What % of your portfolio are active vs passive funds?

enthusiasticsaver

AnotherJoe wrote: »

I sugegst you start tracking VLS60 against your whole portfolio including costs and take a view over time on how its doing.

Thanks and yes I will be doing that.

The IFA does more than invest the funds and presumably keep an eye on them though. He gives us advice on the most tax efficient way on drawing on the portfolio and has mapped out how much we can afford to draw out of the portfolio each year on top of our guaranteed income before we run out of money which was actually a lot more than we thought. For now though we are just investing and leaving it, really as we have done for the last 5 years albeit with a different approach. I have just downloaded the factsheets of all the funds he has allocated various percentages to. I don't have the knowledge to pick funds or the inclination to keep on top of all the investment news in the sector which is why we have opted for the IFA.

I presume you are DIY only?

bostonerimus

enthusiasticsaver wrote: »

We have seen figures to show their current models outperform the VLS60 although of course costs will be higher especially in year 1 with initial fees. He did acknowledge however that our investments in VLS60 had done a lot better than many of the relative novice investors he sees. I just did not want the worry any more about whether I was doing the best with it and decided for 5 years to invest through the IFA. He has allocated it across 11 active funds and has done the same with my SIPP and we are transferring an old DB pension of mine and DHs S and S ISA and DC pension.

You can do a lot with statistics and I'd be surprised if your IFA didn't show you impressive figures.

I think you have fallen into the trap of wanting to do "the best" rather than "good enough"; there is no "best". I hope this works out for you, but please keep an eye on your returns and the fees you are being charged. FYI I do something pretty philosophically close to VLS80 portfolio but with just a few individual Vanguard funds to beat fees down even further.

AnotherJoe

enthusiasticsaver wrote: »

Thanks and yes I will be doing that.

The IFA does more than invest the funds and presumably keep an eye on them though. He gives us advice on the most tax efficient way on drawing on the portfolio and has mapped out how much we can afford to draw out of the portfolio each year on top of our guaranteed income before we run out of money which was actually a lot more than we thought. For now though we are just investing and leaving it, really as we have done for the last 5 years albeit with a different approach. I have just downloaded the factsheets of all the funds he has allocated various percentages to. I don't have the knowledge to pick funds or the inclination to keep on top of all the investment news in the sector which is why we have opted for the IFA.

I presume you are DIY only?

Yep and have been a long time since I discovered that a FA had no more ability to know the future trend of investments than me, and by me doing it I started out with an extra 0.5% gain compared to an FA.
I appreciate you say you dont have the knowledge to keep up with investment news, or have the ability to pick out funds, but I think not only do you not need to, its actually dangerous to, in that encourages churning assets and incurring costs*. You were doing fine with VLS60, I have similar as well as active and the point is, if you invest that way, that you dont need to keep up with the news either.
I dont especially find maximising the tax benefits difficult either I just asked a few Q's here since when i was looking into retiring whilst i was confident about investing having been doing it a long time, i was initially clueless about burning down and minimising tax.
I suspect that most IFAs or FAs are incented to create you a reasonably large portfolio because if they just put you into 2 or 3 funds you might think "hmm I could do that myself"


Of course, I also dont necessarily practice what i preach I have a reasonably large portfolio also . The to be fair, some of that is historic, some of that is because I like it and some because I am possibly deluded enough to think i can beat the market. I am though backed up by a large % of my funds being in passive (aka index investments) somewhere between 40-60% I'd guess. I am also in the position of when my pensions kick in (state and company) they will cover all my "basics" so I dont have to look at eking out every last penny and i can play a bit.



Finally, if the IFA is letting you sleep at night since you were worrying about stock markets and so on maybe its worth that 0.5%.


* whilst i do buy and sell its not on the basis of investment news, whether the FED dropped or the dollar rose or the latest Brexit pronouncement or whatever. Its more future looking, eg I think this or that area or even company will do well so better to emphasise investments in those.

Lois_and_CK

I'm 100% passive.

SIPP:
Vanguard LS 80 acc
HSBC global strategy balanced

S&S ISA:
Blackrock consensus 85
L&G multi index 6

I may add the new Blackrock Mymap to my ISA at some stage.

I'm comfortable with passive. I'm happy with "good enough" and slow and steady, and I like that I can leave them to look after themselves. Although I am flirting with the idea of moving a little of my SIPP, maybe 10%, into Lindsell Train. I've been thinking about that for months though!

Vet

100% passive

keyboardworrier

95% passive. I do have some money with Orbis who only charge a fee when they outperform the benchmark.



A quote from Nick Train reminds me why I've gone majority passive:


Train’s trust has trounced rivals in recent years, delivering a return of 89.5% over five years compared with a sector average of 26.4%. Since he took the helm, it has delivered an annualised return of 11%. Train says he and co-manager Michael Lindsell have been “bewildered” by their success. “Frankly we haven’t the faintest idea whether this kind of performance is sustainable. We would guess almost certainly not.”

enthusiasticsaver

bostonerimus wrote: »

You can do a lot with statistics and I'd be surprised if your IFA didn't show you impressive figures.

I think you have fallen into the trap of wanting to do "the best" rather than "good enough"; there is no "best". I hope this works out for you, but please keep an eye on your returns and the fees you are being charged. FYI I do something pretty philosophically close to VLS80 portfolio but with just a few individual Vanguard funds to beat fees down even further.

I have looked at the cumulative performance of the funds he has picked for us over the last 5 years and some have done better than the VLS60, some do a bit worse but are more conservative and some have done a lot better as of course they are not like for like and the percentages allocated to each fund are different than sticking the whole lot in VLS60. They seem to match our risk profile though with the whole lot being overall in a moderate to cautious portfolio whereas the VLS60 is not really that cautious. There is also a percentage in a UK property feeder account (commercial not residential) which of course the VLS60 does not invest in so it is definitely taking the portfolio in a different direction.

I appreciate the advice and am aware the fees will be higher but he is giving us a service and professional advice which I think we will benefit from now. I will definitely still be keeping a close eye on it over the next few years and comparing it with what it would have done had I left it in VLS60 after taking fees and charges into account.

enthusiasticsaver

AnotherJoe wrote: »

Yep and have been a long time since I discovered that a FA had no more ability to know the future trend of investments than me, and by me doing it I started out with an extra 0.5% gain compared to an FA.
I appreciate you say you dont have the knowledge to keep up with investment news, or have the ability to pick out funds, but I think not only do you not need to, its actually dangerous to, in that encourages churning assets and incurring costs*. You were doing fine with VLS60, I have similar as well as active and the point is, if you invest that way, that you dont need to keep up with the news either.
I dont especially find maximising the tax benefits difficult either I just asked a few Q's here since when i was looking into retiring whilst i was confident about investing having been doing it a long time, i was initially clueless about burning down and minimising tax.
I suspect that most IFAs or FAs are incented to create you a reasonably large portfolio because if they just put you into 2 or 3 funds you might think "hmm I could do that myself"


Of course, I also dont necessarily practice what i preach I have a reasonably large portfolio also . The to be fair, some of that is historic, some of that is because I like it and some because I am possibly deluded enough to think i can beat the market. I am though backed up by a large % of my funds being in passive (aka index investments) somewhere between 40-60% I'd guess. I am also in the position of when my pensions kick in (state and company) they will cover all my "basics" so I dont have to look at eking out every last penny and i can play a bit.



Finally, if the IFA is letting you sleep at night since you were worrying about stock markets and so on maybe its worth that 0.5%.


* whilst i do buy and sell its not on the basis of investment news, whether the FED dropped or the dollar rose or the latest Brexit pronouncement or whatever. Its more future looking, eg I think this or that area or even company will do well so better to emphasise investments in those.

I do think you make some good points and overall the VLS60 has done what I needed it to do over the last 5 years and I have been comfortable investing in it and have not been lying awake worrying about it.

I had to consult a pension transfer specialist to discuss transferring an old DB pension but the IFA we went to uses a holistic lifestyle approach in that we tell him how much we need to live the sort of retirement we want and he invests to achieve that. We liked what he was saying and decided to try a different approach to investing. Yes it will cost us more than me doing as I have done. He is confident that even after charges his model of portfolio will outdo the VLS60 and whilst we have enough I am always keen to do more so we can help out our family, maybe do an extra holiday per year or whatever.

We are lucky like you though in that we have DB pensions to cover all of our essential expenditure (joint DB pensions of around £35k per annum) and the portfolio provides the extras except we have the next 3-4 years sorted for that anyway in internet savers and current accounts. After that our state pensions pay out so the portfolio may never be needed. He is telling us to spend more but old habits die hard.

Only time will tell as to whether it will be worth us going with him in the long run but we are happy with our decision for now. Lots of people do use IFAs for various reasons but this is a new experience for me. We get on well with him though and he is not pushy and always willing to give us time to decide.

Alexland

keyboardworrier wrote: »

95% passive. I do have some money with Orbis who only charge a fee when they outperform the benchmark.

I didn't realise that any MSEers were still with Orbis. After earning £500 in bonuses we moved our money out. Thankfully the excellent returns we achieved initially covered the later underperformance so we still transferred out in profit. We even moved the JISA out despite it being in fee free units until age 18 and that money is now in a VTR fund.

Alex

Alexland

enthusiasticsaver wrote: »

I have looked at the cumulative performance of the funds he has picked for us over the last 5 years...

Your advisor now has the benefit of hindsight so will of course show you funds that were lucky enough to have recently performed better than a more passive approach for a similar risk exposure.

Ask them if they were recommending exactly the same fund mix 5 years ago - almost certainly not. That's the problem.

Alex