Whats your Process/Method/Criteria for choosing funds from the thousands available?

purple_rose

dunstonh wrote: »

I have toyed with putting an OCF cap on the filtering but the consequences of that was that you eliminated many of the best funds in certain sectors. Especially Asia, Emerging Markets and a couple of others.

Of the 13 funds covering the sectors in our model, four of them exceed your 0.75% OCF. three of them are the top long-term performers in the portfolio. The 4th is a property fund (which are more expensive by default). There was no suitable alternative below 0.75% without compromising on the returns potential.

So, we decided not to put a hard filter in place for OCF (hard filter as in not showing any fund exceeding the figure). Instead, we take it into account but on a soft basis. i.e. see the results of that match the criteria and then decide if the OCF is worth it or not.

On that basis, despite including 4 funds over 0.75%, none of our portfolios exceeds 0.75% as a weighted OCF. So, the inclusion of a few more expensive ones is not damaging.

Yes thanks. Its a good point. I will amend the example.


With regards to the Quant analysis - What governance tools are available for a every day joe to do this sort of analysis? (more interested in the free ones if there are any)

jamei305

My key questions are:

Does the graph go up more than other similar funds?
Does it have a thingy rating on Trustnet

purple_rose

To DunstonH
With regard to your quant process - It seems to look at Monitoring only - Not fund selection. Is that right?

purple_rose

jamei305 wrote: »

My key questions are:

Does the graph go up more than other similar funds?
Does it have a thingy rating on Trustnet

Thanks, thats a way.

Wildsound

If you spend a bit of time experimenting on Trustnet, you can put together a load of dummy portfolios consisting of funds in a particular sector (e.g. create a dummy portfolio called "global funds", start filling it with funds in that sector).

Then, customise the table on the analysis>key ratios and performance tab and look at 1m, 3m, 6m, 1y, 3yr, 5yr, Volatility, alpha, beta and sharpe ratios. Personally, I prefer looking at Treynor ratios, but this isn't available on the free Trustnet, only on it's paid FE Analytics tool.

Then try and narrow down the funds based on above average returns to the sector, but with a lower than average volatility (in Trustnet, the best way to do this is add in 1 or 2 tracker funds in that sector to give you a reasonable benchmark for the sector).

If you have a large enough pool of funds in each sector (which will form part of your asset allocation), then you should be able to narrow the selection down to 1 or 2 funds in each sector. In some cases, you may have to consider a fund which has just breached volatility criteria for the sake that it is showing consistent above average performance.

As far as free tools go, Trustnet is the best I could find, although personally I find aspects of it easier to navigate as I have decent experience using FE Analytics.

bostonerimus

purple_rose wrote: »

Yes thanks. Its a good point. I will amend the example.


With regards to the Quant analysis - What governance tools are available for a every day joe to do this sort of analysis? (more interested in the free ones if there are any)

This "quant analysis" is close to numerology. There are examples of very cleaver mathematicians like James Simons apparently doing well with it

https://en.wikipedia.org/wiki/James_Harris_Simons

but the vast majority of practitioners are blowing a lot of hot air. Buy yourself a global equity fund and maybe a UK equity fund if you want to overweight that and then have a bit of fixed income for safety....some government bonds and investment grade corporate intermediate term bonds. You can get those inexpensively in index trackers....do some rebalancing, but basically expect to hold these investments for a few decades.

You'll make most money by having a budget and being frugal rather than chasing alpha and looking for beta.

purple_rose

bostonerimus wrote: »

This "quant analysis" is close to numerology. There are examples of very clever mathematicians like James Simons apparently doing well with it ..
but the vast majority of practitioners are blowing a lot of hot air.

"To Quant or Not to Quant" ?


Thanks for the strategy you mentioned - some good points there. How would you narrow down which indexer you use in each category/sector you mention.

TBC15

Can't help thinking having an OCF limit of .75 is going to crimp your style when it comes to growth.

purple_rose

TBC15 wrote: »

Can't help thinking having an OCF limit of .75 is going to crimp your style when it comes to growth.

Thanks- its been adjusted in the example to a 0.75 OCF portfolio average - with assessment on a per fund basis. Do you have a range or upper limit?

TBC15

No limit, I'll go with whoever I think can increase my money at the end of the day.