Vanguard Factor Funds

bostonerimus

This is a can of worms that most investors don't need to open. The OP should avoid these factor funds. Leave them to those with experience and/or hubris.

msnau

Many thanks for everyone's input. I'm glad I asked here first. On balance, it seems these funds are not for me.

Can anyone help with a step plan on how to choose the most suitable active fund? I've tried to read around the subject but all the books I've read are focused on passive investing.

Going back several years, how did investors successfully come to the conclusion Lindsell Train, Fundsmith etc were solid future investments?

Alexland

So you have VLS100 which is a reliable car that is suitable for long journeys but could still be dangerous if you bail at high speed. Personally I prefer a global tracker such as an All World fund but still we all have our own tastes in good cars.

However now you are asking for advice on buying an unreliable car. The car you can't really trust to get you to your destination. The car that looks amazing, but you always have niggling doubts over and might regret ever seeing...

Unsuprisingly there aren't many good books about buying unreliable cars.

Alex

[Deleted User]

msnau wrote: »

Many thanks for everyone's input. I'm glad I asked here first. On balance, it seems these funds are not for me.

Can anyone help with a step plan on how to choose the most suitable active fund? I've tried to read around the subject but all the books I've read are focused on passive investing.

Going back several years, how did investors successfully come to the conclusion Lindsell Train, Fundsmith etc were solid future investments?

You could look at a fund screener tool and look for Morningstar 5 star rated funds or Trustnet 5 crown rated. This is kind of what I do to filter out the best active funds.

Alexland

Then you could watch the regular Morningstar videos where they explain how they have just downgraded a bunch of top rated funds following a period of poor performance...

[Deleted User]

For info (and it may be of use to somebody)
I read this article on Factors in February https://masterinvestor.co.uk/wp-content/uploads/2019/02/Master-Investor-Magazine-Issue-47.pdf
(page 21)
And decided to track them on a portfolio of 600k with the split as per table 4
The volatility is far too much for me.
https://ibb.co/WKXNM46

That's as at last night
https://ibb.co/zh8PBVX

The Factor portfolio is the YELLOW line (it starts at a base of 590k hence the not 0%) and the time base is February 2019 onwards

(the WHITE line btw doing fantastically well is John Edwards Passive Portfolio)

bostonerimus

Why are you attracted to an active fund?

msnau

I think one of the reasons for seeking an active fund is that I keep reading the market is overpriced, or a correction is due soon etc. The hope is a good active manager will be able to better judge and hopefully avoid. A passive fund would just blindly crash with the rest of the market.

One of the reasons I went for LS100 instead of All-Cap is because I keep reading US stocks are overpriced (based on CAPE - cyclically adjusted price to earning ratio) - so I went for a reduced US allocation.

I'm definately into investing for the long term (10+ years), just trying to gain as much from the upside, whilst trying to limit the downside.

I know holding cash/bonds/gilts is the diversifier against equity crashes - and I do hold these. I just want to optimize the equity side.

The John Edwards Passive Portfolio performance looks really good. I'd never heard of him. Going onto his blog, it looks like he changes his passive funds regularly - moving onto greener funds. Thats a really interesting concept - to create your own passive portfolio based on personal risk/perceptions - in contrast to pre-packaged portfolios/allocations such as LS100 and All-cap.

DrSyn

msnau wrote: »

Going back several years, how did investors successfully come to the conclusion Lindsell Train, Fundsmith etc were solid future investments?

1. If you go down the active fund root. It will not be a buy and forget approach. You will have to do your research to pick the funds you think will do well. Then keep monitoring the funds for

(a) changes manager (the 2 star mangers I wanted, both moved a few, weeks after I bought their fund)

(b) changes in portfolio assets (many in Woodford funds did not do this, so missed the asset change)

(c) continued good performance, then take a view on if the change temporary or permanent.


2. No one can see into the future. So it was just luck that people picked Train & Fundsmith Funds before at the start. Also no one knows for how long there success will continue.

Some will say they like how the fund was to pick there assets and would be run. Or they heard about the managers track record before they started the funds. However I have heard both these things said about funds that turned out average or failed.

DrSyn

msnau wrote: »

I think one of the reasons for seeking an active fund is that I keep reading the market is overpriced, or a correction is due soon etc. The hope is a good active manager will be able to better judge and hopefully avoid. A passive fund would just blindly crash with the rest of the market.

One of the reasons I went for LS100 instead of All-Cap is because I keep reading US stocks are overpriced (based on CAPE - cyclically adjusted price to earning ratio) - so I went for a reduced US allocation.

I'm definately into investing for the long term (10+ years), just trying to gain as much from the upside, whilst trying to limit the downside.

I know holding cash/bonds/gilts is the diversifier against equity crashes - and I do hold these. I just want to optimize the equity side.

The John Edwards Passive Portfolio performance looks really good. I'd never heard of him. Going onto his blog, it looks like he changes his passive funds regularly - moving onto greener funds. Thats a really interesting concept - to create your own passive portfolio based on personal risk/perceptions - in contrast to pre-packaged portfolios/allocations such as LS100 and All-cap.

1. Make no mistake when the crash comes, active funds will also be affected.

2. I suggest you watch both of these:-

http://www.kroijer.com/

https://www.ifa.com/indexfundsthemovie/

Then consider investing in a low cost Global Multi Asset Fund. They have wide diversification while minimising risk, at low cost.

You chose the risk level or share/bond split you are comfortable with, pay them the money & they do the rest. There are a number of these funds. For example these two:-

https://www.vanguardinvestor.co.uk/investing-explained/what-are-lifestrategy-funds?intcmpgn=lifestrategyfunds_learnmore_link

https://www.hsbc.co.uk/investments/isas/hsbc-global-strategy-portfolios/


3. Perhaps this would be of interest to you:-

https://portfoliocharts.com/