Changing your investment approach. Managing your portfolio.

Thrugelmir

DrSyn wrote: »

You forgot to mention:-

(a) Vanguard started the first index mutual fund and were laughed at by the investment industry at the time. They called it "Jack Bogle's Folly ".

(b) That Jack Bogle when he retired, handed over the company to the fund holders and did not keep it for himself.

(c) Vanguard has been a leading force in driving down fund charges.

The above suggest they have their fund holders interest at heart.

I still remember when unit trust costs were low, because they where control by law. The industry said that being allowed to charge what they like, would not mean the costs would go up.

So the legal control on what a unit trust could charge was removed. So what then happens:-
1. Charges start their upward journey.
2. Adverting of the products shoot up.
3. The cult of the "Star Manager" is born!

Investors shunned Vanguard at the outset. Likewise passive investing was created on market efficiencies. As the S&P 500 is the most highly researched market in the world. Only more recently has technology revolutionised share trading per se.

Blackrock ( a commercial organisation) undercuts Vanguard in terms of fees on a number of products.

I'm far from anti passive investing. Just like to keep matters in perspective. Sometimes you wonder if a generation of investors have thought they've found the Holy Grail. One suspects that pitfalls lie ahead. Even Bogle himself was critical of the passive indexing of everything. Other markets aren't as efficient as that of the main US one.

DrSyn

In each generation there are going to be some who think they have found the "Holy Grail". Then the shout always goes up "but its different this time round". As we both know it never is.

JustAnotherSaver

MaxiRobriguez wrote: »

I too missed the SIPP wording in OP.

In which case, at mid-30's I suspect that 100/0 split is more favourable than 80/20 in the current environment and emerging market overweighting isn't to be shied away from. Re-assess at 45.

See that's the thing - do i really want to be changing it every x-months so that it favours the current market when to be honest i don't even know what the current market is. I couldn't tell you what's 'hot' and what's 'not' right now or indeed at any time.



The most recent work i read was Lars Kroijer's Investing Demystified book which basically echoed other work i'd previously read. I was in agreement in that i don't believe i have 'an edge'. In fact i think it's pretty darn obvious that i don't. So why then would going 100/0 be a good idea for me, looking at 30 years & retirement? I'm not convinced it is.

I do think i'd prefer an approach beyond say 60/40 with 30 years to go but 100/0? Not so sure.



Then there's the heavy UK weighting of VLS. Initially i wasn't aware of it and then when i was i didn't understand the impact of that. From reading different articles i've found that i don't want to be heavily weighted towards the UK at all and would prefer a more global spread than that.






Still, the question remains what would others do when it came to changing their approach?
So for example i go with VLS80 and drop from 100, or i go with a different fund altogether - such as HSBC, Blackrock, L&G or whoever. At the moment i still have a chunk invested in 2 Vanguard funds. Would you (or anyone reading this) leave them be as over the course of time while VLS100 for example may make up a large percentage, it will end up being a small percentage compared with 30 years in another fund?
Or would you re-allocate them both totally in to the new fund you select?
I don't see as having what would be 3 funds as 'complicated'. I ran my S&S ISA some years ago and had invested in too many funds, chopping and changing. I think there were about 6 randomly selected funds which had no structure at all. That was a bit complicated but i don't think 3 funds with some thought process behind them would be classified as complicated. Even still, not sure of the most sound way forward.

james_09

I’m in a similar position to you. Mid 30’s and finally started taking enough interest in my pension to move it into a SIPP and DIY. Been reading lots over the past year.

Initially I’ve gone with my core holding (85% of my portfolio) split equally between VLS80, HSBC global dynamic and L&G international index trust. I’m actually thinking the opposite to you and considering moving them to VLS100 or HSBC global adventurous. I’m also wondering if I should move all into one fund - either VLS or the HSBC fund.

MaxiRobriguez

JustAnotherSaver wrote: »

See that's the thing - do i really want to be changing it every x-months so that it favours the current market when to be honest i don't even know what the current market is. I couldn't tell you what's 'hot' and what's 'not' right now or indeed at any time. .

I should have been more precise.

Bond yields are at record lows. There's been some yields that are negative but it's not a phenomena that can keep going. Make no mistake we are at the end of a long bond rally, and if you introduce bonds into your current portfolio the chances are you'll be looking at a loss over the next 20 years because inflation at some point in that timeframe is likely to pick up a bit and bond prices will fall as a result.

If interest rates remain low for 20 years such that you don't come out with a loss then in that scenario stocks are likely to be better anyway.

Introduce bonds after inflation/interest rate rises to 4% and yields follow.

danm

Given this is in a Sipp and therefore i assume for retirement, have you considered a target retirement fund....select the fund by ‘targwt retirement date’ and then the provider manage the rebalancing to take you from equities into fixed income.

bowlhead99

JustAnotherSaver wrote: »

See that's the thing - do i really want to be changing it every x-months so that it favours the current market when to be honest i don't even know what the current market is. I couldn't tell you what's 'hot' and what's 'not' right now or indeed at any time.

The very best way of investing is not to hold a bit of everything but to instead hold whatever is the very best thing to invest in at its current price, and sell it whenever there is something that is going to start going up the most next, and so on. Of course, it's not practical or possible to have such foresight.

However, some multi asset funds are risk targeted and aim to offer a product that gives decent returns while attempting to keep in line with a particular target volatility range.

In order to do this they necessarily have some people analysing market data and statistics and the correlation of certain asset classes with other asset classes and making projections of how markets may move. They periodically refocus the fund to an asset mix that is likely to stay in the target range.

That's is not about maximising the possible performance but attempting to manage the risk and volatility while still giving a long term return that is competitive against similar rivals.

So, they are doing that refocusing every quarter or semiannually or annually or whatever, so you don't have to do it yourself.

By contrast, the VLS product range is performance targeted - they aim to give you whatever is the performance result of holding a portfolio of investments with a particular weighting between stocks and bonds and domestic and international listed assets, which they agree with you in advance and ensure they are holding that mix at the time of each month end factsheet which they produce; and the volatility will be whatever it will be, as a result of holding that mix.

As key drivers of risk and volatility include the ratio of stocks to bonds or international shares to shares listed in UK, some people will say it is basically the same thing, but it's subtly different from the other approach. With a fund that aims to hold fixed ratios, you basically know what you will be holding from time to time before you see the factsheet: because it says it on the tin before you buy it, rather than waiting until a factsheet is produced some time after the month end with a rolling delay, for you to find out what they did.

Still, the question remains what would others do when it came to changing their approach?
So for example i go with VLS80 and drop from 100, or i go with a different fund altogether - such as HSBC, Blackrock, L&G or whoever. At the moment i still have a chunk invested in 2 Vanguard funds. Would you (or anyone reading this) leave them be as over the course of time while VLS100 for example may make up a large percentage, it will end up being a small percentage compared with 30 years in another fund?
Or would you re-allocate them both totally in to the new fund you select?

What you are saying is: your preferred mix for the long term is not to hold the funds you currently hold, because there is something else you want to hold instead.

In the first option you gradually buy so much of the funds you do want to hold that over the course of the coming decades, the ongoing purchases and growth of the funds you actually want for the long term, eventually drown out the funds you don't want to hold. And thereby your existing assets become a very small percentage - while the funds you do want, become a large percentage - and eventually you get a portfolio that is pretty much what you want; it just took you a couple of decades to get there.

In the second option, you decide that the funds you don't have but want, are better than the funds you have but don't want. You dispose of the funds you currently have, giving you cash which can immediately be spent on buying the fund (s) that you want.

If you are some kind of idiot, you might think option one is better and it will be worth waiting twenty years to get to the point that you eventually have what you want, instead of having that today.

Sorry if that sounds harsh.

The most common reason for doing option one is because you feel you don't really know what you want, or distrust what you have read since first assembling your beginner portfolio. So you want to just do a bit of both because you are fine with being a spineless ditherer ; and by not having the courage of your convictions you won't later feel so bad with yourself if you notice that the funds you didn't think you want, actually turn out to have a good run.

Still, keeping a portfolio you don't want until it is drowned out by things you do want, seems pretty dumb to me.

. That was a bit complicated but i don't think 3 funds with some thought process behind them would be classified as complicated. Even still, not sure of the most sound way forward.

If you are concluding that even though you know what you want, you won't be *too* much worse off if you also hold something you don't want so much, and it won't be *too* complicated (even though it is needlessly more complicated than just holding the thing that you want), then who am I to argue.

You can of course just get '3 funds with some thought process behind them' but perhaps it is more logical to keep going and developing the thought process until you work out what one fund is suitable for your needs. Rather than thinking, "well all of these fund options seem like they could be reasonable choices, so I'll just get them all and then later create my own arguments for what ratio I should rebalance back to when I find they don't all deliver the same total return as each other because they have different approaches."

grnglide

therefore i assume for retirement, have you considered a target retirement fund....select the fund by ‘targwt retirement date’

But that is only suitable if you know that you need to withdraw all the money when you reach the target age. In practice this is only suitable for annuity purchases.

JustAnotherSaver

bowlhead99 wrote: »

Sorry if that sounds harsh.

Not at all believe it or not. I'd like to carry your post and my reply around with me as i pass through this message board. Proof enough to the people who come out with "can't handle what he needs to hear" "truth hurts" that it's not what you say but how you say it. Some people on here are unnecessarily rude. They do it just to get a reaction out of someone & get themselves some 'thanks' in the process.



I didn't take your post as being rude or harsh at all. Some times you need to hear things from an outsiders viewpoint because your mind can be clouded.

What you said about not really knowing what you want, spineless ditherer, so on and so forth - that actually wasn't what i was actively thinking although perhaps subconsciously that's what was/is going on in my mind. It can take an outsider at times to make the picture clearer than you were seeing it beforehand.



So no, i didn't find your post one bit harsh. It was actually very helpful.




Though i'm not sure what your edit was. I read it shortly after 6am this morning.