Managed or Tracker fund, which is best?

[Deleted User]

bostonerimus wrote: »

That's why I said "practically zero" and of course there needs to be good regulation and a safety net set up by the insurance companies/government to compensate for any failures.

There is government regulation / safety net. If there is a major event this safety net might not be worth all that much. We got a close call in 2008 and AIG did fail. That was a warning. There usually is, before the real storm.

Linton

Deleted_User wrote: »

Annuity risk isn’t zero. We’ve seen huge insurance companies go bankrupt, should be a wake up call. Nor is DB pension risk “zero”.

Oh dear, not again.

In the UK annuities in payment are 100% guaranteed through the FSCS: https://www.fscs.org.uk/what-we-cover/. DB pensions in payment are similarly guaranteed through the PPF and FAS, see https://www.pensionsadvisoryservice.org.uk/pension-problems/pension-security/the-financial-assistance-scheme, and are 90% guaranteed if not in payment. What the situation is in Canada I dont know.

So for all practical purposes annuities and DB pensions in payment are zero risk unless you want to include in your risk analysis the collapse of your nation state or invasion of the mutant zombies from the planet Zog when the safety of your pension would probably not be at the top of your worry list.

AnotherJoe

Deleted_User wrote: »

That’s true. To some extent. Funny, but usually this point is used to justify why you don’t need international stocks.

Have you read the White Paper by Vanguard?

I've just skimmed it. It doesn't appear to cover the consideration as to how to determine what "home" is. Eg if you buy BP, does that count as home bias. Maybe I missed it amd they account for that. They do mention that home bias leads to an imbalance in sectors and that you should consider sector imbalance.
Who makes the argument that you don't need international stocks? Never seen that before

Linton

AnotherJoe wrote: »

I've just skimmed it. It doesn't appear to cover the consideration as to how to determine what "home" is. Eg if you buy BP, does that count as home bias. Maybe I missed it amd they account for that. They do mention that home bias leads to an imbalance in sectors and that you should consider sector imbalance.
Who makes the argument that you don't need international stocks? Never seen that before

ISTM US investors historically have regarded “international”, ie anything non US, investments as a rather risky option for someone who knows what they are doing, perhaps something like our attitude to EM. In US based literature I have read there seems little understanding that there is a wide range of different opportunities out there, again perhaps like our attitude to EM.

Thrugelmir

Prism wrote: »

Most of my early pension was in some unknown 'black box' of an Aviva (Norwich Union) pension which provided no stats beyond a yearly total and certainly no idea of returns.

As an example. What's the benefit of valuing commercial property on a daily basis. Rent reviews etc can take months to negotiate. Not every investment has a daily liquid value.

Thrugelmir

Deleted_User wrote: »

We got a close call in 2008 and AIG did fail. That was a warning. There usually is, before the real storm.

The credit rating agencies failed to do their job properly though in the US markets. Reputatations now tarnished. Don't receive the coverage they once did.

[Deleted User]

AnotherJoe wrote: »

I've just skimmed it. It doesn't appear to cover the consideration as to how to determine what "home" is. Eg if you buy BP, does that count as home bias. Maybe I missed it amd they account for that. They do mention that home bias leads to an imbalance in sectors and that you should consider sector imbalance.
Who makes the argument that you don't need international stocks? Never seen that before

A very popular line of argument in Canada too (even smaller market than UK). It goes like this:

1. We have multinationals with exposure to markets world over
2. Why should we expose ourselves to dodgy governance and currency risks and withholding tax on dividends by buying stocks elsewhere?

The White Paper considers UK and accounts for the data from BP et al. It shows that you get enough sector diversification as long as you don’t have too much home bias. Some is ok.

Thrugelmir

Deleted_User wrote: »

The White Paper considers UK and accounts for the data from BP et al. It shows that you get enough sector diversification as long as you don’t have too much home bias. Some is ok.

Are Vanguard renown for their market commentary? Given their philosophy is effectively built on piggy backing on others paid for expensive research.

[Deleted User]

Linton wrote: »

Oh dear, not again.

In the UK annuities in payment are 100% guaranteed through the FSCS: https://www.fscs.org.uk/what-we-cover/. DB pensions in payment are similarly guaranteed through the PPF and FAS, see https://www.pensionsadvisoryservice.org.uk/pension-problems/pension-security/the-financial-assistance-scheme, and are 90% guaranteed if not in payment. What the situation is in Canada I dont know.

So for all practical purposes annuities and DB pensions in payment are zero risk unless you want to include in your risk analysis the collapse of your nation state or invasion of the mutant zombies from the planet Zog when the safety of your pension would probably not be at the top of your worry list.

Zombies taking over UK does not seem out of question right now. They already did that with one of the major parties.

A bunch of plausible scenarios on how annuities might fail with governments failing to provide a back stop is provided in Bernstein’s “Rational expectations for investing adults”. William Bernstein described it way better than I ever could.

Let me guess: “this could only ever happen in America but we are different, U.k is perfect and risk free”. Got it.

[Deleted User]

Thrugelmir wrote: »

Are Vanguard renown for their market commentary? Given their philosophy is effectively built on piggy backing on others paid for expensive research.

They are renown for market commentary.

You make a fair point on piggybacking. Another way of looking at it is that they brought wealth and comfortable retirement to tens of millions of people who used to be ripped off by individuals selling lots of expensive BS. Bogle & Co did a lot of excellent research to back it up and then demonstrated it experimentally.