Balancing risk, trackers

mogscot

Seeking some advice from the wise. Apologies for asking the simple questions. 
I am 57 
previously held Indv stocks and shares for years but with little managing by Glasgow firm. These were with reinvested dividends and were inherited. Sold out fortunately before 2008 crash as funds required. Overall  barring dividend reinvestment it was not that fab as an investment return in this period. put me off the higher risk of single shares.  luckily I was advised to come out of the market prior to 2008. 
now I have reasonably decent amount in Prudential Growth PIP and Prudential Cautious fund, PIP both accumulation this following IFA advice. My feeling is this may not be exciting but steady and kept safer from volatility?? Opinions please. Invested after covid crash and has gained 4%
I have a pension 20k so looking to build but also enjoy funds. 

I have further cash to invest. 60k ...which still  leaves  me with a cushion
Do I use an on line platform and pick a solid large global tracker fund, if so recommendations please. My research is they do as well if not better than managed funds. IFA always seem to push Managed of course. 
which platform and which tracker considering my age. 

No mortgage or debts, children sorted. 

I am basically wondering if I do this investment myself rather than the somewhat tied or ‘ managed’ favourites of IFA! 

Is this wise or do I use a managed fund? 

With thanks 

dunstonh

My feeling is this may not be exciting but steady and kept safer from volatility?? Opinions please. Invested after covid crash and has gained 4%

These are effectively ultra cautious options and will almost certainly underperform most medium risk and upwards investments.   They are designed for people that do not understand volatility and do not like volatility.  That comes at a both a cost and a compromise. 

in my opinion, the pru funds are oversold to people that shouldn't really be in them.  That doesn't mean they are not suitable for you though.

Do I use an on line platform and pick a solid large global tracker fund,

So, you have the ultra cautious pru funds on the one hand and now you are talking about jumping right up the scale to the other end.    You need to understand your risk profile before you decide where you need to invest.

My research is they do as well if not better than managed funds. IFA always seem to push Managed of course. 

Incorrect on both counts.  IFAs do not always push managed fund and trackers to not always perform as well as managed.   Where a tracker is best, a tracker should be used. Where a managed fund is best, a managed fund should be used.  You should not be biased to either.   There is absolutely no reason for an IFA to favour managed over passive apart from assessing quality.    Nowadays, most IFAs are using hybrid portfolios which are a mixture of managed and passive.  Quite a lot of the  DIY investors here do the same.

I am basically wondering if I do this investment myself rather than the somewhat tied or ‘ managed’ favourites of IFA! 

IFAs cannot be tied.   Only FAs can be tied.

Is this wise or do I use a managed fund? 

Insufficient information to go on at this stage.   As is said on most of the threads where people ask similar if you know what you are doing and can DIY well, then you will save money.  If you DIY badly it can cost you a lot more than using an IFA.   You should never use an FA.    A lot of people out there are doing DIY and paying more by doing so.  A lot of people using an "wealth management" firm are paying more by doing so.     They key is getting the best of either of the options.  Not the worst of either.

Albermarle

I think you need to be bit better informed on what types of funds are available.
A tracker does just that - it tracks an index . Can be global stock markets , UK stock markets , UK gilts etc .
It is not normally wise to be 100% just invested in one tracker , although global stock market trackers are suitable for younger people/those with high risk tolerance .
So really you need a blend of trackers but you need to know what you doing and many people instead opt for a low cost multi asset fund , which does the job for you at a small cost . You can say they are managed but only with a very light touch - sometimes it is said they are passively managed .
https://monevator.com/category/investing/passive-investing-investing/
A fully managed fund is of course more actively managed .

Sebo027

Incorrect on both counts.  IFAs do not always push managed fund and trackers to not always perform as well as managed.   Where a tracker is best, a tracker should be used. Where a managed fund is best, a managed fund should be used.  You should not be biased to either.   There is absolutely no reason for an IFA to favour managed over passive apart from assessing quality.    Nowadays, most IFAs are using hybrid portfolios which are a mixture of managed and passive.  Quite a lot of the  DIY investors here do the same.

This is true but the empirical evidence suggests that a portfolio comprised of specifically selected passive index trackers will, statistically speaking, out perform the actively managed funds over a 20+ year period e.g.

• Globally diversified equity (developed, market) - 45%
• Globally diversified equity (developed, value) - 10%
• Globally diversified equity (emerging markets)  - 15%
• Global Commercial Real Estate - 10%
• Short term investment grade bonds - 10%
• Inflation linked bonds - 10%

Whether or not this is the "best investment" for the an individual is another question. 

dunstonh

Sebo027 said:

Incorrect on both counts.  IFAs do not always push managed fund and trackers to not always perform as well as managed.   Where a tracker is best, a tracker should be used. Where a managed fund is best, a managed fund should be used.  You should not be biased to either.   There is absolutely no reason for an IFA to favour managed over passive apart from assessing quality.    Nowadays, most IFAs are using hybrid portfolios which are a mixture of managed and passive.  Quite a lot of the  DIY investors here do the same.

This is true but the empirical evidence suggests that a portfolio comprised of specifically selected passive index trackers will, statistically speaking, out perform the actively managed funds over a 20+ year period e.g.

• Globally diversified equity (developed, market) - 45%
• Globally diversified equity (developed, value) - 10%
• Globally diversified equity (emerging markets)  - 15%
• Global Commercial Real Estate - 10%
• Short term investment grade bonds - 10%
• Inflation linked bonds - 10%

Whether or not this is the "best investment" for the an individual is another question. 

The problem with that is it assumes all the managed funds out there.   In reality, the filtering processes used in research will remove the bulk of managed funds very quickly leaving you with a much smaller selection to pick from.       There will be some areas where no managed fund offers increased potential for the cost.  There will be other areas where there is no viable tracker.  There will be areas where a managed fund is better than the tracker (typically in the more focused areas and not general market coverage).
Also, if you are in managed funds, you would typically move around over the years and not stay in the same fund for 20 years.     

mogscot

So many thanks and I agree on the points of information and will learn. Thank you for the links. 
What  is the opinion of the low cost multi asset fund option/ passive type fund? 

As I explained I have had the higher risk of a range of single shares ( mining, banking, pharma, foods, retail plus unit trust, bond mix in the past. 

I wonder if as a recent window stability was an aim with the PRU funds for the beginning and a starting point for the IFA. 

 PRU funds:  are they not of value to maintain core stability and reduced volatility while investing other funds in increased risk while maintaining a core. Surely many people have some funds with less risk and some with more as a balance across their investments. 

Thank you 

mogscot

Should I return to the IFA and invest through him into a multi asset fund? If the PRU funds are not startling, what next? What is better for some core security. 

With all the rating systems is it not possible to reliably do the work by reading HL and other ratings systems that sieve through funds? Is this not what many do? 

masonic

mogscot said:

 PRU funds:  are they not of value to maintain core stability and reduced volatility while investing other funds in increased risk while maintaining a core. Surely many people have some funds with less risk and some with more as a balance across their investments. 

Thank you 

There are higher risk and lower risk funds, achieved by combining different asset classes in various proportions and they will go up and down with the daily movements of those assets. Then there are funds which deliberately hide the daily fluctuations from investors by paying returns as a regular bonus rate. The bonus rate is set lower than the average growth of the assets, so that it can be accumulate at a steady rate and then the excess is held back as a reserve to avoid losses in the bad times. There is a cost to this approach for investors, in the form of higher charges. So the value is really for frightened investors who couldn't cope with seeing the value of their investments fluctuate.

mogscot said:

Should I return to the IFA and invest through him into a multi asset fund? If the PRU funds are not startling, what next? What is better for some core security. 

With all the rating systems is it not possible to reliably do the work by reading HL and other ratings systems that sieve through funds? Is this not what many do?

There is little point in returning to the IFA if you decide to pick your own investments. If you believe your IFA has misunderstood your tolerance for risk then perhaps that is the conversation to have. I'm sure many do rely on HL's marketing list, but it should be viewed with much scepticism, take the recent recommendation to invest in Neil Woodford's funds for example.

mogscot

masonic said:

mogscot said:

 PRU funds:  are they not of value to maintain core stability and reduced volatility while investing other funds in increased risk while maintaining a core. Surely many people have some funds with less risk and some with more as a balance across their investments. 

Thank you 

There are higher risk and lower risk funds, achieved by combining different asset classes in various proportions and they will go up and down with the daily movements of those assets. Then there are funds which deliberately hide the daily fluctuations from investors by paying returns as a regular bonus rate. The bonus rate is set lower than the average growth of the assets, so that it can be accumulate at a steady rate and then the excess is held back as a reserve to avoid losses in the bad times. There is a cost to this approach for investors, in the form of higher charges. So the value is really for frightened investors who couldn't cope with seeing the value of their investments fluctuate.

mogscot said:

Should I return to the IFA and invest through him into a multi asset fund? If the PRU funds are not startling, what next? What is better for some core security. 

With all the rating systems is it not possible to reliably do the work by reading HL and other ratings systems that sieve through funds? Is this not what many do?

There is little point in returning to the IFA if you decide to pick your own investments. If you believe your IFA has misunderstood your tolerance for risk then perhaps that is the conversation to have. I'm sure many do rely on HL's marketing list, but it should be viewed with much scepticism, take the recent recommendation to invest in Neil Woodford's funds for example.

I agree and of course would hope not to rely on one platforms recommend list, especially after the Neil Woodford debacle.  Surely many IFAs use these ratings systems routinely, if time is spent there must be some basis to review them yourself and pick perhaps a split between two/three multi asset funds. Clearly there are funds and funds and different risk profiles. 

I spent years watching shares go up and down and sometimes felt as a small investor that you were last in the heap for attention, I was with Gerrards at the time. So I have had higher risk exposure. I have a pension of 20k, work part time and have no debts plus a decent cash cushion? 

Do you all have an IFA or are you DIY and if so how did you begin or commit to the transition.

Albermarle

I would say most of the regular contributors DIY , but not all .. Some have always DIY'd and some have 'transitioned' 
 In fact a couple of contributors are IFA's
However whenever the question or topic of IFA vs DIY is raised , lets just say there are sometimes 'frank exchanges of views' .between a small group .

masonic

mogscot said:

masonic said:

mogscot said:

 PRU funds:  are they not of value to maintain core stability and reduced volatility while investing other funds in increased risk while maintaining a core. Surely many people have some funds with less risk and some with more as a balance across their investments. 

Thank you 

There are higher risk and lower risk funds, achieved by combining different asset classes in various proportions and they will go up and down with the daily movements of those assets. Then there are funds which deliberately hide the daily fluctuations from investors by paying returns as a regular bonus rate. The bonus rate is set lower than the average growth of the assets, so that it can be accumulate at a steady rate and then the excess is held back as a reserve to avoid losses in the bad times. There is a cost to this approach for investors, in the form of higher charges. So the value is really for frightened investors who couldn't cope with seeing the value of their investments fluctuate.

mogscot said:

Should I return to the IFA and invest through him into a multi asset fund? If the PRU funds are not startling, what next? What is better for some core security. 

With all the rating systems is it not possible to reliably do the work by reading HL and other ratings systems that sieve through funds? Is this not what many do?

There is little point in returning to the IFA if you decide to pick your own investments. If you believe your IFA has misunderstood your tolerance for risk then perhaps that is the conversation to have. I'm sure many do rely on HL's marketing list, but it should be viewed with much scepticism, take the recent recommendation to invest in Neil Woodford's funds for example.

I agree and of course would hope not to rely on one platforms recommend list, especially after the Neil Woodford debacle.  Surely many IFAs use these ratings systems routinely, if time is spent there must be some basis to review them yourself and pick perhaps a split between two/three multi asset funds. Clearly there are funds and funds and different risk profiles. 

I spent years watching shares go up and down and sometimes felt as a small investor that you were last in the heap for attention, I was with Gerrards at the time. So I have had higher risk exposure. I have a pension of 20k, work part time and have no debts plus a decent cash cushion? 

It's important to differentiate between an investment platform's marketing list, especially one in which a fund can buy a place by offering exclusive deals to the platform's customers, and an independent quantitative rating. IFAs may well use the latter, and probably pay for access to such information and associated data. There is plenty of free information out there that is less questionable than the HL wealth list, but all should be taken with a pinch of salt.

mogscot said:

Do you all have an IFA or are you DIY and if so how did you begin or commit to the transition.

I've never received regulated financial advice, I took an interest in investing while still at university and had learned enough to start DIY investing through a mini S&S ISA (when those existed, at a fraction of the then £4k limit) as soon as I was earning some money, a good few years before the global financial crisis.