UK based funds - brexit and onwards

[Deleted User]

dunstonh said:

When using single sector funds, you should have an investment strategy in place to decide your model.  i.e. x% in UK, y% in Europe etc.   If you just pick random numbers and buy on that basis, you will almost certainly end up with lower returns in the long run and any above-average gains in a period will be a fluke.   

Care to add to that statement of principle, dunstonh? 
My expectation, indeed my experience, is that sticking to a pre-determined ratio inhibits growth. The logical consequence of denying headroom. Most things do not revert to their former relationship and no special reason for single sector funds to behave differently, is there?

BananaRepublic

ZingPowZing said:

dunstonh said:

When using single sector funds, you should have an investment strategy in place to decide your model.  i.e. x% in UK, y% in Europe etc.   If you just pick random numbers and buy on that basis, you will almost certainly end up with lower returns in the long run and any above-average gains in a period will be a fluke.   

Care to add to that statement of principle, dunstonh? 
My expectation, indeed my experience, is that sticking to a pre-determined ratio inhibits growth. The logical consequence of denying headroom. Most things do not revert to their former relationship and no special reason for single sector funds to behave differently, is there?

A key principle in reducing risk and volatility is to diversify. If you have no strategy other than buying because you like the colour of the packet, you risk investing in an unblanaced way eg three funds all of which focus on pork scratchings producers. Then when the market in pork scratchings falls, your investments will fall, and you’ll be left scratching your head, and squealing. Some people buy the best performing funds, and end up buying funds that all performed well for the same reason, a reason that soon comes to an end, and they end up saddled with dogs. So don’t choose only small caps, or only UK, or only technology. 

Thrugelmir

VXman said:

So, the question is: Should we be looking at putting money in to UK stocks/funds now brexit has been settled. Do people think the long term will be positive for UK companies or not?

Do you ever rebalance your portfolio?   

There are many highly successfull UK companies. There's always an opportunities to buy in.  Business adapts to the prevailing climate. Other than additional paperwork for many there's little change following Brexit. Covid remains a far bigger challenge to the broad economy. Be a lot of doors that remain padlocked once the fog eventually clears. Not just in the UK either. 

Another_Saver

BananaRepublic said:

Another_Saver said:

As for the UK/global debate, the past 5 years the UK has done crap (or since 2007 and 2013, but not consistently). If you look at any long term period out to 1990 that includes the last 5 years, the UK has done crap even though until the last 5 years, the UK and global market were more or less behaving the same way (comparing large Cap or total market indices on a nominal total return basis in £, just use the indices or sectors on trustnet or compare Barclays UK equity index with S&P 500 total returns data which is widely available) and have performed similarly over the very long term.

The FTSE 100 is a poor index to invest in. But UK investments can and do perform well if you look at small and medium size companies. There are plenty of good funds. But it’s best to diversify across markets so look to the US and Europe too, and maybe Asia. Vanguard VLS 100 is invested about half in US stocks, though US stocks have done very well over the last decade or two. 

I think the advice from dunstonh is sound and it did address your questions. Gift wrapped off the shelf funds are good marketing, and like it or not you’re making investment decisions when buying them. 

Why do you think the FTSE 100 is a poor index to invest in, and relative to what? Granted this thread isn't a home/global bias debate or a UK weighting discussion, but I hear it so often, declared as if it's an established fact.

masonic

Another_Saver said:

BananaRepublic said:

Another_Saver said:

As for the UK/global debate, the past 5 years the UK has done crap (or since 2007 and 2013, but not consistently). If you look at any long term period out to 1990 that includes the last 5 years, the UK has done crap even though until the last 5 years, the UK and global market were more or less behaving the same way (comparing large Cap or total market indices on a nominal total return basis in £, just use the indices or sectors on trustnet or compare Barclays UK equity index with S&P 500 total returns data which is widely available) and have performed similarly over the very long term.

The FTSE 100 is a poor index to invest in. But UK investments can and do perform well if you look at small and medium size companies. There are plenty of good funds. But it’s best to diversify across markets so look to the US and Europe too, and maybe Asia. Vanguard VLS 100 is invested about half in US stocks, though US stocks have done very well over the last decade or two. 

I think the advice from dunstonh is sound and it did address your questions. Gift wrapped off the shelf funds are good marketing, and like it or not you’re making investment decisions when buying them. 

Why do you think the FTSE 100 is a poor index to invest in, and relative to what? Granted this thread isn't a home/global bias debate or a UK weighting discussion, but I hear it so often, declared as if it's an established fact.

One reason is that nearly 40% of a FTSE 100 tracker is made up of just 10 shares, there is industry overlap between those 10 shares, and the index is therefore dominated by the fortunes of a small number of industries. The same general argument also applies also to the S&P500, but it happens to be focused on sectors that have recently done well, while the FTSE100 over-represents sectors that have done poorly.

[Deleted User]

BananaRepublic said:

ZingPowZing said:

dunstonh said:

When using single sector funds, you should have an investment strategy in place to decide your model.  i.e. x% in UK, y% in Europe etc.   If you just pick random numbers and buy on that basis, you will almost certainly end up with lower returns in the long run and any above-average gains in a period will be a fluke.   

Care to add to that statement of principle, dunstonh? 
My expectation, indeed my experience, is that sticking to a pre-determined ratio inhibits growth. The logical consequence of denying headroom. Most things do not revert to their former relationship and no special reason for single sector funds to behave differently, is there?

A key principle in reducing risk and volatility is to diversify. If you have no strategy other than buying because you like the colour of the packet, you risk investing in an unblanaced way eg three funds all of which focus on pork scratchings producers. Then when the market in pork scratchings falls, your investments will fall, and you’ll be left scratching your head, and squealing. Some people buy the best performing funds, and end up buying funds that all performed well for the same reason, a reason that soon comes to an end, and they end up saddled with dogs. So don’t choose only small caps, or only UK, or only technology. 

Except VXman did not ask about reducing risk and volatility - he is already diversified 80/20% Global/UK - he asked about maybe changing the ratio.
But I'm interested in the evidence behind dunstonh's maxim that an investment strategy should conform to certain proportions to maximise returns.

BananaRepublic

ZingPowZing said:

BananaRepublic said:

ZingPowZing said:

dunstonh said:

When using single sector funds, you should have an investment strategy in place to decide your model.  i.e. x% in UK, y% in Europe etc.   If you just pick random numbers and buy on that basis, you will almost certainly end up with lower returns in the long run and any above-average gains in a period will be a fluke.   

Care to add to that statement of principle, dunstonh? 
My expectation, indeed my experience, is that sticking to a pre-determined ratio inhibits growth. The logical consequence of denying headroom. Most things do not revert to their former relationship and no special reason for single sector funds to behave differently, is there?

A key principle in reducing risk and volatility is to diversify. If you have no strategy other than buying because you like the colour of the packet, you risk investing in an unblanaced way eg three funds all of which focus on pork scratchings producers. Then when the market in pork scratchings falls, your investments will fall, and you’ll be left scratching your head, and squealing. Some people buy the best performing funds, and end up buying funds that all performed well for the same reason, a reason that soon comes to an end, and they end up saddled with dogs. So don’t choose only small caps, or only UK, or only technology. 

Except VXman did not ask about reducing risk and volatility - he is already diversified 80/20% Global/UK - he asked about maybe changing the ratio.
But I'm interested in the evidence behind dunstonh's maxim that an investment strategy should conform to certain proportions to maximise returns.

He did not say an investment strategy should conform to certain proportions, that was an example of a strategy that he gave. My post explained why that is not unreasonable. 

VXman is NOT 80% global, 20% UK. He is about 50% US, 30% UK, 20% elsewhere. I don’t call that global, or particularly diversified. I prefer more Europe, less US, but others will disagree. But at least know what you own! As I said, don’t just buy because the design on the packet is pretty. 

Prism

ZingPowZing said:

BananaRepublic said:

ZingPowZing said:

dunstonh said:

When using single sector funds, you should have an investment strategy in place to decide your model.  i.e. x% in UK, y% in Europe etc.   If you just pick random numbers and buy on that basis, you will almost certainly end up with lower returns in the long run and any above-average gains in a period will be a fluke.   

Care to add to that statement of principle, dunstonh? 
My expectation, indeed my experience, is that sticking to a pre-determined ratio inhibits growth. The logical consequence of denying headroom. Most things do not revert to their former relationship and no special reason for single sector funds to behave differently, is there?

A key principle in reducing risk and volatility is to diversify. If you have no strategy other than buying because you like the colour of the packet, you risk investing in an unblanaced way eg three funds all of which focus on pork scratchings producers. Then when the market in pork scratchings falls, your investments will fall, and you’ll be left scratching your head, and squealing. Some people buy the best performing funds, and end up buying funds that all performed well for the same reason, a reason that soon comes to an end, and they end up saddled with dogs. So don’t choose only small caps, or only UK, or only technology. 

Except VXman did not ask about reducing risk and volatility - he is already diversified 80/20% Global/UK - he asked about maybe changing the ratio.
But I'm interested in the evidence behind dunstonh's maxim that an investment strategy should conform to certain proportions to maximise returns.

I believe he follows a fluid strategy where the % splits are not fixed - the point is though its still a strategy rather than being random splits. Thats hard for an individual to do though since we can't easy buy in the data or do proper valuation based splits. 

Personally the only thing I would use sector/region based funds is to reduce the default % of the world index in certain ways - currently I don't use any.

[Deleted User]

"When using single sector funds, you should have an investment strategy in place to decide your model.  i.e. x% in UK, y% in Europe etc.   If you just pick random numbers and buy on that basis, you will almost certainly end up with lower returns in the long run and any above-average gains in a period will be a fluke." - to quoted dunstonh.

Which percentages will almost certainly end up with higher returns, with a starting point of x% in this, y% in that ?
What is the strategy ongoing? The original % will certainly be proved wrong over time so, do you rebalance, half-rebalance (fluid weighting) or not? 

I don't. That's why I'm keen to see the evidence.

Moe_The_Bartender

Another_Saver said:

BananaRepublic said:

Another_Saver said:

As for the UK/global debate, the past 5 years the UK has done crap (or since 2007 and 2013, but not consistently). If you look at any long term period out to 1990 that includes the last 5 years, the UK has done crap even though until the last 5 years, the UK and global market were more or less behaving the same way (comparing large Cap or total market indices on a nominal total return basis in £, just use the indices or sectors on trustnet or compare Barclays UK equity index with S&P 500 total returns data which is widely available) and have performed similarly over the very long term.

The FTSE 100 is a poor index to invest in. But UK investments can and do perform well if you look at small and medium size companies. There are plenty of good funds. But it’s best to diversify across markets so look to the US and Europe too, and maybe Asia. Vanguard VLS 100 is invested about half in US stocks, though US stocks have done very well over the last decade or two. 

I think the advice from dunstonh is sound and it did address your questions. Gift wrapped off the shelf funds are good marketing, and like it or not you’re making investment decisions when buying them. 

Why do you think the FTSE 100 is a poor index to invest in, and relative to what? Granted this thread isn't a home/global bias debate or a UK weighting discussion, but I hear it so often, declared as if it's an established fact.

It’s a poor index to invest in because it doesn’t reflect what’s happening in UK business. Getting on for 80% of business carried out by businesses in the index is conducted outside the UK. It contains companies like Rio Tinto which operates mainly in Australia and sells to China. The best way to invest in the UK if you want to do it (personally I don’t) is through the FTSE250.