Woodford Concerns

Prism

Jonah01 wrote: »

Another question - If you take the fundsmith or Lindsell Train global funds. Are there people that just lump their entire pot into these?

For the last 5 years the gains have been amazing. Obviously I understand the risks involved with doing this now but does it go on?

I don't put my entire pot in but of my equities Fundsmith is around 50%. I use it as my core global allocation. I then have a few other funds to cover emerging markets, small/mid cap companies and specific sectors when appropriate (tech, health, AI etc)

I do not believe that Fundsmith or Lindsell Train are anything like Woodford in their approach - at least not the current Woodford. None of this messing around with unquoted startups, house builders and biotech. Woodford focuses on share price (value). The other two don't pay it too much attention.

Audaxer

fun4everyone wrote: »

By Woodford scenario I mean an active manager losing the plot and having terrible performance. The value of your holding could still plummet if we have a correction or crash. That is why I say pick an appropriate risk level and make sure it is for 5 years+. If/When it crashes and you hold on, history shows it always eventually recovers.

I would say pick an appropriate risk level and be prepared to have it invested for at least 10 years.

seacaitch

There are a range of trackers available and I suppose the global ones do protect you from crashes in specific regions.

Not really, no.

By far the largest risk asset constituents of any global fund will be developed market ones, which will all crash together. And, in the globalised world we (still!) inhabit, correlations between most regions are high.

I know this is a very simplistic way of looking at it but I just need to invest in something that will show a positive return short term just for my mental well being

Your current demeanour/mindset is not compatible with sensible long term investing.

If you invest money with this mindset, then in the face of the next significant market sell off I would say you are pretty much guaranteed to sell out, crystallising losses.

Another question - If you take the fundsmith or Lindsell Train global funds. Are there people that just lump their entire pot into these?

For the last 5 years the gains have been amazing. Obviously I understand the risks involved with doing this now but does it go on?

You've alighted on those two funds solely because they're the top of historic performance charts. You state that "Obviously I understand the risks involved with doing this now", presumably referring to buying these funds now, but I really don't think you understand the risks at all, and in the face of a steep market sell-off you would bale out of these funds just as you would any other funds, crystallising losses and permanently losing capital.

At the moment you are bruised from your investment experiences to date, which are largely due to you (a) not knowing what you're doing and partly (b) you bumping into some "bad luck".

(b) happens from time to time, just as "good luck" happens from time to time when investing [it's why we diversify] but (a) has compounded your "bad luck".

I would reiterate that you don't currently know what you're doing, and my suggestion is that before you embark on further decision making regarding your next investment that you first take steps to very significantly improve your level of knowledge and establish a sensible investment plan (either yourself or with professional input).

At the moment, you're a danger to yourself, and will very likely lose more money in the future.

People who have bad experiences investing very early on can as a result be put off for life, with very damaging long term effects on their lifetime wealth. If you're not careful here, this will be you. It's time to get a grip.

MaxiRobriguez

A short term positive return is possible.

It's called a Marcus account.

OldMusicGuy

Try reading these books before you do anything else:
"Investing Demystified" by Lars Kroijer
"DIY Simple Investing: A Guide to Simple but Effective Low Cost Investing" by John Edwards

Jonah01

steampowered wrote: »

This is not possible.

You are investing for the long term.

With stocks some years they go up, some years they go down, there will be dividends do. You have to accept that. The long term trend is up - about 8% on average each year is the historic return on the major stock markets.

Sorry it was a bit tongue in cheek as was just explaining my mindset of being bruised. I understand it is a long term investment.

Jonah01

seacaitch wrote: »

Not really, no.

By far the largest risk asset constituents of any global fund will be developed market ones, which will all crash together. And, in the globalised world we (still!) inhabit, correlations between most regions are high.



Your current demeanour/mindset is not compatible with sensible long term investing.

If you invest money with this mindset, then in the face of the next significant market sell off I would say you are pretty much guaranteed to sell out, crystallising losses.




You've alighted on those two funds solely because they're the top of historic performance charts. You state that "Obviously I understand the risks involved with doing this now", presumably referring to buying these funds now, but I really don't think you understand the risks at all, and in the face of a steep market sell-off you would bale out of these funds just as you would any other funds, crystallising losses and permanently losing capital.

At the moment you are bruised from your investment experiences to date, which are largely due to you (a) not knowing what you're doing and partly (b) you bumping into some "bad luck".

(b) happens from time to time, just as "good luck" happens from time to time when investing [it's why we diversify] but (a) has compounded your "bad luck".

I would reiterate that you don't currently know what you're doing, and my suggestion is that before you embark on further decision making regarding your next investment that you first take steps to very significantly improve your level of knowledge and establish a sensible investment plan (either yourself or with professional input).

At the moment, you're a danger to yourself, and will very likely lose more money in the future.

People who have bad experiences investing very early on can as a result be put off for life, with very damaging long term effects on their lifetime wealth. If you're not careful here, this will be you. It's time to get a grip.

Thanks for your honest assessment.

As mentioned in my previous reply this was slightly tongue in cheek. I fully understand it is long term. I am only investing money that I don't mind locking in for the long term. Short term losses wouldn't panic me in a well diversified portfolio because i know long term the result will be positive.

I am not about to jump into an investment without the knowledge required so I do not believe I am a danger to myself at all but I appreciate what you are saying. (obviously ignoring my Woodford experience as I jumped in two footed there!)

I also know I am not going to leave my money as cash and miss out on the oppoutunity of investing and the rewards that can come with it.

AnotherJoe

Jonah01 wrote: »

OP here, Although I didn't lose a significant amount of money I am still slightly bruised by this encounter.

Having read this entire thread with interest it does seem like funds/shares/trusts/multi funds and the rest are all a bit of a gamble.

I currently have my money sitting as cash in an ISA and a SIP. I have no idea where to put it in terms of investments as I fear I'll choose one and the bottom will fall out of it.

Then put it in the global market. Many investments that cover the top 4-5-6k companies globally. Then you dont need worry about "the fund" since its the market. Then dont look at it for ten years.

seacaitch

Jonah01 wrote: »

Short term losses wouldn't panic me in a well diversified portfolio because i know long term the result will be positive.

This is very easy to say but in practice will likely prove extremely difficult.

For anyone whose whole investing experience is post-2008/9 they have little idea what it's like to retain investment discipline throughout a deep and prolonged market downturn, and they (and you, if you fit that profile) will face a huge personal test one day. This really cannot be emphasised enough. Very many people who say, and mean, that they won't sell into the next deep bear market will do just that: lose discipline and sell low.

And the reason they will sell low is that in the depths of a bear market it really won't be at all clear that, as you wrote, "long term the result will be positive". It will look like the opposite: the problems facing us will be grim, intractable even, and the economic outlook dire. Many investors will believe, or rationalise, that selling is what they need to do to protect what they have left.

Markets aren't like the ebbing tides or the sun setting or rising. Historic price charts do not guarantee they'll rise again in shortihs order (or even at all) rewarding us handsomely if we hold on. Retaining discipline is something of an act of faith and losing discipline is the easiest thing to do.

I am not about to jump into an investment without the knowledge required so I do not believe I am a danger to myself at all but I appreciate what you are saying. (obviously ignoring my Woodford experience as I jumped in two footed there!)

And equally obviously, we can't ignore your Woodford experience because that's Exhibit A: what you actually did as opposed to what you say you'll do...

Every investor is a danger to themselves. All of us. The less experienced you are - the less you've been tested by very difficult markets - the more at risk you are.

I also know I am not going to leave my money as cash and miss out on the oppoutunity of investing and the rewards that can come with it.

Come the next deep bear market, then many people, and especially those whose investment experience is all post-GFC, will wish they had fewer risk assets and more safer assets. Don't underestimate how hard it is to hold onto risk assets throughout a deep downturn.

My suggestion is to properly take a bit of time to educate yourself a reasonable amount before proceeding with investing your money. At no point in the future are you likely to regret time spent better equipping yourself with this knowledge thereby gaining a better understanding of the risks (and realistic rewards) involved in investing.

Jonah01

seacaitch wrote: »

This is very easy to say but in practice will likely prove extremely difficult.

For anyone whose whole investing experience is post-2008/9 they have little idea what it's like to retain investment discipline throughout a deep and prolonged market downturn, and they (and you, if you fit that profile) will face a huge personal test one day. This really cannot be emphasised enough. Very many people who say, and mean, that they won't sell into the next deep bear market will do just that: lose discipline and sell low.

And the reason they will sell low is that in the depths of a bear market it really won't be at all clear that, as you wrote, "long term the result will be positive". It will look like the opposite: the problems facing us will be grim, intractable even, and the economic outlook dire. Many investors will believe, or rationalise, that selling is what they need to do to protect what they have left.

Markets aren't like the ebbing tides or the sun setting or rising. Historic price charts do not guarantee they'll rise again in shortihs order (or even at all) rewarding us handsomely if we hold on. Retaining discipline is something of an act of faith and losing discipline is the easiest thing to do.




And equally obviously, we can't ignore your Woodford experience because that's Exhibit A: what you actually did as opposed to what you say you'll do...

Every investor is a danger to themselves. All of us. The less experienced you are - the less you've been tested by very difficult markets - the more at risk you are.




Come the next deep bear market, then many people, and especially those whose investment experience is all post-GFC, will wish they had fewer risk assets and more safer assets. Don't underestimate how hard it is to hold onto risk assets throughout a deep downturn.

My suggestion is to properly take a bit of time to educate yourself a reasonable amount before proceeding with investing your money. At no point in the future are you likely to regret time spent better equipping yourself with this knowledge thereby gaining a better understanding of the risks (and realistic rewards) involved in investing.

Superb post thanks.

what I say I'll do is based on experiences from Exhibit A, so a very different scenario to when I made my decision for Exhibit A

Unfortunately I showed a great lack of panic and didn't sell my Woodford units quick enough believing his performance would turn around (long term blah blah). Luckily I got out just before he suspended the fund.

I'm going to take my time like you suggest, read the great posts on here and keep reading on the subject.