Where to Start?

sendu

Prism wrote: »

As I said out performance isn't my primary goal

So why this strategy, and why do you believe it will help you reach your goals?

I don't worry about a benchmark for myself since I am not in control of if I hit it. What happens, happens.

I think the failing that most people who stock pick or pick active funds make, is that they don't compare to the gains they could have achieved by simply investing in a passive global index tracker. They think they must be ahead of the curve because they've invested in things that did well in the past, but don't pay attention to the gains they see for themselves.

For what its worth, equities alone, my SIPP over the last 5 years is running at 15.5% and my ISA over just under 4 years is 22% - using XIRR to calculate.

Hard to make any comparisons on that basis, but I imagined buying £1000 worth of VWRL at the start of Aug 2015, 2016, 2017 and 2018, then selling the lot at the start of this month. 4 years of investing in this passive global index tracker gives an XIRR of 28.6%.
(And that's excluding dividends.)

Prism

sendu wrote: »

Hard to make any comparisons on that basis, but I imagined buying £1000 worth of VWRL at the start of Aug 2015, 2016, 2017 and 2018, then selling the lot at the start of this month. 4 years of investing in this passive global index tracker gives an XIRR of 28.6%.
(And that's excluding dividends.)

Why is it hard to make comparisons? XIRR gives you an annualized rate over any period of time.
Plugging those numbers you gave in gives an XIRR calculated rate of 9.3% for VWRL using Morningstar's figures. Considering the reported 3 year figure for the fund is 11% that seems right. Not sure where you get 28.6% from.

sendu

Prism wrote: »

Why is it hard to make comparisons? XIRR gives you an annualized rate over any period of time.

Because the number you get out depends on when you invested and how often. If I only buy VWRL once in Aug 2015, I effectively get out the annualised return of the fund. If I buy some VWRL whenever I notice a market dip, my XIRR will be higher.

Plugging those numbers you gave in gives an XIRR calculated rate of 9.3% for VWRL using Morningstar's figures. Considering the reported 3 year figure for the fund is 11% that seems right. Not sure where you get 28.6% from.

Yes, sorry, I missed a row when calculating the XIRR. I grabbed numbers off the Google chart that pops up when you search for VWRL, and got 9.65%. If I use numbers for the first dip each calendar year (just eyeballing it, and not that I'd suggest anyone try to time the market), I get 12%.

A fair comparison would be to use your exact dates and amounts invested on those dates.

Anyway, I grant that you've done well over these 4 years, just like many individual active funds beat the market average over short time periods. The real test is if your strategy could out-perform over the long term. Like the active funds you choose and switch between, I suspect not. It's only going to take a bad choice here or there to tank your performance.

Prism

sendu wrote: »

The real test is if your strategy could out-perform over the long term. Like the active funds you choose and switch between, I suspect not. It's only going to take a bad choice here or there to tank your performance.

Very true. I already have a few ETFs which use similar investment styles on my watchlist which I can switch too should I decide that my active funds have had their day.

Audaxer

Alexland wrote: »

But for the first 60% of that 25 years City was treading water. How would you have known to have made that investment a decade ago, given the choice of lots of other similar mediocre total return investments, and why would you expect the recent performance to continue and not go back to the 90s under performance?

But if the retiree was only interested in the natural income from CTY, they would still have achieved their objective of rising income, with the additional bonus of the capital balance, eventually increasing by 200%.

I know hindsight is easy and I don't think it would be wise for anyone to invest all their money in CTY, but if I was to get a natural yield of around 4%, rising each year with inflation, from my portfolio of income funds over the next 25 years, and the capital value rose by even a relatively modest percentage, I would be very pleased by that performance.

Audaxer

sendu wrote: »

I think the failing that most people who stock pick or pick active funds make, is that they don't compare to the gains they could have achieved by simply investing in a passive global index tracker.

sendu, are you invested 100% in a passive global equities index fund, or do you have a percentage of your portfolio invested in a global bonds tracker?

Thrugelmir

sendu wrote: »

I think the failing that most people who stock pick or pick active funds make, is that they don't compare to the gains they could have achieved by simply investing in a passive global index tracker.

Why in particular a global index tracker?

sendu

Thrugelmir wrote: »

Why in particular a global index tracker?

Typical practice is to compare a given fund to a relevant benchmark (an index similar to what the fund holds/ similar beta), but I don't think that's meaningful to an investor, especially one picking and swapping between multiple funds and individual stocks.

It's more meaningful to compare your active investment choices whose purpose is to try and beat the average market return, to someone seeking only the average market return. The best someone can do in seeking the later is to go for a passive global index tracker.

sendu

Audaxer wrote: »

sendu, are you invested 100% in a passive global equities index fund, or do you have a percentage of your portfolio invested in a global bonds tracker?

No bonds. I have a small % in REITs, the rest is a passive global equity index fund.

If I wanted reduced volatility I'd be re-balancing with a % of cash, not bonds, since cash savings are doing better than bonds right now.