Lifestrategy or.....

bostonerimus

dunstonh wrote: »

Fee is not everything though. It is a secondary consideration to suitability.

If you ask someone if they would rather pay 0.22% or 0.75% then they will say 0.22%.

However, if you say would you rather have got 73.16% after charges of 0.22% or 91.65% after charges of 0.75% then the answer will likely be different.

Obviously.....if you can guarantee that the extra charges will give me added value. But they usually don't. I assume that your example compares the VLS60 return to the return of the closest portfolio you have that you mentioned above. Does your example include advisor fees or just the fund and platform fees? If it does include the advisor fee then it is a good result. For example if we were to take a DIY investor getting a 73% return from 2008 to 2017 that's 6.3% annual average. The 91% return is 7.4% average so advisor fees of 1% would almost entirely wipe out the gain and that's assuming they get that much gain....which most don't. So if someone says do you want 73% over 9 years or 91% over 9 years for an annual fee of 1%..........its basically the same.

Audaxer

dunstonh wrote: »

The allocations we use are fluid and bought in. They are also based on timescale (short, medium and long). The closest match to VLS60 (and assuming long term) is currently 25.0% fixed interest, 43% global equity, 10% property and 23% UK equity (contains 10 funds of which 5 are passive and 5 are active). This time last year it was 27.5% fixed interest, 46% global equity, 9.5% property and 17% uk equity (4 passive and 6 active). There were two fund changes over that 12 months and all weightings in each fund are different.

Thanks dunstonh, I'd love to know which 10 funds are in the current portfolio. Is it the same portfolio you would use/recommend for a long-term growth investment of any amount over £100k?

As your portfolio is fluid and will have some changes each year, I think it would be difficult for a DIY investor to achieve as good returns without the specialist knowledge or bought in allocations - I guess that it what you pay an IFA for.

For a DIY investor, at least with a VLS, L&G MI and/or HSBC Global Strategy fund, we basically have a buy and hold fund(s), which will hopefully give us returns in line with global markets. I think the danger is if you make bad choices as a DIY investor choosing single sector funds, you could end with poorer returns than choosing one or more of the passive multi asset funds. Do you agree?

dunstonh

Obviously.....if you can guarantee that the extra charges will give me added value. But they usually don't.

There is no guarantee your way is better either.

I assume that your example compares the VLS60 return to the return of the closest portfolio you have that you mentioned above.

Obviously. Otherwise, any comparison is pointless.

Does your example include advisor fees or just the fund and platform fees?

After adviser charges.

Thanks dunstonh, I'd love to know which 10 funds are in the current portfolio. Is it the same portfolio you would use/recommend for a long-term growth investment of any amount over £100k?

Depends. We have an income version, active, passive and hybrid and socially responsible version. Active is not used any more as hybrid is consistently better. Hybrid, Passive and Income are the main ones.

However, some are constrained by legacy products where you cant get exactly the fund or allocations you want. So, you build using comparable assets.

As your portfolio is fluid and will have some changes each year, I think it would be difficult for a DIY investor to achieve as good returns without the specialist knowledge or bought in allocations - I guess that it what you pay an IFA for.

I have been investing for over 20 years and you key is to know your limitations and stay within your knowledge. Don't reinvent the wheel and understand that there are plenty of ways to invest. There is no one best way. A DIY investor can do just as well or better depending on the time and knowledge they have. I dont have the skills to build my own allocations or carry out the sort of research required. Most IFAs do not. However, I buy in that data and information.

For a DIY investor, at least with a VLS, L&G MI and/or HSBC Global Strategy fund, we basically have a buy and hold fund(s), which will hopefully give us returns in line with global markets. I think the danger is if you make bad choices as a DIY investor choosing single sector funds, you could end with poorer returns than choosing one or more of the passive multi asset funds. Do you agree?

Agree. Little you can do wrong with any of those.

Audaxer

dunstonh wrote: »

I dont have the skills to build my own allocations or carry out the sort of research required. Most IFAs do not. However, I buy in that data and information.

That really does surprise me. I wonder what chance most DIY investors have got of building the right allocations and carrying out the research required if you and other IFAs don't have these skills?

I think I'll stick to mostly multi asset funds although I do have some single sector active funds in an income portfolio.

firestone

bostonerimus wrote: »

VLS60 isn't difficult to beat, particularly when you are looking backwards and know the results. I probably wouldn't solely use VLS60 if I lived in the UK because of the UK weighting, but like A_T's suggestion of a 60/40 World Equity Index and Bond Index.

If tax planning becomes more important to you than investment return then I can see the need for more complex portfolios, but for the vast majority of people they simply aren't necessary to meet their goals. With a 60/40 US biased portfolio I managed an 8.5% average annual return over the last 30 years. Such a portfolio is easy to implement, gives a good framework for rebalancing and is inexpensive as you don't need an FA or IFA and the fees are low. Of course financial advisers are going to want to manage pots over $20k and for many people that can't or don't want to DIY their services will be necessary. But you can easily save 0.5% or 1% in advisor fees with a minimal amount of knowledge and effort and in any year you'll probably beat at least 50% of those advisor portfolios too.

Aggressive saving and 30 years of 8.5% average annual returns has given me a mid seven figure pension pot that is mostly in just 3 index tracker funds. I have them arranged for tax efficiency and I'm managing annual transfers between various accounts to minimize my lifetime tax bill and the tax issues for inheritance. My investments and their management are pretty simple and they have provided solid returns.

well done on your returns -assume you did not use trackers at the start if so what made you change?

Alexland

Audaxer wrote: »

That really does surprise me. I wonder what chance most DIY investors have got of building the right allocations and carrying out the research required if you and other IFAs don't have these skills?

I think I'll stick to mostly multi asset funds although I do have some single sector active funds in an income portfolio.

I would imagine most DIY investors waste a lot of trading fees making a complete hash of their portfolio following share tips and active funds advertised on billboards at train stations, or tipped in newspaper columns or freebie investment magazines.

Certainly that was my experience when I was new to investment in the late 90s. At one point I became so frustrated that I sold my investments for a few years (with the exception of my pension) to concentrate on buying bigger property which turned out just as well.

I don't think we will do too badly with our VLS, L&G MI and HSBC multi asset funds. Another upside is that when markets are down and you don't even want to look at the red blood in your accounts to rebalance - you don't have to!

Given I like to spread my fund manager and platform risk my target pension configuration in 3 years time when I am 40 will be L&G in II, VLS in Vanguard Investor (when they launch their pension assuming fees are reasonable), HSBC (currently VLS) in Halifax SD and scraps awaiting transfer in my workplace scheme.

Plus a UK ETF or IT investment (possibly City of London) in a HL (currently Nutmeg) LISA to balance out the lack of UK bias in the HSBC. The HSBC will probably be more bonds to compensate for the equity LISA.

Alex

BLB53

I wonder what chance most DIY investors have got of building the right allocations and carrying out the research required if you and other IFAs don't have these skills?

I have been a diy investor for many years. Basically asset allocation is about matching the mix of bonds & equities to get the best match to your temperament with a view to staying in the game for the long term. When I was younger I was up to 90% equities but now in my 60s its down to 55% and will probably get down to 40% over the next decade.

Some younger people will feel uncomfortable with a high % of equities...some older people will be OK with 100% equities. Its all down to how each individual reacts to the sudden ups and downs in the markets so the main advice I would pass on is know yourself and don't take on more risk than you can handle.

Not really rocket science imho.

Audaxer

BLB53 wrote: »

I have been a diy investor for many years. Basically asset allocation is about matching the mix of bonds & equities to get the best match to your temperament with a view to staying in the game for the long term. When I was younger I was up to 90% equities but now in my 60s its down to 55% and will probably get down to 40% over the next decade.

I'm retired and roughly 60/40 equities to bonds, but also with a large cash buffer. The only reservation I have about increasing the bonds, is that people are being very wary about bonds, anticipating a crash although it wouldn't be as big as equities crash.

As well as passive multi asset funds I have also chosen active funds for income as I like the idea of some regular dividends coming in even when there is an equity crash. I've got more lumps sums from Cash ISAs to invest soon - just trying to decide whether to put it in multi asset growth funds or more in active income funds or ITs.

bostonerimus

firestone wrote: »

well done on your returns -assume you did not use trackers at the start if so what made you change?

My first "investment" back in 1987 was a deferred annuity offered by my first employer's retirement plan. The total contributions were about $8k and now, 30 years later it's worth $46k. So about 6% compounding with basically zero risk. But I also put money into a couple of equity index funds from Fidelity. As I moved employers I stuck with index funds from either Fidelity, TIAA-CREF or Vanguard. I do own one active fund, Vanguard Wellesley, but it is a small part of my portfolio and I keep it for sentimental reasons.

firestone

looks like you could hold a worse fund for sentimental reasons!