IFA or DIY - any thoughts appreciated

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  • Prism
    Prism Posts: 3,794
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    garmeg said:
    Just looking at the charges is a bit like comparing apples and pears and having invested with VLS60 for about 6 years I moved to an IFA last year and was under no illusion that the charges would be higher.  The performance of the VLS60 though over the last 12 months is 4.4% whereas the portfolio under my IFA has returned  almost 10% with a similar asset allocation of 60% equities and 40% fixed term.  A few of the funds he chose have performed very well over the last few months though so that has skewed the results.  The charges are higher but the return is too so overall it has performed better than in a passive multi asset fund.  I am only speaking from a personal point of view though and of course you could get investors with other IFAs producing completely different results. You cannot really only look at charges in isolation. 
    An IFA (or anyone else for that matter) is unlikely to significantly outperform something like the LS range (or similar multi-asset low cost offerings) over the long term. 
    Depends on the funds chosen.

    Terry Smith has significantly outperformed for years.

    As did Neil Woodford, until he didn't. :smile:
    1. You sure Fundsmith has outperformed if benchmarked appropriately?
    Ditto Woodford
    https://finalytiq.co.uk/woodford-vs-ftse-uk-equity-income-lets-set-the-record-straight/
    You have to remember the (active) investment management industry makes money from selling the dream of outperformance.

    2. If anyone has the ability to pick these future "outperforming" funds/sectors I'm all ears.

    This has just been released and is a good read
    https://www.amazon.co.uk/Incredible-Shrinking-Alpha-2nd-successful-ebook/dp/B08BX5HRLJ/ref=sr_1_1?
    What benchmark would you suggest for Fundsmith. MCSI World is the one they have chosen. I can't think of a better one.
  • Prism
    Prism Posts: 3,794
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    SteveL555 said:
    On the investments front - 
    I'll probably get pulled apart for this, but I'm swayed (utterly swayed) by the passive over active argument, and have decided that the vast majority of my SIPP will be in passive funds. With that decision made it was fairly inevitable I'd end up looking at Vanguard's Life Strategy funds, which happily deal with asset allocation for me (in a binary, equity vs bonds way). I'm not going entirely into Vanguard's LS funds, but the vast majority will go there. They charge 0.22% pa. I'll be honest, I don't actually know what the weighted average charge is on the multitudinous funds I've got with HL but I suspect it's around 0.60% pa.

    I don't think anyone would pull you apart for investing in mostly passive funds - it is likely the best way to do it. The charges are low, the decisions taken for you automatically. I might debate Vanguard vs some of the other passive fund providers but there is very little in it.

    Selecting active funds can sometimes work but it requires a fair bit more effort in my opinion to make a half decent go of it. I tend to track how an active fund behaves for ages before making a decision and you need to keep an eye on them.

    Sounds like you have made the right decision.
  • Prism said:
    garmeg said:
    Just looking at the charges is a bit like comparing apples and pears and having invested with VLS60 for about 6 years I moved to an IFA last year and was under no illusion that the charges would be higher.  The performance of the VLS60 though over the last 12 months is 4.4% whereas the portfolio under my IFA has returned  almost 10% with a similar asset allocation of 60% equities and 40% fixed term.  A few of the funds he chose have performed very well over the last few months though so that has skewed the results.  The charges are higher but the return is too so overall it has performed better than in a passive multi asset fund.  I am only speaking from a personal point of view though and of course you could get investors with other IFAs producing completely different results. You cannot really only look at charges in isolation. 
    An IFA (or anyone else for that matter) is unlikely to significantly outperform something like the LS range (or similar multi-asset low cost offerings) over the long term. 
    Depends on the funds chosen.

    Terry Smith has significantly outperformed for years.

    As did Neil Woodford, until he didn't. :smile:
    1. You sure Fundsmith has outperformed if benchmarked appropriately?
    Ditto Woodford
    https://finalytiq.co.uk/woodford-vs-ftse-uk-equity-income-lets-set-the-record-straight/
    You have to remember the (active) investment management industry makes money from selling the dream of outperformance.

    2. If anyone has the ability to pick these future "outperforming" funds/sectors I'm all ears.

    This has just been released and is a good read
    https://www.amazon.co.uk/Incredible-Shrinking-Alpha-2nd-successful-ebook/dp/B08BX5HRLJ/ref=sr_1_1?
    What benchmark would you suggest for Fundsmith. MCSI World is the one they have chosen. I can't think of a better one.
    If you look at the style you will see it is firmly large cap growth
    https://www.morningstar.co.uk/uk/funds/snapshot/snapshot.aspx?id=F00000LK2Q&tab=3
    Category: Global Large-Cap Growth Equity as of 31 Jul 2020
    So why not start with something like MSCI World Large Cap Growth?
    You can see how much that index has "outperformed" MSCI world
    https://www.msci.com/documents/10199/bcb64e9b-267c-4bc7-b810-fdc0a99ec41d
  • Prism
    Prism Posts: 3,794
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    Prism said:
    garmeg said:
    Just looking at the charges is a bit like comparing apples and pears and having invested with VLS60 for about 6 years I moved to an IFA last year and was under no illusion that the charges would be higher.  The performance of the VLS60 though over the last 12 months is 4.4% whereas the portfolio under my IFA has returned  almost 10% with a similar asset allocation of 60% equities and 40% fixed term.  A few of the funds he chose have performed very well over the last few months though so that has skewed the results.  The charges are higher but the return is too so overall it has performed better than in a passive multi asset fund.  I am only speaking from a personal point of view though and of course you could get investors with other IFAs producing completely different results. You cannot really only look at charges in isolation. 
    An IFA (or anyone else for that matter) is unlikely to significantly outperform something like the LS range (or similar multi-asset low cost offerings) over the long term. 
    Depends on the funds chosen.

    Terry Smith has significantly outperformed for years.

    As did Neil Woodford, until he didn't. :smile:
    1. You sure Fundsmith has outperformed if benchmarked appropriately?
    Ditto Woodford
    https://finalytiq.co.uk/woodford-vs-ftse-uk-equity-income-lets-set-the-record-straight/
    You have to remember the (active) investment management industry makes money from selling the dream of outperformance.

    2. If anyone has the ability to pick these future "outperforming" funds/sectors I'm all ears.

    This has just been released and is a good read
    https://www.amazon.co.uk/Incredible-Shrinking-Alpha-2nd-successful-ebook/dp/B08BX5HRLJ/ref=sr_1_1?
    What benchmark would you suggest for Fundsmith. MCSI World is the one they have chosen. I can't think of a better one.
    If you look at the style you will see it is firmly large cap growth
    https://www.morningstar.co.uk/uk/funds/snapshot/snapshot.aspx?id=F00000LK2Q&tab=3
    Category: Global Large-Cap Growth Equity as of 31 Jul 2020
    So why not start with something like MSCI World Large Cap Growth?
    You can see how much that index has "outperformed" MSCI world
    https://www.msci.com/documents/10199/bcb64e9b-267c-4bc7-b810-fdc0a99ec41d
    Hmm, its a little tricky because the MCSI World Large Cap Growth is priced in dollars and there seems to be no UK ETFs that track it. There are three that track MCSI All World Growth but that includes emerging markets which has dragged the performance back over 3 years... and Fundsmith doesn't cover EM anyway.

    So MCSI World Large Cap Growth has annualized around 13.7% in dollars over the last 5 and 10 years. I estimate that is a touch over 15% in pounds. It looks like Fundsmith has annualized at around 18.5% over the exact same time period. 
  • BritishInvestor
    BritishInvestor Posts: 948
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    edited 29 August 2020 at 4:19PM
    Prism said:
    Prism said:
    garmeg said:
    Just looking at the charges is a bit like comparing apples and pears and having invested with VLS60 for about 6 years I moved to an IFA last year and was under no illusion that the charges would be higher.  The performance of the VLS60 though over the last 12 months is 4.4% whereas the portfolio under my IFA has returned  almost 10% with a similar asset allocation of 60% equities and 40% fixed term.  A few of the funds he chose have performed very well over the last few months though so that has skewed the results.  The charges are higher but the return is too so overall it has performed better than in a passive multi asset fund.  I am only speaking from a personal point of view though and of course you could get investors with other IFAs producing completely different results. You cannot really only look at charges in isolation. 
    An IFA (or anyone else for that matter) is unlikely to significantly outperform something like the LS range (or similar multi-asset low cost offerings) over the long term. 
    Depends on the funds chosen.

    Terry Smith has significantly outperformed for years.

    As did Neil Woodford, until he didn't. :smile:
    1. You sure Fundsmith has outperformed if benchmarked appropriately?
    Ditto Woodford
    https://finalytiq.co.uk/woodford-vs-ftse-uk-equity-income-lets-set-the-record-straight/
    You have to remember the (active) investment management industry makes money from selling the dream of outperformance.

    2. If anyone has the ability to pick these future "outperforming" funds/sectors I'm all ears.

    This has just been released and is a good read
    https://www.amazon.co.uk/Incredible-Shrinking-Alpha-2nd-successful-ebook/dp/B08BX5HRLJ/ref=sr_1_1?
    What benchmark would you suggest for Fundsmith. MCSI World is the one they have chosen. I can't think of a better one.
    If you look at the style you will see it is firmly large cap growth
    https://www.morningstar.co.uk/uk/funds/snapshot/snapshot.aspx?id=F00000LK2Q&tab=3
    Category: Global Large-Cap Growth Equity as of 31 Jul 2020
    So why not start with something like MSCI World Large Cap Growth?
    You can see how much that index has "outperformed" MSCI world
    https://www.msci.com/documents/10199/bcb64e9b-267c-4bc7-b810-fdc0a99ec41d
    Hmm, its a little tricky because the MCSI World Large Cap Growth is priced in dollars and there seems to be no UK ETFs that track it. There are three that track MCSI All World Growth but that includes emerging markets which has dragged the performance back over 3 years... and Fundsmith doesn't cover EM anyway.

    So MCSI World Large Cap Growth has annualized around 13.7% in dollars over the last 5 and 10 years. I estimate that is a touch over 15% in pounds. It looks like Fundsmith has annualized at around 18.5% over the exact same time period. 
    I have GBP total return data for MSCI World large cap growth and it's returned 327% vs Fundsmith 400% over the last 10 years (since Nov 10) vs 211% of MSCI world.
     MSCI World quality has returned 323% over the same period, so I would expect if you had a hybrid index of MSCI World Large Cap Growth & Quality you would get a lot closer. 
    These eggheads have already undertaken the analysis
    https://www.aqr.com/Insights/Research/White-Papers/More-Superstar-Investors-Neil-Woodford-and-Terry-Smith
    Maybe Terry does have genuine skill - we will find out if/when the tailwinds that have suited his style shift direction.....
  • fred246
    fred246 Posts: 3,620
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    I invest passively in thousands of companies globally and pay tiny charges. I am very relaxed about it. Would I be relaxed if I paid a diamond geezer a lot of money to guess 20 to 30 companies that might do really well? I don't think so. Would I want to pay thousands to an IFA because he says he is better at spotting diamond geezers? I don't think so. Does the IFA refund me if his diamond geezer loses all my money? I don't think so.
  • dunstonh
    dunstonh Posts: 116,040
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    Just looking at the charges is a bit like comparing apples and pears and having invested with VLS60 for about 6 years I moved to an IFA last year and was under no illusion that the charges would be higher.  The performance of the VLS60 though over the last 12 months is 4.4% whereas the portfolio under my IFA has returned  almost 10% with a similar asset allocation of 60% equities and 40% fixed term.  A few of the funds he chose have performed very well over the last few months though so that has skewed the results.  The charges are higher but the return is too so overall it has performed better than in a passive multi asset fund.  I am only speaking from a personal point of view though and of course you could get investors with other IFAs producing completely different results. You cannot really only look at charges in isolation. 
    An IFA (or anyone else for that matter) is unlikely to significantly outperform something like the LS range (or similar multi-asset low cost offerings) over the long term. 
    That is easier than you seem to think.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • dunstonh said:
    Just looking at the charges is a bit like comparing apples and pears and having invested with VLS60 for about 6 years I moved to an IFA last year and was under no illusion that the charges would be higher.  The performance of the VLS60 though over the last 12 months is 4.4% whereas the portfolio under my IFA has returned  almost 10% with a similar asset allocation of 60% equities and 40% fixed term.  A few of the funds he chose have performed very well over the last few months though so that has skewed the results.  The charges are higher but the return is too so overall it has performed better than in a passive multi asset fund.  I am only speaking from a personal point of view though and of course you could get investors with other IFAs producing completely different results. You cannot really only look at charges in isolation. 
    An IFA (or anyone else for that matter) is unlikely to significantly outperform something like the LS range (or similar multi-asset low cost offerings) over the long term. 
    That is easier than you seem to think.
    Given that the vast, vast majority of people that I see attempt it (on a professional and individual level), I'd be keen to understand how. Edges are extraordinarily hard to come by in the market.
  • fred246
    fred246 Posts: 3,620
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    Vanguard are too small a company to be able to afford an IFA to construct portfolios for them. IFAs can always show you a portfolio that did better than a passive fund. Whether any of their customer's ever had the portfolio is something the customer will never know. IFAs always say it's not their job to produce the highest investment returns but whenever someone suggests investing in passive funds an IFA always says "I can beat that".
  • TBC15
    TBC15 Posts: 1,446
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    dunstonh said:
    Just looking at the charges is a bit like comparing apples and pears and having invested with VLS60 for about 6 years I moved to an IFA last year and was under no illusion that the charges would be higher.  The performance of the VLS60 though over the last 12 months is 4.4% whereas the portfolio under my IFA has returned  almost 10% with a similar asset allocation of 60% equities and 40% fixed term.  A few of the funds he chose have performed very well over the last few months though so that has skewed the results.  The charges are higher but the return is too so overall it has performed better than in a passive multi asset fund.  I am only speaking from a personal point of view though and of course you could get investors with other IFAs producing completely different results. You cannot really only look at charges in isolation. 
    An IFA (or anyone else for that matter) is unlikely to significantly outperform something like the LS range (or similar multi-asset low cost offerings) over the long term. 
    That is easier than you seem to think.
    Given that the vast, vast majority of people that I see attempt it (on a professional and individual level), I'd be keen to understand how. Edges are extraordinarily hard to come by in the market.

    So if we accept active investors can’t beat the market and passive investments give superior returns why do these people continually accept the loses, some sort of masochism? Year in year out.


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