End of year review

[Deleted User]

fjh wrote: »

Split of holdings is
BMO MM Navigator Cautious D Acc 6.31%
Jupiter Merlin Income Portfolio I Acc 5.88%
Quilter Investors Cirilium Balanced Portfolio R Acc GBP 5.67%
Quilter Investors Cirilium Conservative Portfolio R Acc GBP 5.63%
Threadneedle Managed Equity & Bond ZNA GBP 5.88%
Vanguard LifeStrategy 40% Equity A Acc 5.97%
Total 35.34%
Pension Funds
Name Weight
GBP
Pru PruFund Cautious Fund Pn Ser A 15.95%
Pru PruFund Growth Fund Pn Ser A 48.71%
Total 64.66%

Without calculating, I would guess that bonds make up under 40%, so a balanced portfolio is a reasonable benchmark.

Half of the fund is in an aggressive Pru fund which artificially smoothes the returns but has a high probability of large drawdowns due to high content of risky assets.

Artificial smoothing might be one of the reasons for “underperformance” in 2019. High costs also played a part.

Linton

Update based on %s:


Other than the Prufunds the allocation is split 13.9% equity, 13.2% bonds, 2.4% cash, 5.8% other.


For the full portfolio:
portfolio: 1 yr: 6.6%, 3yr: 19.5%, 5yr:37.3%
VLS20:1yr: 10.1%, 3yr: 14.6%, 5yr:27.2%
VLS40:1yr:12.9%, 3yr: 18.3%, 5yr:37.3%

So, pretty comparable with VLS40.

Deleted_User wrote: »

Half of the fund is in an aggressive Pru fund which artificially smoothes the returns but has a high probability of large drawdowns due to high content of risky assets.

Artificial smoothing might be one of the reasons for “underperformance” in 2019. High costs also played a part.

I hold an earlier version of Prufund Growth. During both the .com crash and the 2008/9 crash it barely faltered. Yes smoothing does have costs, but so does putting a significant % of your assets into low return bonds. Smoothing could give better returns. Sadly the VLS funds have not been around long enough to check on a serious collapse in prices . Since 2011 a relevent version of the Prufund has performed somewhere between VLS40 and VLS60 but with much less volatility.

[Deleted User]

I hold an earlier version of Prufund Growth. During both the .com crash and the 2008/9 crash it barely faltered. Yes smoothing does have costs, but so does putting a significant % of your assets into low return bonds. Smoothing could give better returns. Sadly the VLS funds have not been around long enough to check on a serious collapse in prices . Since 2011 a relevent version of the Prufund has performed somewhere between VLS40 and VLS60 but with much less volatility.

2008 was a very short and sharp drop; uncharacteristic for a bear market. Yes, “smoothing” works well for a short drop but not for anything that would last a bit longer.

The fund should be benchmarked based on what it holds rather than “performed somewhere in between”. VLS 80 seems the closest by asset class make up. Selecting benchmarks based on actual performance defeats the purpose

Linton

Deleted_User wrote: »

2008 was a very short and sharp drop; uncharacteristic for a bear market. Yes, “smoothing” works well for a short drop but not for anything that would last a bit longer.

It was also the case for the .com boom/crash .

The fund should be benchmarked based on what it holds rather than “performed somewhere in between”. VLS 80 seems the closest by asset class make up. Selecting benchmarks based on actual performance defeats the purpose

I disagree that VLS80 is the closest by asset class. For the Prufunds to operate they must internally hold a fair amount of bonds, cash, or other financial instruments. Unfortunately we dont know what this is. So it makes any comparison meaningless.


When selecting benchmarks you need to tconsider both asset distribution and volatility. Otherwise you cannot be comparing like with like. The OPs portfolio is very much less volatile than VLS80, and presumably designed to be so.

[Deleted User]

We do know what it holds https://www.trustnet.com/factsheets/p/dbs2/pru-prufund-growth-fund-pn-ser-a

[Deleted User]

I guess the best approach is to ask “what the OP wants to hold; how old he is, when he plans to retire, how much money he will need, has he experienced actual bear markets as an investor, can he tolerate temporary drops, etc. If he hasn’t experienced it, he needs to try and learn about 1930s and1970s to get a bit of a feel for what might happen. Needs to appreciate what are major long term and short term risks.

Assuming he is in his 30s, he ought to be mostly in shares.

Based on that an appropriate allocation should be designed and a benchmark can be selected if he really wants to go the active route.

Linton

Deleted_User wrote: »

We do know what it holds https://www.trustnet.com/factsheets/p/dbs2/pru-prufund-growth-fund-pn-ser-a

Thanks for that - trustnet knows more than Morningstar which is unusual. Taking the Trustnet figures the Prufind Growth SerA has 42.9% Equity, 24.7% fixed interest, 14.4% property and 18% others. Taking into account this fund, which is one of the higher equity funds in the OPs portfolio, the suggestion that VLS80 is an appropriate comparator seems to be stretching things a bit.

fjh

Deleted_User wrote: »

I guess the best approach is to ask “what the OP wants to hold; how old he is, when he plans to retire, how much money he will need, has he experienced actual bear markets as an investor, can he tolerate temporary drops, etc. If he hasn’t experienced it, he needs to try and learn about 1930s and1970s to get a bit of a feel for what might happen. Needs to appreciate what are major long term and short term risks.

Assuming he is in his 30s, he ought to be mostly in shares.

Based on that an appropriate allocation should be designed and a benchmark can be selected if he really wants to go the active route.

How I wish I was in my 30’s !
I am 63, planning on retiring at @ 66 , cautious.
I lived through the Black Friday and can recall markets since.
I have had this portfolio since July 2018, prior to that just had shares up to 50k.
Thanks

[Deleted User]

I see.

Do you have an idea of what proportion of your required income you already have (accounting for the state pension and all the other sources of income)?

If you have what you need then extreme caution makes sense. No point to keep playing the game if you already won. Otherwise something like 50/50 could still make sense for a while.

[Deleted User]

Here are a few books you might enjoy. Really good stuff; helps to make informed decisions on asset allocation and strategy:

https://www.amazon.com/Ages-Investor-Critical-Life-cycle-Investing/dp/1478227133/ref=bseries_primary_1_1478227133
https://www.amazon.com/Deep-Risk-History-Portfolio-Investing/dp/0988780313/ref=bseries_primary_1_0988780313

Once you are comfortable with asset allocation, this will provide an extremely simple way of executing a portfolio.

DIY Pensions: A Simple Guide to Pensions, SIPPs & Retirement Planning Kindle Edition
by John Edwards (Author)

You might be just fine with what you have but it’s still good to know what’s going on. You are clearly uncomfortable; otherwise you wouldn’t have started this thread.