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

Linton

My approach for my growth portfolio having understood the objective and risk strategy is:
1) produce target allocations with the aim of achieving high diversification and avoiding a high % allocation in any one area
- geography
- company size (small, mid-range, large)
- sector
2) try to achieve the allocations with a minimum number of funds
- choose one global fund
- choose individual geographic, mainly small company, funds to achieve geographic and size allocations
- choose indivisible sector funds to achieve sector allocations
3) analyse actual overall allocations and compare with targets. Change either as appropriate.

Funds are chosen by the following process
1) given geography and company size requirement, identify short list based on performance over past 10 years, particularly in the bad times.
2) Remove funds whose sector allocations make achieving the sector target allocation difficult. In practice this means avoiding small company funds with very high tech allocation.
3) Make a choice based on other relevant factors, eg avoid niche funds that seem too large or too small/obscure, look at fund stated strategy

purple_rose

Linton wrote: »

- choose individual geographic, mainly small company, funds to achieve geographic and size allocations
- choose indivisible sector funds to achieve sector allocations

Thanks Linton.
Could you expand on what you mean by the above two points?
Are you saying:

- a small cap single country fund and
- a Large cap fund ( non sector specific)

Thrugelmir

Been investing for more years than I care to mention. Therefore have built bottom up. As an individual one doesn't have the constraints of a fund manager. As long as one adheres to basic rules of investing. Learns from ones own mistakes. As all investors do make them. Look for opportunities to exploit. Read, listen and attend. Over time you'll have a nose for something that as a small investor will generate a satisfactory return over the longer term.

BritishInvestor

I start with a global equity fund (developed and emerging market, large, medium and small cap) and a global bond fund (all investment grade and hedged to GBP). I then check how this has performed against all the DFM offerings (with their ability to continuously adjust asset allocation, geography and pick winning funds) on a risk adjusted basis, and smile.

purple_rose

Thrugelmir wrote: »

As long as one adheres to basic rules of investing

What do you think the basic rules of investing are?

BritishInvestor

Prism wrote: »

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.

Not sure what this tells you. If, for example the last 10 years has suited a manager's style - e.g. large cap growth, this doesn't really tell you much, as at some point this style will go out of favour.


If you look at fund performance vs the returns a typical investor achieves by investing in these funds it's quite sobering.


https://seekingalpha.com/article/4108688-investor-returns-vs-market-returns-failure-endures

purple_rose

BritishInvestor wrote: »

I start with a global equity fund (developed and emerging market, large, medium and small cap) and a global bond fund (all investment grade and hedged to GBP). I then check how this has performed against all the DFM offerings (with their ability to continuously adjust asset allocation, geography and pick winning funds) on a risk adjusted basis, and smile.

Thanks.
Where do you source the data on the "DFM offerings", aren't they private?
If you have 1 Global Equity and 1 Global Bond - how do you pick them?

purple_rose

BritishInvestor wrote: »

If, for example the last 10 years has suited a manager's style - e.g. large cap growth, this doesn't really tell you much, as at some point this style will go out of favour.

Sounds like a good point.

purple_rose

BritishInvestor wrote: »

If you look at fund performance vs the returns a typical investor achieves by investing in these funds it's quite sobering

This says indexes win. right?

Thrugelmir

purple_rose wrote: »

What do you think the basic rules of investing are?

I would recommend "Harriman's New Book of Investing Rules: The Do's and Don'ts of the World's Best Investors".

A comprehensive read that will leave you no clearer in thought at the end than at the beginning. Though will open your mind to the pro's and con's of every method. As there's well reasoned arguments for which ever path you tread.