Great British Invest off or Passive V Active Discussion

TBC15

For those who are curious to compare their Passive or Active investment strategies I'm starting a new thread today with monthly updates (Bottom lines only in £).

Portfolios rebased to £100000 starting on the last active day of trading on the 29th Sept as a start point and constituents followable on Trustnet .

Ideally the portfolios should mirror the investor's actual holdings as near as possible with Trustnet. This is not really a fantasy league.

If you are interested please leave details of your Portfolios here
http://forums.moneysavingexpert.com/showthread.php?p=73192270#post73192270

and monthly updates here.
http://forums.moneysavingexpert.com/showthread.php?p=73192349#post73192349

It should be interesting to see how strategies fair over the months ahead.

AndyT678

If you want to test whether active or passive produces the best result surely you need to remove the effect of people using differing asset allocations. How do you plan to do that?

Ray_Singh-Blue

Interesting idea, although agree with AndyT678 that it is going to be difficult to make comparisons. Apples and pears.

The TCB15 active portfolio which you have listed in another thread appears to be 100% in equities, with a bias towards tech & perhaps certain geographies. Against what are you going to benchmark it? I guess you could compare it against a passive global stock weighted ETF, but it is not really the same thing.

My own portfolio comprises shares, bonds, commodities and cash. It would be unhelpful to compare our portfolios, and I would probably not choose the same benchmark as you.

One way it could work would be if you split your own portfolio down the middle into passive and active halves, and compared the performance over time. In fact I tried this for a while, but found it difficult to follow through.

Linton

AndyT678 wrote: »

If you want to test whether active or passive produces the best result surely you need to remove the effect of people using differing asset allocations. How do you plan to do that?

If you mean equity/bond allocation then I think it makes more sense to base the comparison on 100% equity. However it will no doubt be interesting to see in practice what return you sacrifice for the risk reduction of bonds.

If you mean different allocations by country/sector/company size, the whole point is that people do use different asset allocations. If you want the passive allocation use the passive fund, if you want something very different you must go active. You can only compare passive funds that exist with active funds that exist. The key comparison is surely a World Index, since the passive assertion is that The Market cannot be beaten in the long term by a subset.

AnotherJoe

Linton wrote: »

If you mean equity/bond allocation then I think it makes more sense to base the comparison on 100% equity. However it will no doubt be interesting to see in practice what return you sacrifice for the risk reduction of bonds.

If you mean different allocations by country/sector/company size, the whole point is that people do use different asset allocations. If you want the passive allocation use the passive fund, if you want something very different you must go active. You can only compare passive funds that exist with active funds that exist.

I think the point being made is you could have your own passive portfolio, based on all passive funds, but as said, the allocation by country/sector/company size is arbitrary, so you cant compare passive vs active (which is what this purports to set out to show) because peoples passives will be very different to each other let alone an active vs a passive. Even the "benchmark" of passive, VLS, is an arbitrary allocation.

Linton wrote: »

The key comparison is surely a World Index, since the passive assertion is that The Market cannot be beaten in the long term by a subset.

Not so sure about that. I think the assertion is that for a given country/sector/company size, that market cannot be beaten.

Even a world index doesn't cover all markets and sectors. The assertion isnt that any given passive will beat any given active.

coastline

If possible I'd like to join in but I'll be trading passive ETF's actively if that makes sense.I'd also like to trade a few FTSE shares.I'll stick with £100,000 cash at the moment until the DOW goes off the boil.
Send a reply if I'm in the team..

TBC15

The gist of this was to compare actual outcomes for people who actively invest V people who passively invest. I.e. is looking for managers with a good track record worth the bother or performance wise are you just as well buying a tracker.

Similarly as time goes on and we hit some hard times how will the active investor fair against the investor will a tracker with bonds VLS 80,60 etc. .

ams25

To be meaningful I suggest we post active equivalents to passives, like I have done with vls60. This removes the asset allocation issue, which is going to drive perfrormance more than fund choice.

Maybe others could take the same approach..ie using vls 60/80/100 (as a benchmark) vs your active choices with the equivalent allocations. Then we are comparing like with like (or close).

Linton

AnotherJoe wrote: »

Not so sure about that. I think the assertion is that for a given country/sector/company size, that market cannot be beaten.

.....

One could assert that, but it's not very helpful to investors since you couldnt compare any fund or portfolio with any other one since they will all be different barring single index funds. You cant get country/sector/company size indexes.

TBC15

Ray_Singh-Blue wrote: »

Interesting idea, although agree with AndyT678 that it is going to be difficult to make comparisons. Apples and pears.

Think of this more as a farmers forum you chose to grow Apples I chose to grow pears. Once a month we go to the market and it decides the relative merits of fruit production.

cloud_dog

Whilst I understand and to a degree accept the discussions around the 'apples and pears' points, I think it is over complicating what is a reasonable consideration for the average guy or gal.

If you continue down this road you may as well accept that you cannot compare even apples with apples. If you pick two UK Smaller Company funds to compare and one performs significantly better/worse but one is overweight in financials or underweight in technology (or whatever); you'll end up excusing differences because, well.... you were comparing Cox's with Gala's and obviously they are different beasts.

I would agree to stick to 100% equity funds but I would argue what is reasonable for a lay person to consider, digest, and have an understanding of when comparing.