Could my pension be working harder?

Linton

dunstonh said:

Deleted_User said:

Prism said:

Deleted_User said:

“Who has said you should include certain sectors at the expense of others?  Why do you think portfolios made up of single sector funds would do that?”

If you are using sector funds and then keep rebalancing to ensure sectors are cap weighted to their overall contribution to economy, then you are adding costs and complexity for no benefit whatsoever. 

Hang on, isn't that exactly what VLS 100 is doing. Its a portfolio of single sector funds picked by a management team at Vanguard. I assume sector = region here.

Sector = technology, financial, industrial, energy, materials etc. Here is the definition: https://www.investopedia.com/terms/s/sector-breakdown.asp

VLS does invest by regions and ensures contributions are cap weighted, except for the home market. 

Thats very different from tinkering by sector. 

We have a terminology breakdown You are referring to sector in the industry sense.  We are referring to sector in the investment fund sense. i..e UK equity, US equity, European Equity etc. 

When I refer to sector I would take it broader than that.  eg small vs large, value vs growth as well as industry and geography - in fact any generic subset of the set of equities.

[Deleted User]

Prism said:

Deleted_User said:

I started with nothing and invested through the tech stock crash, the early 2000s crashes, 2008. I did it in several countries and am now well into 7 figures. So, I am not exactly an “inexperienced DIY investor”. 

In fact, there is good consensus among experienced DIY investors and better advisors that tinkering with sectors is a mug’s game. Here is an example:
https://www.bogleheads.org/forum/viewtopic.php?t=288300

I think quite the opposite. Regional allocations don't especially interest me but avoiding some industry sectors and selecting others is the way I typically select my funds.

The point about “regional allocations” isn’t to tinker with them, with one exception (home market) but to stick with market caps. 

Avoiding industry sectors is an active decision which works well for people who know the future.  Wonder how many people made the right bets on sectors in this plot: https://www.bogleheads.org/forum/viewtopic.php?p=4701165#p4701165. And of the ones who guessed wrong, how many chased the winning sectors to only get hit with underperformance again. 

Linton

Deleted_User said:

I started with nothing and invested through the tech stock crash, the early 2000s crashes, 2008. I did it in several countries and am now well into 7 figures. So, I am not exactly an “inexperienced DIY investor”. 

In fact, there is good consensus among experienced DIY investors and better advisors that tinkering with sectors is a mug’s game. Here is an example:
https://www.bogleheads.org/forum/viewtopic.php?t=288300

That link seems to be all about using sectors to guess next year's winners.  I use sector "tinkering" the other way round: the market is full of investors guessing next years winners and the market behaves accordingly. My aim is to avoid over-dependence on any particular company, or company type/size/location and industry.

[Deleted User]

Linton said:

Deleted_User said:

I started with nothing and invested through the tech stock crash, the early 2000s crashes, 2008. I did it in several countries and am now well into 7 figures. So, I am not exactly an “inexperienced DIY investor”. 

In fact, there is good consensus among experienced DIY investors and better advisors that tinkering with sectors is a mug’s game. Here is an example:
https://www.bogleheads.org/forum/viewtopic.php?t=288300

That link seems to be all about using sectors to guess next year's winners.  I use sector "tinkering" the other way round: the market is full of investors guessing next years winners and the market behaves accordingly. My aim is to avoid over-dependence on any particular company, or company type/size/location and industry.

As in “I have been trying to avoid too much FANG/technology”? 

The thing is that while Apple is large, its still a small fraction of the world cap so if something bad happens specifically to APPL, a couch potato portfolio would be just fine. 

dunstonh

Deleted_User said:

Prism said:

Deleted_User said:

I started with nothing and invested through the tech stock crash, the early 2000s crashes, 2008. I did it in several countries and am now well into 7 figures. So, I am not exactly an “inexperienced DIY investor”. 

In fact, there is good consensus among experienced DIY investors and better advisors that tinkering with sectors is a mug’s game. Here is an example:
https://www.bogleheads.org/forum/viewtopic.php?t=288300

I think quite the opposite. Regional allocations don't especially interest me but avoiding some industry sectors and selecting others is the way I typically select my funds.

The point about “regional allocations” isn’t to tinker with them, with one exception (home market) but to stick with market caps. 

Avoiding industry sectors is an active decision which works well for people who know the future.  Wonder how many people made the right bets on sectors in this plot: https://www.bogleheads.org/forum/viewtopic.php?p=4701165#p4701165. And of the ones who guessed wrong, how many chased the winning sectors to only get hit with underperformance again. 

That is an opinion and structuring a portfolio like that is a management decision.   It is a valid opinion.  However, not having home bias is equally valid.  And having different weightings based on different economic data/assumptions is also a valid opinion.
Nobody can lay claim to one best method.  
Now, if you were just picking weightings at random (say 10% in 10 funds across the different country/region sectors) then it would be fair to say that is not a structured or suitable process.

[Deleted User]

dunstonh said:

Deleted_User said:

Prism said:

Deleted_User said:

“Who has said you should include certain sectors at the expense of others?  Why do you think portfolios made up of single sector funds would do that?”

If you are using sector funds and then keep rebalancing to ensure sectors are cap weighted to their overall contribution to economy, then you are adding costs and complexity for no benefit whatsoever. 

Hang on, isn't that exactly what VLS 100 is doing. Its a portfolio of single sector funds picked by a management team at Vanguard. I assume sector = region here.

Sector = technology, financial, industrial, energy, materials etc. Here is the definition: https://www.investopedia.com/terms/s/sector-breakdown.asp

VLS does invest by regions and ensures contributions are cap weighted, except for the home market. 

Thats very different from tinkering by sector. 

We have a terminology breakdown You are referring to sector in the industry sense.  We are referring to sector in the investment fund sense. i..e UK equity, US equity, European Equity etc. 

Ok, you can reduce the cost a bit, particularly by investing in region-specific ETFs. Which I do. Largely a legacy thing.  Also its more tax efficient in my case. Thats’s done at the cost of added complexity and temptation to tinker.  Simplicity of a single fund ensuring the discipline is good. Particularly so for someone who isn’t experienced. 

[Deleted User]

Linton said:

dunstonh said:

Deleted_User said:

Prism said:

Deleted_User said:

“Who has said you should include certain sectors at the expense of others?  Why do you think portfolios made up of single sector funds would do that?”

If you are using sector funds and then keep rebalancing to ensure sectors are cap weighted to their overall contribution to economy, then you are adding costs and complexity for no benefit whatsoever. 

Hang on, isn't that exactly what VLS 100 is doing. Its a portfolio of single sector funds picked by a management team at Vanguard. I assume sector = region here.

Sector = technology, financial, industrial, energy, materials etc. Here is the definition: https://www.investopedia.com/terms/s/sector-breakdown.asp

VLS does invest by regions and ensures contributions are cap weighted, except for the home market. 

Thats very different from tinkering by sector. 

We have a terminology breakdown You are referring to sector in the industry sense.  We are referring to sector in the investment fund sense. i..e UK equity, US equity, European Equity etc. 

When I refer to sector I would take it broader than that.  eg small vs large, value vs growth as well as industry and geography - in fact any generic subset of the set of equities.

Small, large, value, momentum, quality etc = factor investing. “Sector” really means industrial sector in N America. Apparently its different in the UK

Prism

Deleted_User said:

Prism said:

Deleted_User said:

I started with nothing and invested through the tech stock crash, the early 2000s crashes, 2008. I did it in several countries and am now well into 7 figures. So, I am not exactly an “inexperienced DIY investor”. 

In fact, there is good consensus among experienced DIY investors and better advisors that tinkering with sectors is a mug’s game. Here is an example:
https://www.bogleheads.org/forum/viewtopic.php?t=288300

I think quite the opposite. Regional allocations don't especially interest me but avoiding some industry sectors and selecting others is the way I typically select my funds.

The point about “regional allocations” isn’t to tinker with them, with one exception (home market) but to stick with market caps. 

Avoiding industry sectors is an active decision which works well for people who know the future.  Wonder how many people made the right bets on sectors in this plot: https://www.bogleheads.org/forum/viewtopic.php?p=4701165#p4701165. And of the ones who guessed wrong, how many chased the winning sectors to only get hit with underperformance again. 

Well on that basis VLS 100 isn't doing a very good job as it is tinkering with the allocations beyond the home market. Europe is 10% lower than the index benchmark, the US is 20% lower, Canada is 80% lower and emerging europe is 20% higher. This is not just a home market allocation, its an actively managed alteration to the global index. Its also one that hasn't been doing very well over recent years, although that has a lot to do with the fact that when you change the regional allocation you also change the industry sector allocation too which as your graph points out can create more volatility, especially if those sectors include energy and financials. 

For what its worth, those are the two sectors that I mainly avoid because they are so historically volatile. Information Technology seems to be the next worst in that category which I expect will reveal itself again at some point.

[Deleted User]

What is your source? I am seeing 44.26% US within VLS100 (Trustnet). US makes 54.5% of the world. VLS gives 22% to UK instead of 5% (actual share of the world market cap).  The delta (17%) has to come from the US, Europe and others. And VLS appears to reduce them pro rata or very close.

Thrugelmir

Deleted_User said:

Tinkering with narrow, sector-specific ETFs is likely to be a major distraction over the long term. 

On that point I agree with you. Little different to actively picking individual shares. ETF's can contain as few as 30 stocks. Only takes one constituent to serially underperform.