Damien Fahy's 80-20 Investor - thoughts?

Prism

Davidooo said:

Prism said:

Davidooo said:

Looks like some people have prejudices that can't be overcome with facts. And just for the record, I have no allegiance to Damien and if I thought I could do better elsewhere I wouldn't hesitate to switch. It's clearly pointless trying to have a sensible discussion on a forum such as this. I should have known better!

None of us are subscribed to 80-20 Investor so we can't say what returns we would have got by using his methods. What we can see are the published example returns over 1, 3 and 5 years which are 1.18%, 8.47% and 32.54% as of today. So on paper at least these returns don't look all that special and as a comparison under perform both VLS 60 and VLS 40 by a few % across all those time periods. For something that is supposed to look for the best funds to invest in I would expect it do do a little better than that. I certainly believe its not a pointless task to try and get index beating returns by choosing good funds but surely its got to then actually beat the index, especially over longer time frames, or else what is the point.

I would say a good return over the last 3 years would be 60% (not 8.47%) and 5 years around 100%.

Thank you Prism for a sensible response. Can I clarify, though: in your last sentence I assume you are saying 60% return over 3 years (i.e. 20% p.a.) while the 8.47% is per annum. In which case, are you saying I should be able to get 20% p.a.? If my calcs are correct for the period I looked at, I would have got a return of 7.0% p.a. with VLS 60%. Have I got that wrong?

Also, surely the only way I could have got a return of 20% p.a. would have been by investing in much higher risk funds. Is that correct?

I genuinely want to get to the bottom of this so that I can decide if I should stay with Damien or not.

I actually gave you the wrong number for a great return over 3 years - more like 40% than 60%. Damien got a total return of 8.47% over that time and VLS 60 got a total return of 12.9%. 
To convert a total return figure into an annual return you can plug some numbers into an online compound interest calculator. So for example to achieve a 100% return over 5 years you need to get an annual return of about 13% rather than 20%. To do that does not necessarily involve using a higher risk collection of funds but likely a mix of risk levels.

grumiofoundation

I would say it does not seem very clear on the exact returns of the 80-20 performance.

On this page (https://moneytothemasses.com/become-an-80-20-investor) we see returns over 1, 3 and 5 years which are ^1.18%, ^8.47% and ^32.54% (as posted by Prism).

On this one (https://moneytothemasses.com/80-20-investor-faqs) returns of 8.89% for 6 months, 14.30% for 2 year and 44.66% for 3 years. So possibly the first page is the return versus 'the market' (whatever metric is used) rather than absolute returns?

If this is the case seems like if you had invested a ~£5000 lump sum 3 years ago you would have broken even by using the 80-20 portfolio versus ' the market' (assuming £144 per year = £432 = 8.32% of £5192).

Davidooo

Prism said:

Davidooo said:

Prism said:

Davidooo said:

Looks like some people have prejudices that can't be overcome with facts. And just for the record, I have no allegiance to Damien and if I thought I could do better elsewhere I wouldn't hesitate to switch. It's clearly pointless trying to have a sensible discussion on a forum such as this. I should have known better!

None of us are subscribed to 80-20 Investor so we can't say what returns we would have got by using his methods. What we can see are the published example returns over 1, 3 and 5 years which are 1.18%, 8.47% and 32.54% as of today. So on paper at least these returns don't look all that special and as a comparison under perform both VLS 60 and VLS 40 by a few % across all those time periods. For something that is supposed to look for the best funds to invest in I would expect it do do a little better than that. I certainly believe its not a pointless task to try and get index beating returns by choosing good funds but surely its got to then actually beat the index, especially over longer time frames, or else what is the point.

I would say a good return over the last 3 years would be 60% (not 8.47%) and 5 years around 100%.

Thank you Prism for a sensible response. Can I clarify, though: in your last sentence I assume you are saying 60% return over 3 years (i.e. 20% p.a.) while the 8.47% is per annum. In which case, are you saying I should be able to get 20% p.a.? If my calcs are correct for the period I looked at, I would have got a return of 7.0% p.a. with VLS 60%. Have I got that wrong?

Also, surely the only way I could have got a return of 20% p.a. would have been by investing in much higher risk funds. Is that correct?

I genuinely want to get to the bottom of this so that I can decide if I should stay with Damien or not.

I actually gave you the wrong number for a great return over 3 years - more like 40% than 60%. Damien got a total return of 8.47% over that time and VLS 60 got a total return of 12.9%. 
To convert a total return figure into an annual return you can plug some numbers into an online compound interest calculator. So for example to achieve a 100% return over 5 years you need to get an annual return of about 13% rather than 20%. To do that does not necessarily involve using a higher risk collection of funds but likely a mix of risk levels.

I didn't bother with compounding effects because I just calculated the percentage increase of both the VLS 60% and my Damien portfolio over the three period from January 2017 to January 2020. So I was just interested to know which percentage was bigger at the end of that period. The fact that I divided by three was, I know, not strictly correct but if we just focus on the figure at the end of the period, it doesn't matter.

So, forgetting about annual returns and just looking at the total increase after three years, I used the graph of past performance on the Vanguard website (https://www.vanguardinvestor.co.uk/investments/9241/price-performance?intcmpgn=ls60_findmore_linkanguard ). On this graph, the value in Jan 2017 was £11,526 and on Jan 2020 it had increased to £14,020. So this is an increase of 21.6%, which is less than I actually got with my Damien portfolio (taking into account the reduction in my returns due to the Damien fee).

With regard to any figures that Damien may quote on his website, that is of no relevance to me when I have my own portfolio for which I know exactly how much money I had at the beginning and end of my three year period.

bowlhead99

Davidooo said:

Looks like some people have prejudices that can't be overcome with facts. And just for the record, I have no allegiance to Damien and if I thought I could do better elsewhere I wouldn't hesitate to switch. It's clearly pointless trying to have a sensible discussion on a forum such as this. I should have known better!

 It's not unusual for people to come along promoting get-rich-quick schemes and tip sheets where a person or a company shows you their great track record and says that if only you would give them £x per month they will tell you what funds and shares to buy and sell when, to give you much better than average growth for the risks you are taking.

As a savings and investment forum, you can imagine that we get that all the time. And that the standard response of any seasoned investor would be to tell you that such paid-for investment selection and timing guidance services are at best just a fallible system with no practical comeback if they end up losing you a lot more money than your other potential choices, and at worst an outright scam.

Whether the person offering the service claims to be doing it out of some altruistic intent to enlighten the masses and improve returns for everyone, or just wants to prey on the greed of naïve investors, at the end of the day such a 'classroom / educational' service is  generating revenue for themselves by selling the 'secrets' of how to make money, which which will supplement whatever actual returns they make from the market. If they really had the secrets (an all-knowing algorythm) to guarantee a better return than standard products, they would just leverage themselves up to the hilt and become incredibly wealthy. As they don't, they ask you to pay for the service of 'what to buy and sell this month, and become wealthy that way instead.

Generally, information on historic fund and share performance is available freely in abundance - and ideas, thoughts and opinion on what and where and when to invest is also free on myriad blogs and forums. 

Then at the other end of the scale, there are services providing regulated advice on how to construct a suitable portfolio for your personal objectives using fund products from the whole of the market which have passed a due diligence process (independent financial adviser), or a more simplistic limited fund selection process (robo-advice), or packaged funds-of-funds products which hold a mix of underlying funds which they select and reallocate from time to time in pursuit of a strategic objectives (fund managers of fettered in-house FOFs or unfettered multimanager FOF). All those paid services operate in a highly regulated environment.

In the middle between the extremes of free guidance on one hand, and paid regulated or semi-regulated advice and guidance on the other hand, you get some unregulated investment services charging you money for a mixture of investment analysis (which can be found for free) and investment opinion and guidance (which can be found for free) while wanting to charge you money for it, without wanting to be regulated by anybody so that they can say what they want without having to be truthful or ethical or disclose vested interests etc.

It's quite normal for people on saving and investment forums (who have a lot more than 'investment veteran' Fahy's sixteen years of experience) to be extremely sceptical about those services that dance the line between giving you their opinion for free, and giving you advice for money, and call it giving you their opinion for money.

The disclaimer on the site says:

"Information provided by [   ] is for general information only and is not intended to be relied upon by readers in making (or not making) specific investment decisions. Appropriate investment advice should be obtained before making any such decisions."

That sort of disclaimer of responsibility is one of the ways they get away with being a 'learning' company rather than being subject to regulation as an adviser or fund manager. However, one would expect that most customers signing up to pay £x a month for an algorithm which 'does the hard work for you' are not going to then go and buy independent regulated financial advice. Instead, that are going to rely on the information they are given, which they've paid for. 

So, while all manner of paid tipsheets and algorithms exist, which have small print saying you shouldn't rely on them for your decisions, you can expect that the regulars on this forum are going to tell readers that they are generally best avoided. Just like we do with the various unregulated minibond or cryptocoin investment promotions which promise the earth and reveal in the small print that you might lose all your money and shouldn't really really on them.

AnotherJoe

Davidooo said:

Prism said:

Davidooo said:

Prism said:

Davidooo said:

Looks like some people have prejudices that can't be overcome with facts. And just for the record, I have no allegiance to Damien and if I thought I could do better elsewhere I wouldn't hesitate to switch. It's clearly pointless trying to have a sensible discussion on a forum such as this. I should have known better!

None of us are subscribed to 80-20 Investor so we can't say what returns we would have got by using his methods. What we can see are the published example returns over 1, 3 and 5 years which are 1.18%, 8.47% and 32.54% as of today. So on paper at least these returns don't look all that special and as a comparison under perform both VLS 60 and VLS 40 by a few % across all those time periods. For something that is supposed to look for the best funds to invest in I would expect it do do a little better than that. I certainly believe its not a pointless task to try and get index beating returns by choosing good funds but surely its got to then actually beat the index, especially over longer time frames, or else what is the point.

I would say a good return over the last 3 years would be 60% (not 8.47%) and 5 years around 100%.

Thank you Prism for a sensible response. Can I clarify, though: in your last sentence I assume you are saying 60% return over 3 years (i.e. 20% p.a.) while the 8.47% is per annum. In which case, are you saying I should be able to get 20% p.a.? If my calcs are correct for the period I looked at, I would have got a return of 7.0% p.a. with VLS 60%. Have I got that wrong?

Also, surely the only way I could have got a return of 20% p.a. would have been by investing in much higher risk funds. Is that correct?

I genuinely want to get to the bottom of this so that I can decide if I should stay with Damien or not.

I actually gave you the wrong number for a great return over 3 years - more like 40% than 60%. Damien got a total return of 8.47% over that time and VLS 60 got a total return of 12.9%. 
To convert a total return figure into an annual return you can plug some numbers into an online compound interest calculator. So for example to achieve a 100% return over 5 years you need to get an annual return of about 13% rather than 20%. To do that does not necessarily involve using a higher risk collection of funds but likely a mix of risk levels.

I didn't bother with compounding effects because I just calculated the percentage increase of both the VLS 60% and my Damien portfolio over the three period from January 2017 to January 2020. So I was just interested to know which percentage was bigger at the end of that period. The fact that I divided by three was, I know, not strictly correct but if we just focus on the figure at the end of the period, it doesn't matter.

So, forgetting about annual returns and just looking at the total increase after three years, I used the graph of past performance on the Vanguard website (https://www.vanguardinvestor.co.uk/investments/9241/price-performance?intcmpgn=ls60_findmore_linkanguard ). On this graph, the value in Jan 2017 was £11,526 and on Jan 2020 it had increased to £14,020. So this is an increase of 21.6%, which is less than I actually got with my Damien portfolio (taking into account the reduction in my returns due to the Damien fee).

With regard to any figures that Damien may quote on his website, that is of no relevance to me when I have my own portfolio for which I know exactly how much money I had at the beginning and end of my three year period.

But didnt you say that you didnt strictly follow the DF80/20 "rules" for a period of some time?

So in fact its not the DF portfolio, but yours? All we can go by for DF is what he says. Your figures dont reflect DF. they may be better or worse.

Also, why are you using VLS as a benchmark? You should use another actively managed fund. shouldnt you? 3 years isnt really long enough to compare AM with passive.

And lastly, if i was to compare, i wouldnt use VLS as it has a high skew towards certain industries.

Perhaps check out one of their global funds.

ffacoffipawb

Davidooo said:

Prism said:

Davidooo said:

Prism said:

Davidooo said:

Looks like some people have prejudices that can't be overcome with facts. And just for the record, I have no allegiance to Damien and if I thought I could do better elsewhere I wouldn't hesitate to switch. It's clearly pointless trying to have a sensible discussion on a forum such as this. I should have known better!

None of us are subscribed to 80-20 Investor so we can't say what returns we would have got by using his methods. What we can see are the published example returns over 1, 3 and 5 years which are 1.18%, 8.47% and 32.54% as of today. So on paper at least these returns don't look all that special and as a comparison under perform both VLS 60 and VLS 40 by a few % across all those time periods. For something that is supposed to look for the best funds to invest in I would expect it do do a little better than that. I certainly believe its not a pointless task to try and get index beating returns by choosing good funds but surely its got to then actually beat the index, especially over longer time frames, or else what is the point.

I would say a good return over the last 3 years would be 60% (not 8.47%) and 5 years around 100%.

Thank you Prism for a sensible response. Can I clarify, though: in your last sentence I assume you are saying 60% return over 3 years (i.e. 20% p.a.) while the 8.47% is per annum. In which case, are you saying I should be able to get 20% p.a.? If my calcs are correct for the period I looked at, I would have got a return of 7.0% p.a. with VLS 60%. Have I got that wrong?

Also, surely the only way I could have got a return of 20% p.a. would have been by investing in much higher risk funds. Is that correct?

I genuinely want to get to the bottom of this so that I can decide if I should stay with Damien or not.

I actually gave you the wrong number for a great return over 3 years - more like 40% than 60%. Damien got a total return of 8.47% over that time and VLS 60 got a total return of 12.9%. 
To convert a total return figure into an annual return you can plug some numbers into an online compound interest calculator. So for example to achieve a 100% return over 5 years you need to get an annual return of about 13% rather than 20%. To do that does not necessarily involve using a higher risk collection of funds but likely a mix of risk levels.

I didn't bother with compounding effects because I just calculated the percentage increase of both the VLS 60% and my Damien portfolio over the three period from January 2017 to January 2020. So I was just interested to know which percentage was bigger at the end of that period. The fact that I divided by three was, I know, not strictly correct but if we just focus on the figure at the end of the period, it doesn't matter.

So, forgetting about annual returns and just looking at the total increase after three years, I used the graph of past performance on the Vanguard website (https://www.vanguardinvestor.co.uk/investments/9241/price-performance?intcmpgn=ls60_findmore_linkanguard ). On this graph, the value in Jan 2017 was £11,526 and on Jan 2020 it had increased to £14,020. So this is an increase of 21.6%, which is less than I actually got with my Damien portfolio (taking into account the reduction in my returns due to the Damien fee).

With regard to any figures that Damien may quote on his website, that is of no relevance to me when I have my own portfolio for which I know exactly how much money I had at the beginning and end of my three year period.

How about a comparison with a managed fund like Fundsmith?

Sailtheworld

Davidooo said:

Prism said:

Davidooo said:

Prism said:

Davidooo said:

Looks like some people have prejudices that can't be overcome with facts. And just for the record, I have no allegiance to Damien and if I thought I could do better elsewhere I wouldn't hesitate to switch. It's clearly pointless trying to have a sensible discussion on a forum such as this. I should have known better!

None of us are subscribed to 80-20 Investor so we can't say what returns we would have got by using his methods. What we can see are the published example returns over 1, 3 and 5 years which are 1.18%, 8.47% and 32.54% as of today. So on paper at least these returns don't look all that special and as a comparison under perform both VLS 60 and VLS 40 by a few % across all those time periods. For something that is supposed to look for the best funds to invest in I would expect it do do a little better than that. I certainly believe its not a pointless task to try and get index beating returns by choosing good funds but surely its got to then actually beat the index, especially over longer time frames, or else what is the point.

I would say a good return over the last 3 years would be 60% (not 8.47%) and 5 years around 100%.

Thank you Prism for a sensible response. Can I clarify, though: in your last sentence I assume you are saying 60% return over 3 years (i.e. 20% p.a.) while the 8.47% is per annum. In which case, are you saying I should be able to get 20% p.a.? If my calcs are correct for the period I looked at, I would have got a return of 7.0% p.a. with VLS 60%. Have I got that wrong?

Also, surely the only way I could have got a return of 20% p.a. would have been by investing in much higher risk funds. Is that correct?

I genuinely want to get to the bottom of this so that I can decide if I should stay with Damien or not.

I actually gave you the wrong number for a great return over 3 years - more like 40% than 60%. Damien got a total return of 8.47% over that time and VLS 60 got a total return of 12.9%. 
To convert a total return figure into an annual return you can plug some numbers into an online compound interest calculator. So for example to achieve a 100% return over 5 years you need to get an annual return of about 13% rather than 20%. To do that does not necessarily involve using a higher risk collection of funds but likely a mix of risk levels.

I didn't bother with compounding effects because I just calculated the percentage increase of both the VLS 60% and my Damien portfolio over the three period from January 2017 to January 2020. So I was just interested to know which percentage was bigger at the end of that period. The fact that I divided by three was, I know, not strictly correct but if we just focus on the figure at the end of the period, it doesn't matter.

So, forgetting about annual returns and just looking at the total increase after three years, I used the graph of past performance on the Vanguard website (https://www.vanguardinvestor.co.uk/investments/9241/price-performance?intcmpgn=ls60_findmore_linkanguard ). On this graph, the value in Jan 2017 was £11,526 and on Jan 2020 it had increased to £14,020. So this is an increase of 21.6%, which is less than I actually got with my Damien portfolio (taking into account the reduction in my returns due to the Damien fee).

With regard to any figures that Damien may quote on his website, that is of no relevance to me when I have my own portfolio for which I know exactly how much money I had at the beginning and end of my three year period.

Not sure why VLS60 is being used as a benchmark - it's almost certainly lower risk than the 'damien fund'.

Malthusian

grumiofoundation said:

On this page (https://moneytothemasses.com/become-an-80-20-investor) we see returns over 1, 3 and 5 years which are ^1.18%, ^8.47% and ^32.54% (as posted by Prism).

On this one (https://moneytothemasses.com/80-20-investor-faqs) returns of 8.89% for 6 months, 14.30% for 2 year and 44.66% for 3 years. So possibly the first page is the return versus 'the market' (whatever metric is used) rather than absolute returns?

The first figures are as at "start of March 2020", the second is described as "live".

(I am suspicious as to whether the second figures are actually "live", but I'll need to check the figures in a few days and compare with those quoted here to check whether they've changed. Neither Google nor archive.org had a slightly older version of the page I could compare with. The broken picture on the website doesn't inspire confidence.)

Whatever returns Davidooo has experienced won't change the fact that there is no evidence that anyone can consistently beat the market, and by his own admission, Daniel Fahy has dismally failed to beat the market, having underperformed it by a factor of 2 over 5 years despite taking more risk.

The fact is that if Daniel Fahy was able to consistently beat the market, by now he could have opened his own fund. He'd have a ready made market via the satisfied customers who've been following his newsletter from the beginning. And running a fund rather than a newsletter would not only make it easier to follow his strategy (removing the need for every single one of his investors to mirror his trades) but be in the interests of his smaller investors (as a 0.75% ad valorem fee would be cheaper for them than a £25pm subscription). Keep up his consistent market-beating success and within a decade or two he could be the next Woo... the next Lindsell / Train / Smith.

This of course only doesn't work if he doesn't have any long-term satisfied customers, just a constant turnover of new schmucks.

jbrassy

As others have said, I would be skeptical about a website where you have to pay to get someone's investment advice. What are they getting out of it?

The most important things when it comes to investing are:
1) keep fees to a minimum
2) ensure your portfolio is sufficiently diversified - that is you want to diversify across all geographies, industries, and market cap sizes.
3) ensure the riskiness of your portfolio is appropriate for your risk tolerance
4) don't buy active funds - yes some may beat the market, but how do you know which managers will beat the market (and who has time to do all this research)?

Personally, I invest with Vanguard since their platform fees are very low (0.15%). Then, I've invested 80% of my money in the FTSE Global All Cap Index Fund and 20% in the Global Bond Index Fund. These funds are highly diversified across geographies, industries and companies of different sizes. For me this is a long term investment, so I can afford to put 80% in equities. However, if you want to take less risk or are investing over a relatively short time period, put a greater proportion in bonds rather than equities.

A lot of people seem to be keen on Fundsmith. These are probably the same people who were raving about Neil Woodford about a decade ago. Don't bother with it.

Prism

jbrassy said:

The most important things when it comes to investing are:
1) keep fees to a minimum
2) ensure your portfolio is sufficiently diversified - that is you want to diversify across all geographies, industries, and market cap sizes.
3) ensure the riskiness of your portfolio is appropriate for your risk tolerance
4) don't buy active funds - yes some may beat the market, but how do you know which managers will beat the market (and who has time to do all this research)?

I am going to disagree with some of those points
1) fees are secondary to your desired investment choice. So for two almost identical funds then yes choose the lower of the two, but you should select the investment first and then try and keep the fees down.
2) You don't need to diversify across all geographies or industries. Plenty of people avoid oil, gas, finance and certain other sectors with no negative impact on performance. There are funds that have little to no investment in such as Germany, Japan, Canada to name a few. Again, that isn't especially important in this global world of investing. You likely don't want just a single country to avoid local political and currency issues but you don't need many to diversify.
3) Agreed, though this bit seems hard for people to get right.
4) Both active and passive funds are just fine. You don't know which actives will beat the market but with a bit of research you can select a fund manager which matches with your investment approach. Or you could choose a standard passive or maybe a smart beta fund. Lots of options for all.

My preferences - I don't worry too much about the fee unless it seems out of place with similar funds. I aim for less than 1%. I don't worry at all about regional allocations in my global funds. Its pointless as it doesn't represent where the earnings come from. My funds are mainly focused on just 4 sectors. I use mostly active funds (like Fundsmith) and am very happy with my historical increased returns. I fully expect that to continue - or else I would change approach.