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BritishInvestor

Clive_Woody wrote: »

If you speak with an IFA who doesn't explain the product they are recommending, find someone else.

I agree, but it should happen right after the end of the process, and is the least important part.

If the adviser claims to beat the market at this point, try not to laugh....

https://www.youtube.com/watch?v=70yqithPgcY

dmelife

Hmm...one of the first things they claim is that 73% of their funds have outperformed their respective benchmarks. I’m not sure I see your point.

bostonerimus

BritishInvestor wrote: »

I'm not confused, and nor are the authors of the enormous amount of research on the subject.
These guys are pretty good.
https://us.dimensional.com/

When you say equivalent tracker fund you will need to adjust for volatility and also the head/tailwinds due to factor tilts. It's very rare for active funds to outperform once this has been done. Doesn't stop the people that market it claiming otherwise.

I've never been a fan of funds you have to pay a financial advisor to access or investment strategies you need a Cray computer to implement.

BritishInvestor

dmelife wrote: »

Hmm...one of the first things they claim is that 73% of their funds have outperformed their respective benchmarks. I’m not sure I see your point.

Sorry, good at educating advisers where returns come from.

Regarding their funds, a large number of their funds may "beat the market" primrily due to their factor tilts (and other processes such as patient trading that avoids issues with frontrunning/rebalancing with some indices), but if you adjust for risk (risk being volatility, but IMO of much more importance, drawdown, as this is when a client is most likely to throw in the towel), and take into account long periods of potential underperformance (factor returns being unpredictable) then the benefits may be less clear.

Lots of debate over on Bogleheads.

BritishInvestor

bostonerimus wrote: »

I've never been a fan of funds you have to pay a financial advisor to access or investment strategies you need a Cray computer to implement.

1. Having to use a financial adviser: They aren't offered to the general public as their processes would potentially be compromised by the tendency of private investors to sell when the market falls leading to large outflows and forced selling. *Hopefully* an adviser can lmit this to a certain extent.
2. Complexity: Agree, personally I prefer simplicity.

bostonerimus

BritishInvestor wrote: »

1. Having to use a financial adviser: They aren't offered to the general public as their processes would potentially be compromised by the tendency of private investors to sell when the market falls leading to large outflows and forced selling. *Hopefully* an adviser can lmit this to a certain extent.

So why not do what Vanguard does and just put limits on trading. I think the "advisor wall" is to keep an air of exclusivity and to keep the admin overhead down by not having to deal directly with the retail investor.

[Deleted User]

dmelife wrote: »

Hmm...one of the first things they claim is that 73% of their funds have outperformed their respective benchmarks. I’m not sure I see your point.

Call me a sceptic. Guess what happens to non-performing funds? They don’t attract money. Then they are shut down. Then they can claim that the surviving funds “outperform”.

In the real world we know for a fact that the vast majority of actively managed funds underperform.

jamesd

amazon1234 wrote: »

On a slightly diferent note, someone suggested investing more of the original sum and buying a house with a mortgage as a more financially astute solution.

Yes, that's likely to make you better off. The reason is the difference between likely investment returns and mortgage interest rates.

Long term UK stock market returns are about 5% plus inflation while a mixture including bonds might achieve around 4% plus inflation. Assuming inflation is at the Bank of England's 2% target that's 7-6% to compare with mortgage interest rates.

Whoever suggested this o your new home seems to be worth paying some attention to.

So far as income goes, around 3% should be achievable without depleting capital.

I suggest considering around 3.5% with simple rules - just increase with inflation each year - or around 4.5% using the little more complicated Guyton-Klinger rules. These levels don't ensure preserving all of the capital whatever markets do but you're unlikely to live through sufficiently bad investment times to hugely deplete the capital and would have ample time to adjust. There's a lot of research into this, introduced in Drawdown: safe withdrawal rates. Playing around with cfiresim is a good learning tool to get you some feel for the range of possible outcomes.

You could do far worse than sending a private message to dunstonh asking for contact details. I've previously verified that dunstonh is an IFA and would be happy to use dunstonh myself. You also have sufficient money to split any money management between two advisers.

jamesd

Deleted_User wrote: »

In the real world we know for a fact that the vast majority of actively managed funds underperform.

Given that for UK investors active funds outperform passive by 0.65% a year on average that'd still make active preferable.

It's worth looking more closely because as might be expected the passives did better on average for the US, so passive US and active elsewhere might be sensible.

Flim

I find it quite scary that potentially 2million in the Bank does not give you enough to live on. For the record I would be d lighted if our investments just kept pace with inflation. Our current low risk portfolio has returned 0.5 per year for th last 2 years, but accept that markets do fluctuate and hopefully may return at some point. (Although a long way off the hinted at “average rate of 5%”....). Our current budget suggest that we have enough even if interest rates are only ever 50% of inflation but it would be nice if they did manage to do a little better...