Managed or Tracker fund, which is best?

[Deleted User]

beamyup wrote: »

Yeah definitely no home bias in my new portfolio

Yes, and it would give some pain if sterling were to recover, at least in the short term. Remember, your expenditure is in sterling, so you carry a lot of short term currency risk by not having meaningful allocation to UK.

bostonerimus

Round and round we go comparing apples to oranges. A long time ago I decided that actually save a large amount of my earnings was far more important that the management style of the funds in my portfolio. I decided that I was in this for the long term and didn't want to spend too much time on managing/trading/evaluating a manager's performance. So I went with a 3 fund portfolio that was mostly domestic equity, international equity, domestic bonds broad cap weighted indexes. I did some annual rebalancing....the average annual return over the last 30 years has been 8.5%. I could have chosen another portfolio or active funds and achieved far bigger returns, but I had a target and I chose the low cost indexing approach as I believed it maximized my chances of hitting my target; I didn't want the added standard deviation in results that I saw from active portfolios.

The result is that I've never worried about the funds I own, I spend minimal time managing my portfolio even in down markets when many people make big mistakes by doing too much in a panic and I've been able to retire at age 52 with a mid 7 figure investment portfolio. Why make investing more difficult than it needs to be?

Thrugelmir

Deleted_User wrote: »

Also, justification for some home bias has nothing to do with trying to eke out alpha. The arguments for some home bias are mostly around risk.

Hardly surprising that the UK stock market is currently offering it's most attractive valuations in 30 years. The bottom line is that one is investing in companies that generate revenues and hopefully profits.

In 2018 US companies bought back over €1 trillion of their own stock. Much with borrowed money. Flatters EPS and no doubt helps executives share option schemes. Only time will tell if this was positive for other shareholders.

Sometimes one can get lost in the fog of financial engineering.

[Deleted User]

Round and round we go comparing apples to oranges.

Also, I don’t have a lot of faith that people report their own returns correctly. There are psychological games involved; we try to kid ourselves. For example some split their portfolio into bits and only report the most profitable ones, e g by ignoring bonds and cash or ignore some of the costs.

[Deleted User]

Share buybacks are essential to prevent dilution of shareholder equity. Also, a more tax efficient way of returning money to shareholders than dividends. EPS isn’t the only metrics available.

I do not know if US businesses have borrowed too much or how it compares to Britain but it’s not exactly like investors in the UK carry no risks. Expropriation comes to mind.

Linton

Deleted_User wrote: »

Share buybacks are essential to prevent dilution of shareholder equity. Also, a more tax efficient way of returning money to shareholders than dividends. EPS isn’t the only metrics available.

Why? Dont forget we are in the UK. If it is why dont UK companies do it very often?

[Deleted User]

Linton wrote: »

Why? Dont forget we are in the UK. If it is why dont UK companies do it very often?

Here is why

https://www.gov.uk/tax-on-dividends
https://www.gov.uk/capital-gains-tax/rates

And I understand that many Brits fall under allowances or have enough room in tax-free accounts and don’t care about taxes on investments but a lot of wealth is held by wealthy people. Funny that.

In any case, I was responding to someone who was talking about share buybacks in the US.

AnotherJoe

Deleted_User wrote: »

By having a separate fund or ETF for UK. If it was me I would put 20% of stock allocation into something like Lyxor Core Morningstar UK NT (DR) UCITS ETF or SPDR FTSE UK All Share UCITS ETF. The former has lower MER, but only large and midsized companies

But if you look at most of the major constituents of either of those they are large multinationals that pretty much just happen to be domiciled here and most of their income comes from overseas. Shell, BP, Unilever, BAT, Rio Tinto etc. If the Pound rose they woudl fall.
So, is that really a "home" bias ?

Prism

I don't worry too much about regions at all at the large company size, so regional bias doesn't really exist until you get down to mid/small caps.

Unilever has its HQ in the UK and Netherlands, yet makes most of its revenue from emerging markets. Alibaba has its HQ in China, is on the NASDAQ and makes its money globally. Philip Morris is on the NYSE but makes no money at all in the US.

Prism

Deleted_User wrote: »

Also, I don’t have a lot of faith that people report their own returns correctly. There are psychological games involved; we try to kid ourselves. For example some split their portfolio into bits and only report the most profitable ones, e g by ignoring bonds and cash or ignore some of the costs.

You are right as there are a few ways to calculate the gains and we don't all include the same pools. I for example have only considered my SIPPs and ISAs so far, however I have recently started up a fixed account 'bond' ladder which i will include from this point.

Due to lots of irregular payments in I use XIRR in Excel for my number (15% over three years)