What % of your portfolio are active vs passive funds?

Prism

stphnstevey wrote: »

At the end of the day, the only real question people want answering on this type of thread is does my active portfolio outperform your passive! :rotfl:

Looking at performance LTGE, FE, SMT or HVPE for example, looks like you could have had the same performance with a slightly cheaper NASDAQ 100 tracker EQQQ

To be fair nobody has brought up comparision stats, because what would be the point - we all have different allocations. There are quite a few ETFs that have beaten or matched some of the best performing active funds, buts its difficult to predict which one. My best performing fund of the last 3 years was a global passive tech tracker.

stphnstevey

Prism wrote: »

To be fair nobody has brought up comparision stats, because what would be the point - we all have different allocations. There are quite a few ETFs that have beaten or matched some of the best performing active funds, buts its difficult to predict which one. My best performing fund of the last 3 years was a global passive tech tracker.

Which global passive tech tracker out of interest?

To be honest, what's the point of seeing who is passive and who is active? Yes, X passive Vs Y active doesn't really tell you much

Nobody invests in shares to make a loss, everyone wants to pick the best investment

The most interesting thing of this thread is what other people invest in

Naturally, your going to want to compare and generally you do that through performance

There maybe other strategies, such as wealth preservation, income etc, but those active funds mentioned above/below have a definite growth element that most would look for in them. Therefore this growth element of those actives can be compared to passives

Also, if you specialize in a niche area with a passive tracker, say the NASDAQ 100, although not quite as small as the 30 or so holdings of some actives, does this niche then mean your effectively acting like a active where you are the fund manager deciding that small niche of investments? So can you be passively active or actively passive?

Prism

stphnstevey wrote: »

Which global passive tech tracker out of interest?

The L&G one. I also had L&G health for a couple of years. Both are index trackers but I would say that I used them actively when I thought they would do well.

Linton

stphnstevey wrote: »

At the end of the day, the only real question people want answering on this type of thread is does my active portfolio outperform your passive! :rotfl:

Looking at performance LTGE, FE, SMT or HVPE for example, looks like you could have had the same performance with a slightly cheaper NASDAQ 100 tracker EQQQ

Sorry, I must disagree....
- if 2 funds have the same performance it doesn’t matter what the charges are. Fund performance is always reported after deduction of charges.
- performance is a secondary criterion for choosing a fund. Basing a portfolio solely on Brazilian stocks would be a disastrous strategy despite IIRC 50% returns over the past year or two. LTGE is not an alternative to a NASDAQ tracker. It invests far more widely. Happening to show the same performance over a given time period is of no relevance to what may happen in some other time period.

bowlhead99

stphnstevey wrote: »

At the end of the day, the only real question people want answering on this type of thread is does my active portfolio outperform your passive! :rotfl:

Looking at performance LTGE, FE, SMT or HVPE for example, looks like you could have had the same performance with a slightly cheaper NASDAQ 100 tracker EQQQ

Yes, if you had decided you would gamble on one stock market being a good place to be, rather than allocating your money to global holdings around the world through active management, you might by coincidence get the same result, or one might be better or worse than the other over a given time period.

stphnstevey wrote: »

Also, if you specialize in a niche area with a passive tracker, say the NASDAQ 100, although not quite as small as the 30 or so holdings of some actives, does this niche then mean your effectively acting like a active where you are the fund manager deciding that small niche of investments? So can you be passively active or actively passive?

Person A decides their core investment strategy will be to employ active investment manager to evaluate opportunities around the world and buy a selection of holdings which have attractive characteristics for the price, periodically selling out of the holdings and buying other ones. For this they pay a management fee.

Person B decides their core investment strategy will be to pick one particular stock market out of all the ones that exist, and just buy the biggest things on that market (weighted to the very biggest / most expensive ones) and see what happens. For this they pay a smaller management fee.

Person B might think of themselves as a 'passive investor' but given they decided the strategy and subset of opportunities in which they would participate - out of all the possible ways they could have built a portfolio - and their holdings look nothing like a global index, they have clearly made a very 'active' decision before they even start.

stphnstevey

Linton wrote: »

Sorry, I must disagree....
- if 2 funds have the same performance it doesn’t matter what the charges are. Fund performance is always reported after deduction of charges.

Which is worse for active as the charges are generally higher

Linton wrote: »

- performance is a secondary criterion for choosing a fund. Basing a portfolio solely on Brazilian stocks would be a disastrous strategy despite IIRC 50% returns over the past year or two. LTGE is not an alternative to a NASDAQ tracker. It invests far more widely. Happening to show the same performance over a given time period is of no relevance to what may happen in some other time period.

Choosing performance as one of your criteria doesn't necessarily have to correspond with high risk and you would be fooling yourself to think it doesn't play a large factor, albeit not the overriding factor

I confess to not knowing the LTGE holdings, but 30 or so was quoted in the news article I saw, which seems less than 100 for the NASDAQ 100. These 30 are likely global, but so are the majority of NASDAQ 100 companies

Yes you can choose any time period to suit the situation, in the same way you can use it to hide it. If not performance, what other measures would you compare?

stphnstevey

bowlhead99 wrote: »

Yes, if you had decided you would gamble on one stock market being a good place to be, rather than allocating your money to global holdings around the world through active management, you might by coincidence get the same result, or one might be better or worse than the other over a given time period.

Person A decides their core investment strategy will be to employ active investment manager to evaluate opportunities around the world and buy a selection of holdings which have attractive characteristics for the price, periodically selling out of the holdings and buying other ones. For this they pay a management fee.

Person B decides their core investment strategy will be to pick one particular stock market out of all the ones that exist, and just buy the biggest things on that market (weighted to the very biggest / most expensive ones) and see what happens. For this they pay a smaller management fee.

You can spin it anyway you like

Is it a gamble taking 100 of the biggest (often grown as a result of being the top performing) companies, most if not global based, work in markets across the globe, which index is readjusted automatically without human error or sentiment at a low annual cost

Or is it a gamble to rely on someone else to pick your companies, based on a humans best guess at what might do well, often with a smaller level of holdings than an index to truly call global, competing against all the other millions of people trying to do the same, even if they are able to outperform the market (which is difficult), doing so is likely for only relatively short lived periods, then when they fall out of favour you might miss this and be locked in to their selection and paying considerably more on an annual basis

bowlhead99 wrote: »

Person B might think of themselves as a 'passive investor' but given they decided the strategy and subset of opportunities in which they would participate - out of all the possible ways they could have built a portfolio - and their holdings look nothing like a global index, they have clearly made a very 'active' decision before they even start.

Yes, this was what I was insinuating, how close to active is a passive investor when picking indexes

However picking an index over an active fund, where possible, I do currently feel has advantages, but happy to be convinced otherwise

Linton

stphnstevey wrote: »

Which is worse for active as the charges are generally higher

No, you havent understood. If an active fund states a 10% return and 1% charges and a passive fund 10% return with 0% charges, you get 10% in both cases. The active fund's investments have actually returned 11%.

Choosing performance as one of your criteria doesn't necessarily have to correspond with high risk and you would be fooling yourself to think it doesn't play a large factor, albeit not the overriding factor

You cannot choose future high performance. You can choose high past performance. You can choose ability for high performance. But anything capable of oustandingly good performance is also capable of outstandingly bad performance. Look at what happened in the tech boom/crash and the 2008 crash.
For me individual fund performance does not play a large factor, my concern is diversification with a focus on sectors that can provide high performance.

I confess to not knowing the LTGE holdings, but 30 or so was quoted in the news article I saw, which seems less than 100 for the NASDAQ 100. These 30 are likely global, but so are the majority of NASDAQ 100 companies

According to Morningstar, NASDAQ is 97.6% US. It is also 56% Tech, 26% Consumer Cyclical with all other sectors under 10%. The top 5 companies are tech except for Amazon which is at least partly techy (6 shares as Google is split in two) account for 45% of the total.


LTGE is 35% US, 35% UK, 21% Japan. Looking at sectors it is 46% Consumer Defensive, 24% Consumer Cyclical, 16% Financial Services, and 11% Technology. Its top 5 companies are 34% of the total and are in a wider range of industries.



Clearly they are very different funds and LTGE is far more diversified. Though to my view LTGE is still too focussed to form the basis of a solid portfolio.

Yes you can choose any time period to suit the situation, in the same way you can use it to hide it. If not performance, what other measures would you compare?

I would look at the portfolio as a whole and ensure that it covered as many things as possible without overdependence on any single area. In that way you gain at least something from any area that does particularly well and dont lose most of your money when one area collapses.

stphnstevey

Linton wrote: »

According to Morningstar, NASDAQ is 97.6% US. It is also 56% Tech, 26% Consumer Cyclical with all other sectors under 10%. The top 5 companies are tech except for Amazon which is at least partly techy (6 shares as Google is split in two) account for 45% of the total.

LTGE is 35% US, 35% UK, 21% Japan. Looking at sectors it is 46% Consumer Defensive, 24% Consumer Cyclical, 16% Financial Services, and 11% Technology. Its top 5 companies are 34% of the total and are in a wider range of industries.

Clearly they are very different funds and LTGE is far more diversified. Though to my view LTGE is still too focussed to form the basis of a solid portfolio.

I note you haven't listed the number of holdings. A small number of holdings can lead to concentration in itself, which is not diversity, whether or not they happen to be spread out across the globe

I could have compared to the S&P 500 index, which is far more diverse, but then the performance would have been touted as not as much as LTGE

Also, listing the country base and sector, does not mean they do not work globally and provide services to other sectors. Microsoft provide the platform for the majority of computers in the majority of sectors. Amazon provides it's cloud computing to a multitude of businesses. You would be hard to find a sector that doesn't pay Google for advertising and their Android system is the most used communications mobile device platform on the planet. Paypal is a global fintech. Alibaba and Tencent span multiple industries. Tech probably has more far reaching properties, spanning other sectors, more than any other sector and in itself is hugely diversified.

bowlhead99

stphnstevey wrote: »

I note you haven't listed the number of holdings. A small number of holdings can lead to concentration in itself, which is not diversity, whether or not they happen to be spread out across the globe

Broadly, if they are all listed on the same exchange or headquartered in the same country you will have some country/political/regulatory risk, which can be diversified away by instead using companies from across the world with different risks from different governments or regulators - even if the companies you are choosing typically have multinational operations.

It is true that companies and business generally is becoming more globalised, but if you restrict your shopping list to what can be bought on one particular stock exchange you are not doing yourself any favours when it comes to accessing a broad scope of investment opportunities.

Also, listing the country base and sector, does not mean they do not work globally and provide services to other sectors. Microsoft provide the platform for the majority of computers in the majority of sectors. Amazon provides it's cloud computing to a multitude of businesses.

So those two companies have business interests around the world. Should those companies together be 22% of your portfolio? They are that proportion of EQQQ.

Alibaba and Tencent span multiple industries.

I like those companies. However, if you decide to invest in EQQQ, they will be 0% of that portfolio while Microsoft, Amazon and Google will together be 30%.

Yes, this was what I was insinuating, how close to active is a passive investor when picking indexes

However picking an index over an active fund, where possible, I do currently feel has advantages, but happy to be convinced otherwise

An investor will build a portfolio with allocations to meet their needs, which will often involve holding multiple things in the portfolio to cover a range of asset classes, geographical regions and industry types.

The investor might choose to use active or passive building blocks for the portfolio.

If the investor chooses to use predominantly passive building blocks to structure that balanced portfolio, and periodically rebalance those building blocks from time to time, he would probably think of himself as quite passive, even if he is doing a bit of buying and selling from time to time to juggle the holdings as they naturally grow and contract in value. Likewise if he just buys a global tracker fund and doesn't do much to it other than hold it, it's a passive attitude.

However, if he decides that instead of making a globally balanced portfolio of different regions, industries or asset classes - or simply following a global index - he will just 'pick an index' that he likes the look of, which is not a global index and is skewed to certain types of company or industry: that does not really seem like he is being very passive in the traditional sense of 'buy the market constituents and hold them according to market weight'.

If he just buys a NASDAQ 100 tracker, he is ignoring the fact that global capital is allocated by global stock markets to produce allocations to thousands of companies. He is saying forget these other companies on the rest of the 40+ developed and emerging global stock markets, and forget the other companies on the other US stock exchanges (NYSE/AMEX), I just want to get the biggest companies that choose to list on NASDAQ, and am happy with 30% of my money in just Microsoft and Amazon and Alphabet as a result of that particular choice.

- If you know you want exposure to a certain region or industry sector within your portfolio and decide that an index tracker (a passively allocated collective investment scheme) is the best way to obtain it for that particular region/sector , fair enough.

- However, if you are just deciding to use one concentrated tracker of one part of the global stock market (eg NASDAQ 100 or FTSE 100) instead of a global tracker or a regionally /industry diversified set of trackers, you are not being very 'passive' because you are not letting the market (the sum of what is out there to invest in) guide your allocation.