DIY pension definition and related questions

zagfles

Prism said:

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.

Indeed it's not impossible, I've done it myself, I use mostly active funds. But when you start adding active fund management charges to IFA charges to platform charges you can (as we've seen here many times when people using IFAs have posted their portfolio) get into the realms of around 2% annual charges. At that level of charges you're really eating into investment growth, so although it's still possible to beat pure cheap passive the charges drag makes it less likely.

Thrugelmir

zagfles said:

Prism said:

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.

Indeed it's not impossible, I've done it myself, I use mostly active funds. But when you start adding active fund management charges to IFA charges to platform charges you can (as we've seen here many times when people using IFAs have posted their portfolio) get into the realms of around 2% annual charges. At that level of charges you're really eating into investment growth, so although it's still possible to beat pure cheap passive the charges drag makes it less likely.

Trouble is ETF's are increasingly being viewed as passive as their range expands. A cheap alternative to active. The more specialised and targeted they are. The better understanding you need of what they actually contain. Sometimes it's easier to identify companies you don't want to hold. Not every company in a sector is going to perform well nor is well managed. 

[Deleted User]

Prism said:

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.

Again, I am summarizing the Vanguard White Paper he referenced, or at least my recollection of it. 

Having said it... If you want to increase your chances of offsetting higher costs and beating passive, you have to take bets and more risk. You HAVE to be less diversified. If you buy factors, you are cutting out certain types of companies and might be facing long periods of underperformance. 

Or you are as well diversified as a passive fund and then you are just buying a closet index fund but at a higher cost.  And on top of it all you have risk of bad management which you don’t have with the index. 

Recent record of active vs passive speaks for itself. Very few active funds beat passive given the same level of risk. The longer your sampling period the smaller your chance.  In the US they now have really cheap active funds as a result - these might become competitive. 

Then you have some funds buying a limited selection of US tech funds. These have done great the last decade but at a massively higher level of risk and are kinda useless. If thats your game, just buy stock. 

[Deleted User]

Yes, Vanguard has changed the industry dramatically and made the life of IFAs harder. More to come.  Some are taking it personally. Understandable. 

[Deleted User]

Thrugelmir said:

zagfles said:

Prism said:

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.

Indeed it's not impossible, I've done it myself, I use mostly active funds. But when you start adding active fund management charges to IFA charges to platform charges you can (as we've seen here many times when people using IFAs have posted their portfolio) get into the realms of around 2% annual charges. At that level of charges you're really eating into investment growth, so although it's still possible to beat pure cheap passive the charges drag makes it less likely.

Trouble is ETF's are increasingly being viewed as passive as their range expands. A cheap alternative to active. The more specialised and targeted they are. The better understanding you need of what they actually contain. Sometimes it's easier to identify companies you don't want to hold. Not every company in a sector is going to perform well nor is well managed. 

ETFs started of as passive but now there are lots of active ETFs.  So, they are not “increasingly viewed as passive”.   If you go with a plain vanilla passive product from any major provider then you are pretty safe. 

The companies which people believe to have poor prospects tend to be cheap. They are called “value” and historically outperformed over the long term. 

dunstonh

Deleted_User said:

Yes, Vanguard has changed the industry dramatically and made the life of IFAs harder. More to come.  Some are taking it personally. Understandable. 

How do come to that conclusion?   Vanguard has made things better for IFAs.  I am not aware of a single IFA that takes it personally.    I suspect I know more IFAs than you seeing that you are not even in the UK.  Vanguard have a large set up to cater for IFA support and they have get large quantities of investments from IFAs.

Recent record of active vs passive speaks for itself. Very few active funds beat passive given the same level of risk. The longer your sampling period the smaller your chance.  In the US they now have really cheap active funds as a result - these might become competitive. 

One of the biggest failings with the biased passive brigade is their inability to understand that when buying an active fund, you filter out the funds you dont want to be left with a much smaller set of funds to select from. Sometimes only a couple.   Or the fact that some areas are best with trackers and some are best with active.   

It is pointless referencing the US as an example for the UK as active funds in the US are handicapped due to internal taxation and it makes sense to have as much passive there as possible.  The UK does not have that internal taxation.

There are far more duff active funds than decent.  But being close-minded to all of them is not a good idea.  Equally, there are people that only use active.  They are also being close minded and should consider passive as the key is the best of both worlds.

OldMusicGuy

dunstonh said:

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.

It seems odd that IFAs like dunstonh who constantly trumpet their ability to "make more money" refuse to countenance value-based pricing on the basis of how much more money they make their clients. I would pay for that, not a marketing myth.

zagfles

dunstonh said:

Deleted_User said:

Yes, Vanguard has changed the industry dramatically and made the life of IFAs harder. More to come.  Some are taking it personally. Understandable. 

How do come to that conclusion?   Vanguard has made things better for IFAs.  I am not aware of a single IFA that takes it personally.    I suspect I know more IFAs than you seeing that you are not even in the UK.  Vanguard have a large set up to cater for IFA support and they have get large quantities of investments from IFAs.

 So even IFAs have been "brainwashed by the church of Vanguard"

[Deleted User]

OldMusicGuy said:

dunstonh said:

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.

It seems odd that IFAs like dunstonh who constantly trumpet their ability to "make more money" refuse to countenance value-based pricing on the basis of how much more money they make their clients. I would pay for that, not a marketing myth.

That statement was utterly unprofessional.  The man is untrustworthy.  Any “advisor” who implies he can guarantee better returns if you just pay more money is but a dodgy salesman.  The only ones worth talking to are the ones who are uncertain.  Add to that him having no idea about my finances which he is comparing to his clients’ and its blatantly obvious he is selling snake oil. 

dunstonh

Deleted_User said:

OldMusicGuy said:

dunstonh said:

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.

It seems odd that IFAs like dunstonh who constantly trumpet their ability to "make more money" refuse to countenance value-based pricing on the basis of how much more money they make their clients. I would pay for that, not a marketing myth.

That statement was utterly unprofessional.  The man is untrustworthy.  Any “advisor” who implies he can guarantee better returns if you just pay more money is but a dodgy salesman.  The only ones worth talking to are the ones who are uncertain.  Add to that him having no idea about my finances which he is comparing to his clients’ and its blatantly obvious he is selling snake oil. 

 And you are a liar.   
1 - I have never said returns are guaranteed.  
2 - you are the one that said you had a seven-digit portfolio and don't believe in active investing.    Indeed, it was rather crass of it you to drop that 7 digit reference into the thread.

It is a shame you cannot debate and discuss issues without telling lies and attacking others.