Lifestrategy or.....

Linton

bostonerimus wrote: »

Yes to DIY you need to understand the basics of investing. But they are pretty basic. There are many vested interests that want investing to appear difficult and to be expensive when in fact anyone with a little common sense and an understanding of percentages and compound interest can be successful. As a portfolio grows the tax implications can become complex and if you want to get into offshore structures then advice is probably necessary, but most people simply don't need those and so can DIY.

I very much doubt that the majority of people in this country can calculate compound interest.

But yes if you are starting from scratch with small contributions, by the time you have accumulated life changing amounts of money you should know what you are doing, at least if you have spent a bit of time finding out and have learnt from your mistakes.

On the other hand things are very different for those people with no experience who start off with a very large lump sum from an inheritance or a pension. They wont have the opportunity to safely learn from any mistakes.

JustAnotherSaver

Alexland wrote: »

Yes those are the ones we were referring to and they work similar to the L&G MI taking a risk based approach but without the UK equity bias. However as a result this has a higher percentage of US than VLS or L&G MI. I don't expect the equity/bond ratios to move significantly in the L&G or HSBC fund but I guess it could happen if the world turns upside down. There are actually 5 but they are not listed on all platforms:

These multi index funds are essentially robo-investing in a traditional fund wrapper.

http://www.assetmanagement.hsbc.com/uk/advisers/fund-range/global_strategy_funds.html

"HSBC Global Strategy Cautious Portfolio
HSBC Global Strategy Conservative Portfolio
HSBC Global Strategy Balanced Portfolio
HSBC Global Strategy Dynamic Portfolio
HSBC Global Strategy Adventurous Portfolio

All five portfolios offer the benefits of diversification and an actively managed asset allocation, while delivering what we believe to be significantly good value.

Each portfolio holds a mix of HSBC's own index tracking funds and Exchange Traded Funds (ETFs) so we can keep costs low and maintain strong governance. We also include several direct investments including UK government bonds. All of the portfolios invest across both developed and emerging markets.

The portfolios are monitored and rebalanced daily, while the allocation of assets between the different asset classes is formally reviewed on a monthly basis. The monthly review ensures each of the five portfolios are managed in line with their agreed risk budgets and provides the potential to take advantage of any short term market opportunities that arise."

As I value a bit of home bias this would be number 3 on the podium for me.

Alex

Thanks for the reply. Very helpful.

If the VLS, LG MI & HSBC funds are all somewhat similar then it makes me ask...

Q:) Why would someone pick one over the other?

I've seen it mentioned here about VLS being biased towards UK equities. So since VLS60 is a popular fund i took a look...

http://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/v/vanguard-lifestrategy-60-equity-accumulation/fund-analysis

International Equities: 43.62%
UK Equities: 13.68%.

Now 13.68% when you've got one that's 3-times as much is (to me at least) not what i would call a heavy bias.

Even when you look at their VLS100

http://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/v/vanguard-lifestrategy-100-equity-accumulation/fund-analysis

International Eq: 73.03%
UK Eq: 23.10%

So if i'm reading here that these have a heavy UK bias then what would be considered not heavy? Virtually zero for UK?


I'm getting the loose jist of it i think but probably not enough of a grasp to fully understand the differences between the 3 providers.
As i like the idea behind them with the fund-of-fund and rebalancing what would the core differences be between the VLS, LG & HSBC? I suppose this is pretty much just a rewording of my earlier question, but anyway...

Alexland

JustAnotherSaver wrote: »

If the VLS, LG MI & HSBC funds are all somewhat similar then it makes me ask...Why would someone pick one over the other?

VLS if you want fixed allocation with UK equity bias. L&G if you want risk managed allocation with UK equity bias. HSBC if you want risk and opportunity managed allocation with no country equity bias but as a result heavy in the US.

As you say it doesn't make a huge amount of difference but gives us something to talk about while my son is having his afternoon nap today.

Alex.

bostonerimus

Linton wrote: »

I very much doubt that the majority of people in this country can calculate compound interest.

This is why a personal finance class should be mandatory in all secondary schools.

AnotherJoe

JustAnotherSaver wrote: »

Thanks for the reply. Very helpful.

If the VLS, LG MI & HSBC funds are all somewhat similar then it makes me ask...

Q:) Why would someone pick one over the other?

I've seen it mentioned here about VLS being biased towards UK equities. So since VLS60 is a popular fund i took a look...

http://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/v/vanguard-lifestrategy-60-equity-accumulation/fund-analysis

International Equities: 43.62%
UK Equities: 13.68%.

Now 13.68% when you've got one that's 3-times as much is (to me at least) not what i would call a heavy bias.

Even when you look at their VLS100

http://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/v/vanguard-lifestrategy-100-equity-accumulation/fund-analysis

International Eq: 73.03%
UK Eq: 23.10%

So if i'm reading here that these have a heavy UK bias then what would be considered not heavy? Virtually zero for UK?

30% of the equities in either case are UK based then. Thats pretty high when IIRC the UK is about 6% global economy?

That is offset / exaggerated in practice since most of those big companies that will make up that 30% do most of their business outside the UK, even so its also just a handful of companies in a handful of industries so its quite volatile.

Fatbritabroad

bostonerimus wrote: »

This is why a personal finance class should be mandatory in all secondary schools.

Not just in schools I showed a 25 year old chap at work a simple compound interest calculator showing 100 a month over 40 years at work as he was moaning about pension being a waste. His reaction was why the hell don't pension advisers just show you this instead of giving us all this complicated information. My sentiment exactly. Treating customers fairly my foot

Audaxer

Linton wrote: »

The next problem is choosing the funds. The criteria are:
1) Overall asset allocation. This is not straightforward as for example a possible choice for SE Asia may have a high % tech which needs to be balanced by a choice of lower tech funds to cover Europe.
2) Consistent good performance. Based on individual annual returns in Trustnet (rather than 1/3/5 years) and where possible data covering the Great Crash. Dont look for the very best fund but rather one that should be good enough.

Mainsteam funds of a non trivial size dont tend to make catastrophically wrong decisions. Because the Growth portfolio focusses on asset allocation there is virtually no reason to choose a celebrity manager or a conviction fund. After all they could decide to change their allocations at any time. Also the range of assets in which they choose invest tends to be too limited to justify a significant holding. Were the asset allocation of a chosen fund to change then I may well sell the fund - for example I have switched out of Stewart Investors Asia Pac Leaders fund since it broadened its remit possibly because it became too large.

Problems with individual funds are minimised by keeping all funds within a limited range of %s, currently 5%-18% so in the unlikely event of any one suffering a major fall the overall consequences would not be catastrophic.

The effort with running the Growth fund is to keep all the factors balanced. At the moment this is made more difficult by a decision to switch out of some partial duplications.

Thanks Linton for your detailed reply. It does sound like a lot of knowledge and experience is needed to maximise returns on a growth portfolio like you are doing. Are there not any active 100% equity individual funds that include all the asset classes you mention, that would give the same sort of returns you are getting from your single sector portfolio?

Linton

Audaxer wrote: »

Thanks Linton for your detailed reply. It does sound like a lot of knowledge and experience is needed to maximise returns on a growth portfolio like you are doing. Are there not any active 100% equity individual funds that include all the asset classes you mention, that would give the same sort of returns you are getting from your single sector portfolio?

The asset allocation is far from what you can get from any general fund, in particular >50% small and midcap companies, and only about 33% US overall. There ise one fund to cover a significant part of the large cap. The portfolio holds 12 funds, and probably needs 10 as a minimum, to provide what I want.

bostonerimus

Audaxer wrote: »

Thanks Linton for your detailed reply. It does sound like a lot of knowledge and experience is needed to maximise returns on a growth portfolio like you are doing. Are there not any active 100% equity individual funds that include all the asset classes you mention, that would give the same sort of returns you are getting from your single sector portfolio?

You can make this as complex as you want by drilling down in an attempt to squeeze the most out of a portfolio with [strike]numerology and hunches[/strike] research. Most people who do that will fail to beat an index investor. The ones who succeed get far more attention than those that fail.

BananaRepublic

Alexland wrote: »

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

I don't know if you are right about most DIY investors. However in my experience most people who dabble in the stock markets get cold feet once a crash occurs. They are often drawn in at the end of a bull market, when the flavour of the month is to buy equities. Of course most people do invest via pension schemes, but take little interest in them, tending to accept the advice of financial advisors who sold them. One of my first pensions from a workplace scheme was so poor that it's sole purpose was to fuel the management fees. That said, I did very well out of the Equitable Life catastrophe, perhaps embarrassingly so.

I suspect that most people here are sensible enough to read some good books on investing and learn the basics.