Maximising investment portfolio performance

mollycat

Oggers wrote: »

Chaps


The role of any fund I possess is to make as much money as possible!

Yep; and the ones that may do that are also the ones that may have the potential to lose you a big chance of cash as well!!

All well and good though, as long as you understand risk, volatility and balance

Once again, I wish you well.

MyOnlyPost

Oggers wrote: »

The role of any fund I possess is to make as much money as possible!

I know very little about investing, I did a lot of reading before taking a SIPP out and self managing. I don't claim to know 1% of what others know who have already answered.

I have 7 Funds in my SIPP, Over the past 12 months my best performing fund is +32.7% and my worst is +6.4% but I haven't once thought about putting more into the higher returning fund at the expense of the lower. It may boom for a few more months but if (when) it stalls or even crashes I expect my lower returning fund to pick up the slack, this is why we diversify.

Set a growth target for the long term and invest accordingly. Pick funds that compliment each other and spread your coverage. Don't micro manage because as an amateur investor you are far more likely to get more decisions wrong than right, especially when jumping in after a rise. Minimise your decision making and you will minimise your mistakes (losses).

BananaRepublic

Oggers wrote: »

Mollycat

I had already read it twice! He does say a year may be adequate...However, to re-phrase the question perhaps, what do you believe is the best way of understanding if the fund is performing well or not?

Even a year may not be enough, you have to understand what you are investing in. For example, it might be that you invested in some UK active funds which got the Brexit wrong, and took a hit. You then move the funds elsewhere, and miss out on good future growth. Or you might have funds in the UK, US and Europe, and Europe does badly as a whole, so you move out of Europe, and then miss a growth spurt. Or you had some funds in small companies, which did poorly compared to bigger companies, but the following year economic conditions favoured smaller companies. In other words, if a fund underperforms over a reasonable timescale compared to the index, and other funds in that sector, then it may well be worth moving. But think carefully if it is the index as a whole which underperformed relative to other indices, ideally you need to have some understanding of why.

My own approach is to look at the long term performance of a fund, and the associated index or sector. If a fund underperforms relative to the index over a few years, then there is something wrong. And of course I diversify over many sectors/indices. However, there are many alternative approaches.

seacaitch

MyOnlyPost wrote: »

I know very little about investing

<snip>

Don't micro manage because as an amateur investor you are far more likely to get more decisions wrong than right, especially when jumping in after a rise. Minimise your decision making and you will minimise your mistakes (losses).

It seems to me that you've learned a great deal.

Most people cannot trade successfully, and attempting to do so will harm their returns; the more frequent and short term the trading, the worse the outcome.

So the approach should be that of long term investing, and the primary focus should be on the process not the outcome.

Effort should be put into formulating a simple but sound investment plan and then adhering to that plan. Make the "emotional payoff' (the feelgood factor) you enjoy from your investment arise from the disciplined application of your plan rather than arise from your portfolio being aligned with every short term movement in the market.

If you do this over time, sticking to your sound process, the good outcome will take care of itself. You'll have become a disciplined, unstressed, unemotional, investor, who enjoys decent long term returns.

Oggers

I am all in favour of not tinkering about. However, this approach assumes that you have made the correct investment decisions in the first place, got the fund balance right and diversified appropriately. I have made corrections to the latter, but being a novice investor, i am unsure of the former and would like to correct my mistakes. I think banana's suggestion is the way to go - which to an extent I already do by monitoring the funds against their associated index and use a Jensen's Alpha calculation to assess performance.

Another factor is the faith I have in the fund manager themselves. My portfolio is skewed somewhat towards Woodford and Fundsmith, both of which I am led to believe have excellent fund managers.

EdSwippet

Oggers wrote: »

... The role of any fund I possess is to make as much money as possible!

I'm going to suggest that this will be a route to dissatisfaction. At any given point one of your several holdings will be ahead of the others. This will lead you to repeatedly and constantly rethink whether the others are pulling their weight, or whether you should have instead put everything into the (current) winner. You'll either tinker, or at minimum feel a constant pull to tinker.

As an antidote, consider that what you need is not an optimal outcome, only a satisfactory one. Moving from a maximising to a satisficing mindset will make you happier overall.

Easier said than done, of course. My approach is to buy non-overlapping passive tracker funds -- this factors out star (and dog!) managers -- and then accept that if one or more of them is lagging and one or more storming ahead then the entire portfolio is operating entirely as expected.

Oggers

Ed

I don't think that there is anything particularly amiss with adjusting the approach if you believe you have invested in a dog, shooting said dog, and replacing it with what may be considered to be an improved performer. The problem is ensuring you have truly identified said dog rather than simply identifying a fund which is only temporarily down in the doghouse and which has as good a likelihood as any other of returning to the fold and thus may turn out to be a better performer than the one you intend to replace it with.

Making as much money as possible from the funds is not an unreasonable expectation - otherwise why do folk invest rather than stuff money under the mattress? - but I would accept that it should not consume your life and not lead to excessive tinkering about. .

AnotherJoe

Agree with that Oggers, a lot of people here throw up arms on the theory that you chose all your allocations perfectly first time round and so why change them, just rebalance.

I take the position my choices arent likely to be perfect at the time, let alone later, and it could even be, you did choose them perfectly but now the manager of such fund has decamped to run another one and the new person isn't as good.

One way I've discouraged my inclination to tinker though, is to go for more wide ranging global low cost funds for the core of my invstments. If I'm invested across the world then there's no point switching since the Venusian Stock Exchange melted down (literally) , whilst Jupiter and Saturn collapsed under pressure.

EdSwippet

Oggers wrote: »

Making as much money as possible from the funds is not an unreasonable expectation ...

It's not unreasonable, and it's what most folk aim for. However, it's possible to take the perspective that it's optimising the wrong thing, and I think you might have missed my point somewhat.

What you most likely want is to maximise your happiness, not your wealth. That's not to say that increasing your wealth is unimportant, since clearly having none will make you miserable. But the money is in effect just a scoring mechanism that you (hope to) translate later into happiness. And the relationship between money and happiness is not linear.

The term for losing sight of the ultimate goal and focussing only on the intermediate one is 'medium maximisation'. Pretty much everyone does this, by the way -- it's more or less a basic human trait.

AnotherJoe wrote: »

Agree with that Oggers, a lot of people here throw up arms on the theory that you chose all your allocations perfectly first time round and so why change them, just rebalance. ... I take the position my choices arent likely to be perfect at the time, let alone later, and it could even be, you did choose them perfectly but now the manager of such fund has decamped to run another one and the new person isn't as good.

No disagreement from me. The issue, of course, is a) identifying when to ditch a fund, and b) identifying next year's winning fund. It's the perennial problem with actively managed funds. Or single stocks, if individual stock picking is your preference.

AnotherJoe wrote: »

One way I've discouraged my inclination to tinker though, is to go for more wide ranging global low cost funds for the core of my invstments. If I'm invested across the world then there's no point switching since the Venusian Stock Exchange melted down (literally) , whilst Jupiter and Saturn collapsed under pressure.

Exactly. This would be sufficing.

ChesterDog

Oggers wrote: »

The role of any fund I possess is to make as much money as possible!

That's like picking a football team consisting only of strikers because you want it to score the most goals. Meanwhile, no one is in goal at your end...

You need balance, diversification.

And don't stress over having the 'best' choices. The thing that is the 'best' will vary, but your mix should be a blend of things that are at least likely to be 'very good' now and again.

Good enough is good enough.

Good enough can become the 'best' if you leave it to get on with it.

Personally, I would suggest you get yourself a good global tracker to do the boring heavy lifting, and then you can dither over the other stuff without doing too much damage if you must.