Beginner investing - mxed asset funds

bostonerimus

vanbobble wrote: »

Based on the limited amount of time I had to look this weekend.. the 3 funds / trusts I mentioned simply seem to be unusually high performing with a risk score quite a bit below others producing the same gains. I do appreciate that past performance is not something to make a decision on, but given the mixed asset allocation, surely better than an 80% or 90% equities based fund making the same gains?

Just looking at Nick Greenwood's performance at Milton his annualized return has been 6.5% over the last 14 years......my portfolio has returned an annualized 8.75% over the same period, but nothing like as much over the past 5 years. So is short term return more important than longer term return? and would you implement my portfolio over Mr Greenwood's.....probably not because he gets paid by investors and I'm just DIYing and keep things "ridiculously" simple.

As a beginning investor I'd advise you to start with one of the low cost open ended multi-asset funds, but If you are ok with the investment philosophy of your chosen funds and understand how they make their returns then go ahead, this is your portfolio and you have to be comfortable with your choices. But get ready for some volatility.

Sam_J

vanbobble wrote: »

I accept that the value of my investment may go up or down.. I would probably class myself as moderately adventurous.

I fear that a correction in the equities market may come sooner rather than later, and would like to avoid as far as possible any major losses in the short term.

Hi! I'm not sure that you are "moderately adventurous" based on the second paragraph in the quote above. Even investing in a 60/40 equity/bond split won't stop big losses in the short term if there is a crash. It might mean your portfolio drops 35% rather than 50% had you invested completely in equities. You need to ask yourself if you can stomach your £40k being worth £26k this time next year, and not knowing whether it will drop further... and be willing to sit it out and not sell. There is evidence that investors - investing in passive or active funds - do considerably worse than the average market performance due to making extremely poor decisions about when to sell.

If you think you can stomach those kinds of losses and be able to sit it out then go for it. What I might recommend is investing a smaller amount of your cash - perhaps a few thousand - in this investment for a few months and then assess your feelings about smaller market fluctuations. If you start getting concerned about your portfolio value dropping a couple of hundred, or you start obsessing about the daily valuations, then you should probably reassess your risk profile. This is what I did when I started investing.

seacaitch

vanbobble wrote: »

I am a novice investor so do not know much about financial markets

Having done a bit of research on Trustnet I have found 3 mixed asset funds / trust, which seem to have a varied mix of assets / sectors etc.. and which have all outperformed VLS 60% over the last 5 year period (notwithstanding the fees for these 3 options are between 1 - 2%. As far as I can see these are all 40 - 60% equities based

As a novice investor, you are almost compelled to place much too great an emphasis on recent performance - which is exactly what you have done.

The only real inference you can draw from a portfolio's strong recent performance is that financial markets proved particularly favourable for a portfolio of that shape during that period. That's not tremendously useful for forward looking decisions, although it is extremely hard for novice investors to appreciate that.

The key point is that the relative performance of a fund is a not a durable property of it (in the way that for example the resolution of a laptop computer's screen is a durable property) and hence has strictly limited use. NB a fund's costs should, in the main, be a durable property, hence the greater usefulness of weighting that property.

In your position, I would focus on a low-cost mainstream fund, which has an underlying ethos (portfolio construction & decision making) that you understand, that appeals to you, and that you believe you can stick with through thick and thin, ie. not panic sell if markets took a 20, 30, 40+% tumble.

Avoid attempts at data mining seeking funds that have performed unusually well in recent periods. If something has performed particularly well, you need to look at how that has been achieved to gauge whether it is durable outperformance, because if it's not then outperformance is as likely to be followed by underperformance. As a novice investor, it's impossible you'd be able to make this type of judgement, not least because it's (almost) impossible for anyone to make such judgements.

If you've not invested before, or for long, the simple act of feeding money into an investment regularly will begin to teach you a huge amount about both yourself and investing. Assuming you've plenty of life left in you(!), this experience will build and should serve you very well over the coming decades of your life. The important thing is to get started, and to do so on the right, sensible footing.

ArchBair

This link from FE Trustnet may be of interest regarding the best multi-asset funds both passive and active.

https://www.trustnet.com/news/770578/the-latest-multi-asset-funds-joining-the-fe-invest-approved-list?utm_source=Trustnet%20Newsletters&utm_campaign=d1b7cf1edd-20171106_Investor11_6_2017&utm_medium=email&utm_term=0_2314bd04ee-d1b7cf1edd-77272609