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Thrugelmir

BritishInvestor wrote: »

When you say higher alpha, you imply there is such a thing (in modern, more efficient markets (my opinion))

Even banks don't understand their own balance sheets. What hope have analysts and investors got looking in from the outside? Then there's share buybacks and financial engineering (E.g. Tesco's having to restate prior years profit ) to contend with. Raises questions as to whose benefit some companies are being run.

greenglide

And passive funds never buy and sell?


An active can buy, sell or hold as the manager sees fit (depending on the funds objective) while the passive fund must surely buy and sell on a regular basis to continue to track the index.


Or an I missing something?

[Deleted User]

Thrugelmir wrote: »

I suspect that many current investors weren't invested in the global markets at the time of the collapse of the Nikkei. As an investor being complacent is extremely dangerous. Markets have the ability to bite your hand off when you are least expecting it.

That was an illustration why one has to be globally diversified. Japanese who invested exclusively in the home market didn’t do all that well.

For a diversified investor, complacency is good. Being asleep is even better. By the time market timers withdraw, it’s too late. Of cause they have to time it right not once but twice

[Deleted User]

greenglide wrote: »

And passive funds never buy and sell?


An active can buy, sell or hold as the manager sees fit (depending on the funds objective) while the passive fund must surely buy and sell on a regular basis to continue to track the index.


Or an I missing something?

Buying does not trigger taxation. Selling within a tracker fund normally happens when a company is kicked out from the index. This is rare and happens to companies with low weighting. As a rule index funds have each share based on market cap. If shares jump or fall, market cap changes accordingly and there is no need for the fund to sell anything. One exception is when index is modified or funds decide to track a different index but its rare.

Active funds managers trade a lot more.. That’s just a fact. They don’t have to but they do.

Factor funds also sell more and are less efficient in a taxable account - whether you class them passive or active.

Thrugelmir

Deleted_User wrote: »

Buying does not trigger taxation. Selling within a tracker fund normally happens when a company is kicked out from the index. This is rare and happens to companies with low weighting.

Both the FTSE 100 and FTSE 250 are reviewed quarterly. At the end of December these were the changes to the FTSE 250.

Entering FTSE 250 Index
Acacia Mining
Aston Martin Lagonda Global Holdings
Funding Circle Holdings
McCarthy & Stone
Smithson Investment Trust
Woodford Patient Capital

Exiting FTSE 250 Index
AA
Keller
Kier Group
On The Beach Group
Spire Healthcare Group
Thomas Cook Group

Hiscox and Spirax-Sarco Engineering joined the 100, with Just Eat and Royal Mail leaving.


Not just market capitlisation that's taken into account by indexes. Liquidity in the stock is also taken in account. Has to be sufficient free float shares enabling an active trading market.

[Deleted User]

Thrugelmir wrote: »

Both the FTSE 100 and FTSE 250 are reviewed quarterly. At the end of December these were the changes to the FTSE 250.

Entering FTSE 250 Index
Acacia Mining
Aston Martin Lagonda Global Holdings
Funding Circle Holdings
McCarthy & Stone
Smithson Investment Trust
Woodford Patient Capital

Exiting FTSE 250 Index
AA
Keller
Kier Group
On The Beach Group
Spire Healthcare Group
Thomas Cook Group

Hiscox and Spirax-Sarco Engineering joined the 100, with Just Eat and Royal Mail leaving.


Not just market capitlisation that's taken into account by indexes. Liquidity in the stock is also taken in account. Has to be sufficient free float shares enabling an active trading market.

And what proportion of the index market cap did these companies represent between them? I have no idea, but a wild guess... around 0.01%.

[Deleted User]

Besides, US domiciled ETFs use financial tools available to them to eliminate taxable events.

I hold 4 of these. Never had capital gains unless I sold shares.

There are taxes on dividends, including withholding taxes, but trackers tend to be far more tax efficient than active funds.

bostonerimus

For most people with access to ISAs, SIPPS and workplace pensions investment taxable events will be limited to income tax on the pension withdrawals. Even if they have regular taxed investment accounts the UK's generous dividend and capital gains allowances make taxable events rare. However if the OP gets $2M as an inheritance outside of tax advantaged accounts there should be a plan to get as much of it as possible into ISAs, SIPPs and other tax efficient wrappers asap.

Being in the US with sizeable amounts outside pensions I have chosen tax efficient US domiciled index funds for most of that money. Right now my income is low and so I'm not much tempted by tax free municipal bonds, but as I get older I expect my income to increase as I have to make mandatory withdrawals from my retirement funds and then they might look a lot more attractive. The OP also needs to look at their tax situation and choose investments to match.

[Deleted User]

How can he put 2M into tax sheltered accounts? Isn’t the lifetime limit on pension contributions just over 1M?

bostonerimus

I did say to get "as much as possible" into tax sheltered accounts. There is the ISA as well and a spouse's allowances if there is one. Then there are VCTs