For those familiar with Lars Kroijer and his views

bostonerimus

Linton wrote: »

I thought you used trackers and government bond funds. These provide one with minimal asset allocation control. The only levers you have are the % equity vs safe bonds and I guess US vs "International" equity. There is far more to asset allocation than this. I am interested in asset allocation in the context of (a partial list):

- managing correlation in capital performance
- managing correlation of income sources
- increasing diversification by choice of %s of large and small companies
- increasing diversification by use of other investment areas such as infrastructure and property
- increasing diversification by use of different types of bond
- avoidance of over-dependence on individual sectors or geographies

It all depends on your objectives. If you have no actual need for your investments other than for use in an emergency and to bequeath to your children then it may not make sense to go to this level of detail other than out of interest. But then it doesnt matter much what you do as long as it isnt stupid.

On the other hand if you want a high secure income over an extended time period whilst leaving sufficient for long term care I feel it is very worthwhile.

As an active investor I would expect you to slice and dice and have lots of levers to pull. I don’t see the need to worry about such fine detail. I take a very high level approach and use an asset allocation that hopefully will provide some gains and 3% dividends with a reasonable amount of risk given my circumstances and the historical efficient frontier

arwain

iglad wrote: »

I thought I was the only one 100% active. I picked my funds wisely and have been suitably rewarded.

I read on another thread that you have only been in these funds since March of this year, and that you chose them by looking at which were the best performing funds over the last few years. This has worked well for you so far and I hope it continues to do so. There seems to be a fair amount of evidence however that this is usually not a very successful strategy over the long term.

I wonder if once you had selected these top performing funds and read up on them and really understood why they had done well and what might happen to them under different market conditions then that might be a good strategy. I suspect though that not too many people have the ability to do that, I know I certainly don't.

badger09

Linton wrote: »

Yes but, for example, the choice of VLS100 vs a FTSE World tracker made a difference of 15% in 5 years, far greater than the effect of most fees, SJP excepted. Since both funds invest following the same approach in much the same universe of companies this difference arises from asset allocation. Yet many people here focus on the fees.

15% is a substantial difference. May I ask which FTSE World Tracker?

Alexland

badger09 wrote: »

15% is a substantial difference. May I ask which FTSE World Tracker?

According to the trustnet charting tool the index has returned 91.1% and VLS100 fund has returned 73.2% over the past 5 years so a circa 15% difference after making allowance for reasonable costs in tracking the index. While VLS60 and VLS80 are both good for balanced and adventurous risk if going 100% equities there are better options than VLS100.

DrSyn

Surely even a beginner will have enough curiosity to look at the breakdown of fund before buying it?

So if they wanted a FTSE World Tracker index fund, they would quickly see that the breakdown of the VLS100 is not the same as the !!!!!!.

Prism

DrSyn wrote: »

Surely even a beginner will have enough curiosity to look at the breakdown of fund before buying it?

So if they wanted a FTSE World Tracker index fund, they would quickly see that the breakdown of the VLS100 is not the same as the !!!!!!.

You would think, but I get the feeling that lots of investors have no real clue what the make-up of their funds are - especially with active ones. I tend to have a fund on my watchlist for 6 months to a year before deciding one way or another.

quirkydeptless

DrSyn wrote: »

So if they wanted a FTSE World Tracker index fund, they would quickly see that the breakdown of the VLS100 is not the same as the !!!!!!.

Audaxer

Linton wrote: »

I thought you used trackers and government bond funds. These provide one with minimal asset allocation control. The only levers you have are the % equity vs safe bonds and I guess US vs "International" equity. There is far more to asset allocation than this. I am interested in asset allocation in the context of (a partial list):

- managing correlation in capital performance
- managing correlation of income sources
- increasing diversification by choice of %s of large and small companies
- increasing diversification by use of other investment areas such as infrastructure and property
- increasing diversification by use of different types of bond
- avoidance of over-dependence on individual sectors or geographies

It all depends on your objectives. If you have no actual need for your investments other than for use in an emergency and to bequeath to your children then it may not make sense to go to this level of detail other than out of interest. But then it doesnt matter much what you do as long as it isnt stupid.

On the other hand if you want a high secure income over an extended time period whilst leaving sufficient for long term care I feel it is very worthwhile.

Linton, if you are so confident that your strategy will meet your objectives and these objectives require higher returns than you would get from low cost index funds, does that not mean that you do consider that you have an edge? Is it managing the risk and asset allocation that gives you that edge?

JustAnotherSaver

DrSyn wrote: »

Surely even a beginner will have enough curiosity to look at the breakdown of fund before buying it?

Prism wrote: »

You would think

Not necessarily.



I'm going to take a stab at the pair of you being quite knowledgable in investing, or at the very least confident, even if that confidence may or may not be misplaced.

On that note you're seeing it through biased eyes. It's easy to say you'd expect someone to do XYZ when you know that's the least that should be done, but what about the very real possibility that the beginner doesn't actually know what questions to ask? They wouldn't even think of looking at certain areas because they don't know how it works, they don't know what they should or shouldn't be doing.
And then they're worried about making a huge balls up so they end up doing ... nothing.

bostonerimus

Audaxer wrote: »

Linton, if you are so confident that your strategy will meet your objectives and these objectives require higher returns than you would get from low cost index funds, does that not mean that you do consider that you have an edge? Is it managing the risk and asset allocation that gives you that edge?

It’s super difficult to prove an edge because you have to compare like with like and the performance of one portfolio vs another is never going to be statistically significant. So it all comes down to personal preferences. There are an infinite number of ways to reach your financial goals and I’m certain Linton has things well covered. The key here is that both Linton and I have done some research and understand what we are doing and why. That’s the most important component in each of our portfolios.

Now lots of people won’t be as geeky as that which is where something like VLSxx comes in and maybe even the advice of a sensible IFA.