Don't buy index trackers.........for my sake

username12345678

davieg11 wrote: »

Just wait till the next big market crash and all these passive investors, especially the Loyal Vanguard in this forum, will get the shock of their lives. I'm quietly confident my 6 active funds in my portfolio won't drop as much as the passive funds.

Can you expand on reasoning behind this?

It's something that i've heard quite a lot - and in my current investing position I would rather hope it's true.

There is however some doubt...

http://moneyweek.com/active-funds-performance-in-bear-markets/

bostonerimus

davieg11 wrote: »

Just wait till the next big market crash and all these passive investors, especially the Loyal Vanguard in this forum, will get the shock of their lives. I'm quietly confident my 6 active funds in my portfolio won't drop as much as the passive funds.

Well my pretty lazy portfolio and rebalancing when my asset allocation is radically changed by market volatility has taken me through some major corrections and down turns since 1987. Of course performance in both bull and bear markets is important and to underline the point of this thread's first post, I'm glad of your confidence and hope that it is warranted and that you are not one of the disappointed active investors.

TBC15

bostonerimus wrote: »

I live in the USA so my asset allocation wouldn't be right for someone in the UK. 30 years ago my asset allocation was 60% US equity (Russel 3000) and 40% in a US bond index. As I've got older I've added some international equities so now I'm basically 50% US equity, 20% total international tracker (ex USA) and 30% US bonds tracker. I've stopped rebalancing and because I'm retired with sources of guaranteed income I can take on a lot if risk. I've tracked my return over the last 30 years and the average is 8% per year.

I just chose a "lazy portfolio" of broad indexes. A criticism might be my relative lack of small and mid cap funds as I am market cap weighted.....but others would say that's a good thing.

Here are the basic funds

https://personal.vanguard.com/us/funds/snapshot?FundId=0585&FundIntExt=INT
https://personal.vanguard.com/us/funds/snapshot?FundIntExt=INT&FundId=0569
https://personal.vanguard.com/us/funds/snapshot?FundIntExt=INT&FundId=0584

I’m sorry I just can’t see the attraction; a portfolio with the 3 above funds would have me looking for the phone book to get an IFA.

Linton

bostonerimus wrote: »

.......

I just chose a "lazy portfolio" of broad indexes. A criticism might be my relative lack of small and mid cap funds as I am market cap weighted.....but others would say that's a good thing.

Here are the basic funds

https://personal.vanguard.com/us/funds/snapshot?FundId=0585&FundIntExt=INT
https://personal.vanguard.com/us/funds/snapshot?FundIntExt=INT&FundId=0569
https://personal.vanguard.com/us/funds/snapshot?FundIntExt=INT&FundId=0584

Many things are very different in the US to other parts of the world. Small Companies is one of them. US Small Companies are highly correlated with the main index. So there is little point in having a separate holding. The UK in particular, but also Europe and Japan, are rather different:

Performance over 5 years:
FTSE Allshare: 80.5%
FTSE Small Cap (Ex-IT): 146%

MSCI North America: 136%
Russell 2000:138%

MSCI Europe: 104%
MSCI Euro Small Cap: 165%

MSCI Japan: 108%
MSCI Japan Small Cap: 132%

General rule - US data and experience should only be applied elsewhere with very great care.

bostonerimus

TBC15 wrote: »

I’m sorry I just can’t see the attraction; a portfolio with the 3 above funds would have me looking for the phone book to get an IFA.

My asset allocation would not be good in the UK, but if I lived in the UK I might be 50% International stocks, 20% UK stocks and 30% UK bonds. I might do that with 3 or 4 individual funds or just buy a couple of multi-asset funds like VLS80 and VLS60 if I wanted to fine tune the equity to bond ratio.

TBC15

bostonerimus wrote: »

My asset allocation would not be good in the UK, but if I lived in the UK I might be 50% International stocks, 20% UK stocks and 30% UK bonds. I might do that with 3 or 4 individual funds or just buy a couple of multi-asset funds like VLS80 and VLS60 if I wanted to fine tune the equity to bond ratio.

Please don’t get me wrong I’ve seriously been investigating trackers for the day when my mental faculties are not at their finest. I’m keeping a keen eye on Vanguard LS100.

I’m fiscally prudent to the point of with regard to air travel if it was cheaper to stand I’d do it.

I’ve been investing seriously for about 25ys and educating myself mostly from forums such as this that that have some extremely talented contributors that are willing to share their thoughts and advice.

The mantra spoken by the trackers is the average fund manager fails to beat the index, very true. So don’t use an average fund manager, all the information is out there.

Yes I do have a tracker in my portfolio L&G Global Technology Index Trust.

bostonerimus

TBC15 wrote: »

The mantra spoken by the trackers is the average fund manager fails to beat the index, very true. So don’t use an average fund manager, all the information is out there.

The market needs active investors. I'm personally very glad that you are out there keeping the market efficient.

Ray_Singh-Blue

davieg11 wrote: »

Just wait till the next big market crash and all these passive investors, especially the Loyal Vanguard in this forum, will get the shock of their lives. I'm quietly confident my 6 active funds in my portfolio won't drop as much as the passive funds.

Why would that be a shock?
If the markets drop by 50%, so will the trackers. Where's the surprise in that?

Sure, your 6 active funds may well not drop that much, if their goal and structure is to preserve capital during market downturns. But unless you have a high degree of certainty about how they will perform, then potentially you could be the one in for a shock?

Thrugelmir

bostonerimus wrote: »

The market needs active investors. I'm personally very glad that you are out there keeping the market efficient.

Interesting fact about the US market over the decades is that only around 800 shares (of some 25,000) have returned a better rate than cash. Vast majority of performance has come from only 8 stocks. Explains a lot really.

TBC15

bostonerimus wrote: »

The market needs active investors. I'm personally very glad that you are out there keeping the market efficient.

I’m glad I’ve made your day, have a good one.