How To Own The world. New fund

firestone

bostonerimus wrote: »

Here is an excellent discussion on "trend following" over at Bogleheads.com. There will probably be some bias there, but it does have links to all the academic papers referenced by Andrew Craig and some good observations. Of course this sort of moving average approach has been around for ages so Mr. Craig isn't selling anything new. For my part I do the opposite by selling things that have gone up and buying things that have gone down to keep my allocation constant, which was hard in 2008, but worked out well enough. I keep my indexes large so that they are fairly efficient and then fall into the warm arms of market averages. My portfolio and approach is just one solution in a space of almost infinite solutions and, like many others would have done, it's brought me to a very comfortable place. The trick isn't to maximize return it's to maximize the probability of getting to one of those nice comfortable peaks in the solution space. I have no need to win or beat anything, just meet the numbers in my plan.

https://personal.vanguard.com/us/funds/snapshot?FundId=0521&FundIntExt=INT&funds_disable_redirect=true

think your last sentence is very true as with the amount of information out there it is very hard especially with active funds to not keep comparing and tinkering rather then being happy with hopefully a gain.But it seems human nature and included myself at times to want that extra %. Even with a passive approach people seem to check the market every day instead of relaxing and going with the flow.
Did read the book a while back and seem to remember Gold & Silver played a large part as well?

bostonerimus

firestone wrote: »

think your last sentence is very true as with the amount of information out there it is very hard especially with active funds to not keep comparing and tinkering rather then being happy with hopefully a gain.But it seems human nature and included myself at times to want that extra %. Even with a passive approach people seem to check the market every day instead of relaxing and going with the flow.
Did read the book a while back and seem to remember Gold & Silver played a large part as well?

The desire beat the market, ie chase alpha, is what keeps financial professionals employed. I would sign up for active management or buy Mr Craig's fund or retain an IFA/wealth manager to manage my funds if they could guarantee "above average" returns. But they won't because they can't. They will promise and point to their past successes, but they have selection bias and always down play the failures. If you can tune out the external horse race you have a good chance of success on your own terms rather than somebody else's.

firestone

bostonerimus wrote: »

The desire beat the market, ie chase alpha, is what keeps financial professionals employed. I would sign up for active management or buy Mr Craig's fund or retain an IFA/wealth manager to manage my funds if they could guarantee "above average" returns. But they won't because they can't. They will promise and point to their past successes, but they have selection bias and always down play the failures. If you can tune out the external horse race you have a good chance of success on your own terms rather than somebody else's.

Its not so much passive v active (but well done on sneaking it in:)) but that with any system unless you have picked a dog when do you rest easy with your choice.
But with regards this fund the reply was given that its not the same as an L&G multi asset fund but looks like Andrew Craig was thinking of all their funds not the cheaper 4/5/6 etc but guess he would rule out the VLS or HSBC range as well.So in that case is it not more like an absolute return fund?

gif1

Hello everyone, I understand and appreciate the high(er) costs for this fund, but after having read the documentation, I find its rationale compelling and I would like to give it a try. I currently invest (just started) 500 per month in the HSBC Global Strategy Balanced accumulation fund, with a view at doubling that next year. In the meantime, I could spare an extra 100/150 per month and this is the amount I am considering investing in the VT-PEF-Global-Multi-Asset-Fund, just to start. Would it be something silly of me to do? Would it make more sense investing in only one fund (either HSBC or VT-PEF)? Or, by your experience, do you strongly advice against investing into this fund, in the first instance?
Thank you, your feedback is much appreciated, as always.

firestone

some will say yes & others will say no and in general people prefer the "not all your eggs in one basket idea".But if you've made your choice and are happy then go for it as your decision is the one that counts

bostonerimus

I'm one of the ones who wouldn't buy VT-PEF because I won't pay such high fees and I think techniques that seek to "beat the market" are hit and miss at best. Now that does not mean that you should not buy it if you think I am wrong.

gif1

Apologies for the naïve question, but will 9£ per 1000£ (in charges) make a big difference to my return? I have read the documentation and their back-tested annual return is after costs (conservative approach, being 4x higher in their model), so not that bad? Is that amount in charges not worth the protection (or better, the mitigation) in case of a crash?

grey_gym_sock

gif1 wrote: »

Apologies for the naïve question, but will 9£ per 1000£ (in charges) make a big difference to my return?

yes, 0.9% a year is a very significant difference in charges.

suppose you invest £500 a month for 20 years, and returns (before charges) are 6% a year.

if you pay 0.1% a year charges, then you end up with £225,272.

but if you pay 1% a year charges (0.9% more), you end up with only £203,728.

I have read the documentation and their back-tested annual return is after costs (conservative approach, being 4x higher in their model), so not that bad? Is that amount in charges not worth the protection (or better, the mitigation) in case of a crash?

i think the back-test giving higher returns for their method, compared to simple buy-and-hold, is somewhat suspect. some other studies, of similar approaches, have only claimed to achieve about the same return as buy-and-hold, but with lower volatility and smaller drawdowns.

small changes in the details of the strategy could account for this difference in returns. the problem is that the exact version of the strategy that happened to give higher returns in the past may not be a version that does so in the future. there is a real risk when using back-testing that, perhaps unintentionally, you pick a version of a strategy that happens to have done particularly well in the past. but it may not in the future.

so i would be very wary of going into the strategy in the hope of higher returns than a simpler, cheaper, buy-and-hold strategy. of course, if they do get higher returns (by a large enough margin), that could outweigh the effect of their higher charges. if they don't, higher charges will be a drag on returns.

bostonerimus

gif1 wrote: »

Apologies for the naïve question, but will 9£ per 1000£ (in charges) make a big difference to my return? I have read the documentation and their back-tested annual return is after costs (conservative approach, being 4x higher in their model), so not that bad? Is that amount in charges not worth the protection (or better, the mitigation) in case of a crash?

Fees are important and you need to compare them with the gain you might expect from a fund......so if one fund with no fees gets 5% return you'll need the one charging 1% to make 6% to do as well......so that's a 20% better return.

The parameters for back testing can be chosen to give a range of results, one obvious one is the time period. People selling funds are always going to make them seem attractive, you'll never see bad figures in the promotional material for funds so always check those numbers and be a bit cynical.

gif1

Thank you for your answers, but my question was more like "Is 0.9% a premium worth paying to reduce the volatility next time a crash happens?". I see this like an "insurance" and was wondering whether the premium is fair. The fund (seems to) offer similar performance (after charges and costs) to other multi-asset, but with far lower volatility. It is the latter aspect I am interested. I guess anyone would settle for similar performance and lower volatility, all things being equals?