DC to drawdown

Victor_Meldrew

bostonerimus wrote: »

You would not want to invest everything in a single actively managed fund with little diversity as that would expose you to too much market risk

And I wouldn't. Strangely, this is what I have been saying all along.

bostonerimus wrote: »

Woodford is a good example of the negative effects of that

But you don't think HSBC could also collapse? Why not? If something happens that causes a run on HSBC and people attempt to withdraw en masse wouldn't that cause the same reaction? Unlikely I know but possible.

bostonerimus wrote: »

But HSBC Global is a big diverse fund of funds and so there's no problem in having it as your only fund.

So why not split the pot between 5 or 6 fund of funds. Surely that's better as you are not reliant on one manager.

bostonerimus

Victor_Meldrew wrote: »

But you don't think HSBC could also collapse? Why not? If something happens that causes a run on HSBC and people attempt to withdraw en masse wouldn't that cause the same reaction? Unlikely I know but possible.

The scenario you mention is a possibility for any fund, but it is such a small possibility with something like HSBC global that I wouldn't worry. Woodford is a stock picker and so if a few stocks tank and he underperforms it can cause a run on the fund. HSBC global is invested in large index funds....biggest allocation is to S&P500...so Woodford and HSBC Global are completely different and the comparison is almost meaningless.

So why not split the pot between 5 or 6 fund of funds. Surely that's better as you are not reliant on one manager.

You are welcome to do that, but it complicates things unnecessarily. There would probably be a lot of investment overlap.

Victor_Meldrew

bostonerimus wrote: »

HSBC global is invested in large index funds....biggest allocation is to S&P500...so Woodford and HSBC Global are completely different and the comparison is almost meaningless.

But HSBC can underperform the rest of the market. You only have to look at the funds performance tables to realise that if you pick the wrong fund you could loose out a lot. And trackers do not all perform equally as you will know. Yes HSBC is good at the moment but it doesn't mean it will be in the future. Hence why I advocate using the multi-manager approach. Just because its complicated doesn't mean its wrong.

bostonerimus

Victor_Meldrew wrote: »

But HSBC can underperform the rest of the market. You only have to look at the funds performance tables to realise that if you pick the wrong fund you could loose out a lot. And trackers do not all perform equally as you will know. Yes HSBC is good at the moment but it doesn't mean it will be in the future. Hence why I advocate using the multi-manager approach. Just because its complicated doesn't mean its wrong.

With an fund of funds like HSBC global you are essentially buying a portfolio of index funds. If you don’t like the asset allocation or management then find a different fund or more fundamentally a different philosophy. The temptation to perfect and/or protect a portfolio is great, which is why I just use a few index funds and basically never touch them. I recommend that most people do that and the easiest way to achieve that is with a multi-asset fund of your choice. I fear that you are worrying about things that don’t matter. Less is often more when it comes to investing.

Victor_Meldrew

Thanks for your input bostonerimus. Its given me pause for thought and I will seriously consider your ideas. Its always good to get someone elses point of view particularly where they think differently to yourself.

On a further note the IFA has agreed to sign off so that I can self-invest. This was written into the agreement they had with my employer which meant I was not bound to accept them as ongoing IFA (which I didn't know initially). It means I will save a considerable amount.

[Deleted User]

I am with Boston. There could be good reasons to pick something other than the specific fund. For example, I am not a fan of hedging bonds (or foreign bonds for that matter) but that’s about asset allocation, costs and risks.

The reasons you are listing don’t hold water. HSBC won’t be allowed to go bankrupt but if it did investor stocks would be ring-fenced. And Financial Services Compensation Scheme would pick up the bill for the small portion that might be at risk from the administrators. The experience would be unpleasant and it’s well worth having access to 6 months worth of expenses elsewhere.

The costs you listed would make this option an absolute no-no for me. That’s a massive chunk of your expected return and there is nothing stopping you from getting something very similar for 0.2% per year total, particularly so that you invested before. You do need to read up a bit before proceeding.