Thoughts on Multi-Asset Funds for 2018

Linton

economic wrote: »

On a market cap weighted basis Tech makes up about 20% of the Us stock market. That does not mean its over valued. Many if not all of the companies are generating good earnings and many have decent earnings growth. Just because they make up 20% or they have gone up so much (which is why they make up so much a US tracker fund), doe snot mean they will not continue to perform.

If you do think tech is over valued, then just underweight it. But do so at the risk of missing out. Generally it makes sense to buy things that are shown by the market to be doing well. And shun things that are not doing so well.

Surely if you are going to rely on variable allocations it makes more sense to buy sectors which are relatively cheap rather than ones that are relatively expensive - buy low and sell high. Tech has an unfortunate history. If you invested through the tech crash you would have seen that the market went for things which were fashionable and hyped rather than things that had a realistic chance of making real long term money and I dont think this has changed. I would certainly reduce tech at 20%. Not because I think it is overvalued (I have no idea) but rather because 20% seems too high a % for anything, especially if much of the 20% comes from a small number of companies with a limited product range that could disappear very quickly. With a constrained allocation if it does increase in value you do at least get the gains from rebalancing without losing a great deal later.

ValiantSon

Alexland wrote: »

No this is the Halifax Investment Account or ISA which is their simple ready-made retail offer. A bit like the HSBC World Selection this tends to be quite tame. The medium risk option is only 49% equities and has a very heavy UK bias - only 7.2% overseas equities.

https://www.halifax.co.uk/investments/our-investment-products/

Alex.

That is very tame for a "medium risk" allocation and that UK bias is crazy. Add in the costs of this and that is, all in all, a pretty unattractive package.

forextc

I think the OP will struggle to find the fund he is looking for from a mainstream low fee fund. The likes of HSBC Global, Vanguard, LG are low cost as by nature they replicate common benchmarks in order to keep costs low.

It sounds like you are looking for something contrarian to the consensus view?

Picking on the Vanguard funds (most of these funds are the same) I certainly wouldn't disagree with what you say, particularly when it comes to the concentration of US valuations in a limited amount of tech stocks. Also for my tastes having 1% in Japanese Gov Bonds here and 1% European Government bonds doesn't really offer much diversification in real terms.OK the funds look diverse but when you drill down in the composition, correlation and compensation of risk they are not quite as diverse as they seem.

If you really want to take a contrarian approach, which seems to be what you are saying then I think you will need to either build a portfolio yourself. This can be done quite cheaply with funds and ETF's etc if you have the time and/or inclination.

Or perhaps take a look at active management. There are few notable contrarian funds that spring to mind including the Trojan and Ruffer funds (they have equivalent investment trusts) or possibly RIT or Seneca Growth and Income Trust.

These types of funds are meant to offer capital preservation and protection to capital in a down turn.
As a result they tend to, eschew overvalued sectors or hot stocks and back value based assets using their convictions. You will of course pay for their portfolios and there is no guarantee that they will get it right.