biggest thing in your portfolio? You could add active or passive funds in developing and frontier markets.
3) Home bias. The tracker by necessity is allocating your money to the biggest global stockmarkets, maybe 6-7% in UK at most. In retirement are you planning to spend 93% of your income and stored wealth on the imported elements of goods and services? You could add funds with more domestic UK exposure.
4) Private equity. The index by necessity only buys things listed on the stock market and not the other companies that are outside public ownership and owned by private investors and institutions such as other companies, wealthy families, pension funds, insurance companies and governments. No real trackers here but you could get global exposure diversified by sector, region, vintage year of investment etc by holding a fund-of-funds. Also helps with reducing the problem at point (1) where lots of your existing equities are mega caps.
What about your non-equity exposure?
1) Your commercial property exposure is mostly overseas and through listed vehicles which go up and down with the stock market. In the last credit crunch when equities fell 35-40%, REITS fell something like 30%. So much for diversification. So, you can change it up and add a UK-focused direct property fund. Beyond generalist exposure, if you want to try to get overly complex you could think about your future needs and look at a super specialist UK fund such as one that owns care homes. You may be a customer one day - and if not, in the meantime those businesses pay decent rent and the customer base isn't shrinking. Just throwing out ideas here, you don't have to like 'em!
2) "Absolute return" funds try to generate some absolute positive level of return every year through up and down markets, by using investment techniques that are not too heavily correlated with the main stock and bond market movements. They don't always succeed; some people say they are stupid and an equity tracker will always beat them in the long term. They may be right. However, from year to year, a fund that is less obviously correlated with your other main holdings, is a good thing. That is how diversification works, to help lower the overall volatility in your portfolio and to give you something from which to top up the bits that have performed poorly. You mentioned you are looking to de-risk a bit as you get older.
3) What isn't plain vanilla equities and properties and bonds? There's that "real assets fund" I mentioned in an earlier post when talking about your friend's portfolio; holds stuff from timber and infrastructure to some complex credit instruments which aren't caught by mainstream trackers. Really just another bunch of diversification that isn't captured by passive funds and isn't really needed, but adds something different if you are looking at what you have and don't have. Different is good.
I was originally going to do 4 ideas on the equity side and 4 on the non equity side. However, the existing idea of using a couple of strategic bond funds is good, if you've picked ones that truly roam all over the bond spectrum looking for returns, but don't get hung up on ekeing out a high income at any risk.
For example, for the long run you don't want funds that are purely strategic corporate bond stuff, packed with high yield opportunities that crash with the equity markets and never holding any government stuff. Even if you don't want some countries bonds now, you are likely to at some point in the next three decades. So if you are going "active management, strategic" , and not buying any specific bond types yourself for the bond allocation, don't just buy and forget; make sure the bond manager has a broad remit to buy all types and is not simply focussed on highest potential gain, if you are trying to use bonds to take the edge off your equity tracker risks. Consider how it is that you came to the conclusion that these particular bond funds were a good match for your needs, and what it is in your research that helped you to know you'd made the right choice.
Thank you so much bowlhead for your detailed response which I appreciate very much.
It has opened my eyes more widely to the type of opportunities in the market however I will have to study/research a lot more before I do anything at the moment.
As you said (tongue in cheek), I could always sell everything and buy the IFA list! Alternatively, there are many IFA's in my area (Yorkshire) that are offering an initial free consultation so really I have a lot to think about (difficult decisions)!0 -
The above ideas are not things you'll necessarily want to go through with of course- and after discussing with you, a real IFA might almost certainly decide many of them are unsuitable for your risk level or understanding. It doesn't hurt to know what's out there though, which is why I deliberately named a few things that are not on everyone's shopping list ; the diversity of investment opportunities means that surfing an index up and down is definitely not a "no brainer".
Indexes have the advantage that they are cheap and relatively easy to comprehend, and it is easy to write compelling arguments to get people to adopt them. But even staunch advocates such as "The Tracker" do not, presumably, just hold one simple global tracker in the arsenal.
True, a free consultation is really just to let them understand what type of a customer you are and what you might need them to do for you, and for you to understand what approach they would take to creating a solution and what it would cost (which they can't give you a sensible future on until they have explored with you what it is you might need). You would expect the more detailed discussion and the actual advice (other than superficial high level ideas about how what they could do might fit in with what you want) to be something that happens in later (paid) meetings.EdGasket wrote:That's fine if you want to hear a sales pitch; don't expect anything useful for free!
You could meet with two or three IFAs who have customers with similar levels of assets to you and see what they say and whether you feel you could get on with them.
It's unlikely that if you use an IFA you'd walk away with something that exactly mirrored what your friends have, as investing is something that employs a lot of opinion, even for two people with superficially similar goals and needs.0 -
I know it's an old article, it doesn't make it irrelevant. That's a commentary on his record up to the point he set out on his 'new' career.
https://www.trustnet.com/managers/factsheet/Neil-Woodford/utoeic/U/00000WOO04/
https://www.trustnet.com/managers/factsheet/mark-barnett/utoeic/U/00000264DW/
I'm sure he is not the first star fund manager who set up a new fund which underperformed relative to expectations. For my own part I make decisions based on historical performance of a fund and not the manager, although if the manager changes that may well impact future performance.0
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