Passive + active investment? Or just passive?

csgohan4

I use active for my satellite funds, such as Small caps, EM e.t.c and passive for my main global index trackers.  Personal choice. 

grumiofoundation

TheLittleSaver said:

Merry Christmas everyone!

And thanks for the feedback.

I see, so the general consensus is to diversify as much as possible, and so a "multy asset fund" would be better than ETF (like Alexland suggested).

In which case, what platform would you suggest for someone like me who doesn't have much experience and would much rather buy a "package" without doing the hard work? As I said I was thinking OpenMoney but still didn't do anything (besides, I'm having some troubles on my browser to go through the process... maybe a sign?! eheheh), so if you know of a better place to start investing then I'm all ears!

Thanks

Here is a link to a comparison of various multi assets funds

https://monevator.com/passive-fund-of-funds-the-rivals/

BananaRepublic

TheLittleSaver said:

Thank El_Torro for the reply. So you are saying that it would be better to have all the money in that ETF package, rather then using part of it to buy shares?

To be clear, when I talk about "playing" with shares I don't mean by shares now and sell it tomorrow or when I think they are "ripe" enough, etc...as I absolutely I don't have thatkind of experience and confidence!

What I mean is, apart from investing in that package, I would use part of the money in investing in a few more small companies, but still keeping the shares for a few years, if that makes sense?

By the way, the package I'm talking about is a "Self Invested Personal Pension" (just in case it helps to know that for your feedback).

You definitely don’t want to buy shares in a few small companies. You simply cannot forecast the outcome. The way to reduce risk is to spread money across many companies. If one goes pop, your losses are minimal. 

I made the choice to buy funds, I can’t be doing with choosing shares. Some people do well, others like me leave it to fund managers. I prefer active funds, though I do have a US passive fund. They have done well over 25 years. I did once venture into more passive funds, that was a big mistake. Passive funds have their place, and are good for exposure to some markets eg US. Sounds like you need to do more research into investing. 

TheLittleSaver

Thanks grumiofoundation for the link, I'm actually reding it now, and so far I guess the choice is between Vanguard and Fidelity.
Anyway I'll look more into it before choosing, thanks again.

@BananaRepubblic May I ask you why you even consider passive funds a big mistake? I am actually reading that active funds doesn't usually outperform passive ones in the long run, like 5-10+ years (and for me, I am investing so that I would HOPEFULLY get some decent money for my retirement, so I don't really care about "winning" 3k now, to then loose 2.9k next year ahahah).

Anyway I now agree that investing in shares is not a good move, especially for someone like me who doesn't have much experience, but I will keep researching as you suggest.

JohnWinder

TheLittleSaver said:

@BananaRepubblic May I ask you why you even consider passive funds a big mistake?

I didn't take it to mean anyone considers passive funds a big mistake. Someone's one time venture into passive funds was felt to be a big mistake; I think that's different. Choose a poor index to follow, follow it badly, over-charge for the service, and you'll lose enough customers to force closure of the fund. And there are other scenarios you could choose from. Still, the answer could be interesting.

TheLittleSaver

JohnWinder said:

TheLittleSaver said:

@BananaRepubblic May I ask you why you even consider passive funds a big mistake?

I didn't take it to mean anyone considers passive funds a big mistake. Someone's one time venture into passive funds was felt to be a big mistake; I think that's different. Choose a poor index to follow, follow it badly, over-charge for the service, and you'll lose enough customers to force closure of the fund. And there are other scenarios you could choose from. Still, the answer could be interesting.

I see, but still, as you said it could still be interesting to know, in order to have a better idea of what oculd happen even if choosing something "reltevely safer" like passive funds.

Anway I see Vanguard has this kind of LifeStrategy/Pension package where you can start for example at 80/20 ration, to then automatically switch to "safer" options as I get closer to my pension age... I think that would workout better then my initial option of using OpenMoney. What do you guys think?

Also, does any other platform do this kind of things and you think would be better to use compared to Vanguard?

TheLittleSaver

Oh, one more thing. Considering that I already have a lump sum ready to invest, would be better to just invest it in one go, perhaps trying to keep it consistent (as in, I add the same amount or almost once a year), or would be better to split it into monthly payments through direct debits?

Linton

TheLittleSaver said:

JohnWinder said:

TheLittleSaver said:

@BananaRepubblic May I ask you why you even consider passive funds a big mistake?

I didn't take it to mean anyone considers passive funds a big mistake. Someone's one time venture into passive funds was felt to be a big mistake; I think that's different. Choose a poor index to follow, follow it badly, over-charge for the service, and you'll lose enough customers to force closure of the fund. And there are other scenarios you could choose from. Still, the answer could be interesting.

I see, but still, as you said it could still be interesting to know, in order to have a better idea of what oculd happen even if choosing something "reltevely safer" like passive funds.

1) Anway I see Vanguard has this kind of LifeStrategy/Pension package where you can start for example at 80/20 ration, to then automatically switch to "safer" options as I get closer to my pension age... I think that would workout better then my initial option of using OpenMoney. What do you guys think?

2)Also, does any other platform do this kind of things and you think would be better to use compared to Vanguard?

1) significant derisking as you approach retirement was normal when the only option was to buy an annuity.  But now it is not necessarily a good thing to do if you are planning to draw down .  If you retire say at 60 you will probably not need to touch 2/3 of your pension pot for another 10 years.  In any case, I assume you are many years from retirement, and if so you have plenty of time to change investments later.  So I suggest you just buy a simple global equity fund, either active or passive. 

2) "Life cycling" here is nothing to do with the platform, it is a feature of that particular fund which is available of all mainstream plattforms.

- are you employed and paying into your employers pension?  If so why not simply increase the contributions?

TheLittleSaver said:

Oh, one more thing. Considering that I already have a lump sum ready to invest, would be better to just invest it in one go, perhaps trying to keep it consistent (as in, I add the same amount or almost once a year), or would be better to split it into monthly payments through direct debits?

Because you believe that investments generally increase over time, statistically it is beneficial to invest as much as you can as soon as you can.  However this may make you worried.  So it's a balance between your future wealth and your happiness.

Eco_Miser

The general consensus is to invest as soon as the money is available. That is, invest lump sums as lump sums, and savings from income as it arises, usually monthly. Psychologically, splitting lump sums into 2, 3, or 4 parts may help if you fear a drop just after you invest, but that can happen anyway just after the last instalment, and you miss out on earlier growth.

Also, you need to distinguish between the actual investment (shares, ETFs, funds), tax wrappers (SIPP, ISA, unwrapped), and platforms (the company providing a web portal to buy, store, and sell investments within  (or without) a wrapper). Vanguard do a platform, and also do funds and ETFs, which can confuse beginners.

Have a good read round the Monevator site, this forum, and other investing sites.

To answer the title question, I hold both Vanguard LifeStragegy 80 - an actively managed fund of passive indexed funds, and various Investment Trusts - actively managed to achieve results other than 'beating the market', like preserving capital or providing a higher dividend income.

TheLittleSaver

Linton said:

- are you employed and paying into your employers pension?  If so why not simply increase the contributions?

Sorry, I should have clarified this at the very beginning. I'm a self employed, in my mid-thirties, and I have been so fool in not thinking about my pension until now. So I am looking for something that would grow my capital reasonably enough to have some kind of decent pension when I reach that age, something that would grow more than a simple Saving account.

Regarding the lump sum: Ok, so basically it's better to invest what I have now, to then invest more as soon as some more "investable" money, in order to get as much out of it as possible. That makes sense.

I think I'm now leaning towards The Vanguard Life Strategy 60/40, as a good compromise in terms of risk and growth over time. Perhaps putting some cash on a global equity fund too? Or would that already be included in the 60/40 package? If so, then I think that would be the way to go, at least for my circumstance.

Anyway I don't want to rush this, so I will keep up researching, in the meantime any other recommendation from any of you would be very much appreciated and welcome!