DIY pension definition and related questions

dunstonh

Deleted_User said:

dunstonh said:

Dox said:

dunstonh said:

I understand these are investments and they may go up and down, so I am focussing on charges in the first instance.

Charges are a secondary concern.  Not a primary concern.  Where you invest and how you invest is more important.  Charges are certainly important but not the first thing you should be looking at.

But charges are the one certainty and as such are important, especially here where the personal pension was set up in 1998 and could be full of all sorts of old-fashioned charging nasties. 

As I said, charges are important.  But what if that 1998 plan has higher charges than a modern plan but has a guaranteed minimum maturity value or GAR?    Yes, it could be an old "nasty" plan but it could be an old gem of a plan.  Charges dont come into play at that stage. They come in later when you compare the pros and cons.
If charges were a primary concern, then you would only stay in a savings account with its nil implicit charge.  You would never invest as all other investment options would fail at the first filter of "lowest charge".

You are not picking the brushes, paint and painting it. You are picking the colour, the vendor and are getting the vendor to do it for you. Vanguard experts have already chosen and pre-packaged the actual investments for you. They based investment choices within a VLS fund on a lot of research from some of the best experts in the field to design their products. You just pick whatever you believe suits you. Or you can pick an interior designer to select the colours for you. Neither is actual “DIY”. And the interior designer will try to get you to pay an annual fee on the paint he chose for you. 

You know that sounds like a load of marketing from someone brainwashed by the church of Vanguard?
All investment funds, whether issued by Vanguard of another fund house, have "experts" ...

I don’t think reading lots of books on the subject from the leading experts and selecting an informed investment strategy qualifies as “brainwashed”.
I do think that John Bogle did more for the individual investor than anyone else in the world. If you think that’s “brainwashed”, you should address your criticism directly to Warren Buffett. I used his words.
It is true that Vanguard isn’t the only game in town. There are other large and reputable providers of low cost well designed funds. 

It is worth noting that Vanguard themselves also believe in active management and have funds that are active.  It is worth reading how they think the hybrid option of using the best of both is considered worthwhile.

Thrugelmir

dunstonh said:

Deleted_User said:

dunstonh said:

Dox said:

dunstonh said:

I understand these are investments and they may go up and down, so I am focussing on charges in the first instance.

Charges are a secondary concern.  Not a primary concern.  Where you invest and how you invest is more important.  Charges are certainly important but not the first thing you should be looking at.

But charges are the one certainty and as such are important, especially here where the personal pension was set up in 1998 and could be full of all sorts of old-fashioned charging nasties. 

As I said, charges are important.  But what if that 1998 plan has higher charges than a modern plan but has a guaranteed minimum maturity value or GAR?    Yes, it could be an old "nasty" plan but it could be an old gem of a plan.  Charges dont come into play at that stage. They come in later when you compare the pros and cons.
If charges were a primary concern, then you would only stay in a savings account with its nil implicit charge.  You would never invest as all other investment options would fail at the first filter of "lowest charge".

You are not picking the brushes, paint and painting it. You are picking the colour, the vendor and are getting the vendor to do it for you. Vanguard experts have already chosen and pre-packaged the actual investments for you. They based investment choices within a VLS fund on a lot of research from some of the best experts in the field to design their products. You just pick whatever you believe suits you. Or you can pick an interior designer to select the colours for you. Neither is actual “DIY”. And the interior designer will try to get you to pay an annual fee on the paint he chose for you. 

You know that sounds like a load of marketing from someone brainwashed by the church of Vanguard?
All investment funds, whether issued by Vanguard of another fund house, have "experts" ...

I don’t think reading lots of books on the subject from the leading experts and selecting an informed investment strategy qualifies as “brainwashed”.
I do think that John Bogle did more for the individual investor than anyone else in the world. If you think that’s “brainwashed”, you should address your criticism directly to Warren Buffett. I used his words.
It is true that Vanguard isn’t the only game in town. There are other large and reputable providers of low cost well designed funds. 

It is worth noting that Vanguard themselves also believe in active management and have funds that are active.  It is worth reading how they think the hybrid option of using the best of both is considered worthwhile.

Far removed from John Bogle's original fund. Though living off the legacy.

aekostas

ZingPowZing said:

If you use a fund, you're not really "Doing it Yourself," obviously your fund manager is managing your investment.
Funny how many flatter themselves on this subject.  

I think I should apologise for quoting the DIY thing; all I was getting at was "low cost". In my case DIY would have been disaster area, more deflating than flattering.

[Deleted User]

aekostas said:

ZingPowZing said:

If you use a fund, you're not really "Doing it Yourself," obviously your fund manager is managing your investment.
Funny how many flatter themselves on this subject.  

I think I should apologise for quoting the DIY thing; all I was getting at was "low cost". In my case DIY would have been disaster area, more deflating than flattering.

My word you have absolutely nothing to apologise for, aekostas. The term is ubiquitous on the board.

[Deleted User]

dunstonh said:

Deleted_User said:

dunstonh said:

Dox said:

dunstonh said:

I understand these are investments and they may go up and down, so I am focussing on charges in the first instance.

Charges are a secondary concern.  Not a primary concern.  Where you invest and how you invest is more important.  Charges are certainly important but not the first thing you should be looking at.

But charges are the one certainty and as such are important, especially here where the personal pension was set up in 1998 and could be full of all sorts of old-fashioned charging nasties. 

As I said, charges are important.  But what if that 1998 plan has higher charges than a modern plan but has a guaranteed minimum maturity value or GAR?    Yes, it could be an old "nasty" plan but it could be an old gem of a plan.  Charges dont come into play at that stage. They come in later when you compare the pros and cons.
If charges were a primary concern, then you would only stay in a savings account with its nil implicit charge.  You would never invest as all other investment options would fail at the first filter of "lowest charge".

You are not picking the brushes, paint and painting it. You are picking the colour, the vendor and are getting the vendor to do it for you. Vanguard experts have already chosen and pre-packaged the actual investments for you. They based investment choices within a VLS fund on a lot of research from some of the best experts in the field to design their products. You just pick whatever you believe suits you. Or you can pick an interior designer to select the colours for you. Neither is actual “DIY”. And the interior designer will try to get you to pay an annual fee on the paint he chose for you. 

You know that sounds like a load of marketing from someone brainwashed by the church of Vanguard?
All investment funds, whether issued by Vanguard of another fund house, have "experts" ...

I don’t think reading lots of books on the subject from the leading experts and selecting an informed investment strategy qualifies as “brainwashed”.
I do think that John Bogle did more for the individual investor than anyone else in the world. If you think that’s “brainwashed”, you should address your criticism directly to Warren Buffett. I used his words.
It is true that Vanguard isn’t the only game in town. There are other large and reputable providers of low cost well designed funds. 

It is worth noting that Vanguard themselves also believe in active management and have funds that are active.  It is worth reading how they think the hybrid option of using the best of both is considered worthwhile.

Yes, I know. The key is low cost (less than 0.4% total based on Vanguard’s White Paper). And you are taking on more risk when you do it. I use active for some of my more complex fixed income. I also use low cost factor investing for 30% of my US allocation.  Its probably an unnecessary complexity but I am well into a 7 digit portfolio and trying to squeeze a little alpha by taking on more risk on a portion of investment makes sense. Smaller portfolios should focus on simplicity. 

dunstonh

Its probably an unnecessary complexity but I am well into a 7 digit portfolio and trying to squeeze a little alpha by taking on more risk on a portion of investment makes sense. Smaller portfolios should focus on simplicity. 

You are absolutely entitled to your opinion but it is nothing more than that.   Everyone that pays just a little bit more and gets higher returns will feel different to you.   you can be happy you are paying lower charges and they can be happy they have made more money.

[Deleted User]

dunstonh said:

Its probably an unnecessary complexity but I am well into a 7 digit portfolio and trying to squeeze a little alpha by taking on more risk on a portion of investment makes sense. Smaller portfolios should focus on simplicity. 

You are absolutely entitled to your opinion but it is nothing more than that.   Everyone that pays just a little bit more and gets higher returns will feel different to you.   you can be happy you are paying lower charges and they can be happy they have made more money.

On costs, it’s not my opinion. I was briefly summarizing Vanguard’s analysis which you referenced. The higher the costs the better your chances of underperforming passive all the while taking more risk. 

The bit about “making more money than me” is a weird thing to say for a professional who knows zilch about my money. 

Prism

Deleted_User said:

dunstonh said:

Its probably an unnecessary complexity but I am well into a 7 digit portfolio and trying to squeeze a little alpha by taking on more risk on a portion of investment makes sense. Smaller portfolios should focus on simplicity. 

You are absolutely entitled to your opinion but it is nothing more than that.   Everyone that pays just a little bit more and gets higher returns will feel different to you.   you can be happy you are paying lower charges and they can be happy they have made more money.

On costs, it’s not my opinion. I was briefly summarizing Vanguard’s analysis which you referenced. The higher the costs the better your chances of underperforming passive all the while taking more risk. 

The bit about “making more money than me” is a weird thing to say for a professional who knows zilch about my money. 

If funds were selected randomly then that would be true. However those of that do use active funds are not simply throwing a dart at a list of options. A certain amount of work does go into it to select a fund or stock which might be able to out perform its benchmark without increasing risk by much. In fact most of my funds have performed better with lower risk - assuming we are talking volatility and deviation which is only on that is reliably measured. 

I have nothing against passive funds and would recommend and do sometimes use passive funds. However is it far from impossible to use active funds to get a better result. That could be DIY or IFA led.

dunstonh

ZingPowZing said:

If you use a fund, you're not really "Doing it Yourself," obviously your fund manager is managing your investment.
Funny how many flatter themselves on this subject.  

I think I should apologise for quoting the DIY thing; all I was getting at was "low cost". In my case DIY would have been disaster area, more deflating than flattering.

No need to apologise.   Recently, a small number of people just want to argue about anything and everything regardless of the subject.

zagfles

aekostas said:

Hi all. Many thanks for all those answers so quickly. NottinghamKnight asked about the level, it's around £35,000, I am not sure if that's large or small in the context, Mordko and others.

dunstonh thanks for picking up, as it was your initial comments that got me on the forum. You had written of "a low cost platform"; how low is Vanguard, what goes lower? And to ask perhaps a radical question, do I have to have a platform? For my current policy they just send me a letter once a year and I can write to them (ink and paper) if I want to make a change (e.g. pick another of the 10 funds available to me); is this a "platform" of 1998 standards? Nothing is guaranteed in the end, by the way.

Thanks also for the warning about picking a good investment. I find it very hard to compare funds, and I drown in the deluge of options that one can see online. In one instance I liked a fund and, though listed on the provider's site (I presume for the benefit of existing customers) it turned out it is no longer available; very confusing. So I decided to go with something higher level, stop short of robo in this instance (perhaps), start with the costs as an indication of whether they care about me at all, and seek online reviews for the actual product.

Vanguard's platform at 0.15% is low cost, with a small'ish amount you're usually better off with a platform that charges % fees rather than flat fees. But I think you can only buy Vanguard funds on it. You can compare platform charges using snowman's spreadsheet, see here https://forums.moneysavingexpert.com/discussion/5583030/coolly-comparing-investment-platform-charges-snowmans-spreadsheet/p1   You might find a cheaper platform but there won't be a great deal in it.

There's lots of debate on how good their funds are - the LS funds are a basically a hybrid of active and passive in that they use underlying passive funds but they choose which underlying passive funds and the allocations of them. The % of bonds and equities is fixed, ie LS80 will be 80% equities and 20% bonds etc. They also have target retirement funds which derisk as you approach the retirement year in the fund name.

The fund charges are quite low eg 0.22% for the LS and 0.24% for the target retirement, there are pure global trackers which are cheaper but with none of the "active" management (and because of this they are over 50% US). Vanguard have a "home bias", which they have for good reason for (been discussed in previous threads) but in recent years this has resulted in worse performance than global trackers because the UK market and the pound hasn't done well by international standards over the last 5 years or so. Nevertheless the performance hasn't been bad. Worth reading the monevator site, loads there about cheap passive investing there.

Ignore the "brainwashing" comments. It's understandable that IFAs don't like the likes of Vanguard who make bypassing them so easy with cheap multi-asset globally diversified funds that you can just buy and hold and don't need regular rebalancing. Take any performance claims with a pinch of salt - a pure global trackers would have beaten Vanguard in recent years, so will many actively managed strategies, it doesn't mean they are better or will carry on doing so in the future.

Having said all that, personally I don't use Vanguard funds yet (so I've obviously not been "brainwashed" by them ) but for a simple smallish investment they are fine IMO.