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

purple_rose

Wildsound wrote: »

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).

Thanks Thats the best practical advice ( Tool avalable to joe bloggs and advice on how to narrow down the range) given for Quant side so far.

Prism

My method is quite simple and admittedly partly guesswork

I tend to start off with past performance - 10 years is ideal as it includes the financial crisis. This will be more difficult when the 10 year timeframe moves on. If not 5 years will do. I ignore 1 and 3 year performance mostly.

I look to see if there has been any manager changes in that timeframe.

I look up the number of holdings that a fund has. I don't like funds with 100's of holdings. I like a high active share.

I look for passives in regions where it is generally established that they have a better chance of out performing active funds e.g US large/mid cap

I look for 'defensive' equity funds for my core holdings e.g health care, staples etc

I try and learn about the manager and their methodolgy. Several managers post regular video clips about their thoughts e.g Nick Train, James Anderson, Terry Smith

Things I don't really care about are short term performance (unless there is a good reason to worry), charges(unless really high 2%+) or volatility (I will in 15 years or so).

An example of that last part can be seen with Legg Mason Japan which I hold. It often underperforms for months on end. It has quite high charges of over 1% and it is hugely volatile. +/- 3% a day is not unusual. It is my best performer

kidmugsy

I'll tell you what I did it when I started investing (if my memory is right).

(i) In money purchase pension Far Eastern Equities. As every owner of a Honda motorbike knew, people underestimated the Orient.

(ii) In PEP (forerunner of S&S ISA) as much as possible into generalist Investment Trusts e.g. Alliance, Witan ... I think there was a limit on how much could go into ITs so I may have invested in other things too if we had enough spare money to fill PEPs.

(iii) Index-Linked Savings Certificates paying 4.5% p.a. above RPI inflation.

We already had a house (mortgaged) and I was contributing to a DB pension.

You might call this opportunistic investing. Very well it did too.

purple_rose

Prism wrote: »

I look for 'defensive' equity funds for my core holdings e.g health care, staples etc

Thanks Prism, What % of portfolio is your core?

Prism

purple_rose wrote: »

Thanks Prism, What % of portfolio is your core?

My core is what I think of as global large companies. I have three funds at the moment which pretty much cover that which is about 60% of the portfolio. Of those 3 funds 2 are pretty defensive and 1 is not. (Fundsmith, L&G healthcare index, Scottish Mortgage)


Morningstar (through YouInvest, my platform) tells me that my total portfolio is in total about 50% defensive (staples and healthcare). I am hopeful that will protect me a little during downturns. (there are some limits to my desired levels of volatility I guess)

purple_rose

Prism wrote: »

My core is what I think of as global large companies. I have three funds at the moment which pretty much cover that which is about 60% of the portfolio. Of those 3 funds 2 are pretty defensive and 1 is not. (Fundsmith, L&G healthcare index, Scottish Mortgage)

Thanks Prism, Was it 10 year performance, managent factors and high active component and a bit of guess work that made you choose those funds ?

bostonerimus

purple_rose wrote: »

"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.

Stick with the reputable players, Vanguard, BlackRock etc.......and buy the least expensive you can.....

I set my asset allocation wrt my personal circumstances. I was 60/40 for a long time, but now I'm retired and my spending is covered from pensions and other guaranteed income I'm at 75/25. I largely avoid active funds and don't bother to second guess the allocation within something like Vanguard All Cap Global Index.

It's good to understand alpha, beta etc....I look to get alpha = 0 and beta = 1 for my funds and as such come pretty damn close to success every year as I'm buying trackers. I take a Zen approach to things as I stopped trying to outperform years ago and it's actually worked out pretty well for me and a saved me from many ulcers.

Prism

purple_rose wrote: »

Thanks Prism, Was it 10 year performance, managent factors and high active component and a bit of guess work that made you choose those funds ?

Yup, that pretty much sums it up. Of all of them though I guess I would say it was the methodology of buy and hold quality which I stick to the most.

purple_rose

bostonerimus wrote: »

Stick with the reputable players, Vanguard, BlackRock etc
I was 60/40 for a long time, but now I'm retired and my spending is covered from pensions and other guaranteed income I'm at 75/25

Thanks, Were you 60/40 - Equity/ Bonds and now 75/25 - Equity Bonds as you have a secure Income.?

Who would you say are the other main Reputable players apart from those two?

bostonerimus

purple_rose wrote: »

Thanks, Were you 60/40 - Equity/ Bonds and now 75/25 - Equity Bonds as you have a secure Income.?

Who would you say are the other main Reputable players apart from those two?

Yes, I was less aggressive when I was working.....which goes against convention. But now I have secure income that isn't dependent on me working and I have more than enough in pension/investment funds I feel ok letting my equity percentage increase; I can afford to take the risk.

For low cost index trackers look at Vanguard, BlackRock and
iShares, HSBC, Fidelity, L&G etc.