How to grow £230K

NottinghamKnight

It's a niche approach with 85% in wealth preservation and the remainder in aggressive us focused equities, nothing wrong with that if you are happy but it's missing a lot of the world.

itwasntme001

NottinghamKnight said:

It's a niche approach with 85% in wealth preservation and the remainder in aggressive us focused equities, nothing wrong with that if you are happy but it's missing a lot of the world.

Wealth preservation funds like CGT and PNL seem to capture more broadly the world compared to just global public equities.

Aminatidi

itwasntme001 said:

What would a 50% fall in both SMT and USA do to your state of mind?  Would you be tempted to sell out?  If yes, dial the risk down to a level where a 50% fall would keep you invested.

Or if the reasons you bought the funds don't meet your objectives and risk tolerance going forward then cut back some or all.

I am looking to reduce my SMT holding and invest the proceeds into CGT.  It has become too much of a weighting for my portfolio.

I think I'd be OK with it.

That's kind of the point I made above though I guess i.e. how on earth do you compare (random numbers) £20K of SMT exposure to £50K of Fundsmith exposure when you don't know what's coming and you look at what happened in March?

Damned if I know

Aminatidi

itwasntme001 said:

In my view (and I could easily be wrong) I think CGT and PNL will outperform equities and even the best performing funds of today.

Why do you think that?

Or do you mean the long-term view?

itwasntme001

Aminatidi said:

itwasntme001 said:

What would a 50% fall in both SMT and USA do to your state of mind?  Would you be tempted to sell out?  If yes, dial the risk down to a level where a 50% fall would keep you invested.

Or if the reasons you bought the funds don't meet your objectives and risk tolerance going forward then cut back some or all.

I am looking to reduce my SMT holding and invest the proceeds into CGT.  It has become too much of a weighting for my portfolio.

I think I'd be OK with it.

That's kind of the point I made above though I guess i.e. how on earth do you compare (random numbers) £20K of SMT exposure to £50K of Fundsmith exposure when you don't know what's coming and you look at what happened in March?

Damned if I know

The best way to do it is to use historical return and volatility data to compare the two funds.  The problem is you need to go back over several economic cycles to really see how they performed under a number of regimes.  And we know Fundsmith has only really been around for one type of environment whilst SMT 2 or 3.

So the next best is to look at what is available and judge for yourself how risky the holdings are.  I think it is obvious SMT is the riskier of the two funds.  So you would apply a greater shock test to SMT than you would to Fundsmith.  Use a shock that is somewhat reasonable and based on history if possible.  So SMT you may use 50% and Fundsmith, since its less riskier although not really been tested you would use 30%.  Adjust your weights according to what you can live with and maintain diversity.

Personally I would just stick to Vanguard All Cap for your 100% equity allocation.  You don't ever need to time things because there is no manager risk.

itwasntme001

Aminatidi said:

itwasntme001 said:

In my view (and I could easily be wrong) I think CGT and PNL will outperform equities and even the best performing funds of today.

Why do you think that?

Or do you mean the long-term view?

Longer term view.  Equities don't owe anyone anything and they are the riskiest asset class there is.  With the Western world heavily in debt, demographics working against growth and the largest inequalities since the robber baron days, it seems entirely possible financial assets are setup for long term negative real returns.

Which means aligning your interest with managers who HAVE to protect wealth becomes even more important.  Taking a multi-asset approach is part of this as well.  You don't ever want to rely on 100% equities no matter your age or risk tolerance.

Alexland

itwasntme001 said:

The best way to do it is to use historical return and volatility data to compare the two funds.  The problem is you need to go back over several economic cycles to really see how they performed under a number of regimes.

Yes, and even then most of the data would be in an environment of reducing interest rates which favours certain types of investments which could in future become very unpopular.

itwasntme001

Alexland said:

itwasntme001 said:

The best way to do it is to use historical return and volatility data to compare the two funds.  The problem is you need to go back over several economic cycles to really see how they performed under a number of regimes.

Yes, and even then most of the data would be in an environment of reducing interest rates which favours certain types of investments which could in future become very unpopular.

Yes and there is a saying that not every great business make a great investment - valuations matter and what may look cheap under one regime, may look very expensive in another...

itwasntme001

But there is a case that stocks are still reasonably priced.  A 10 year bond has a PE of 100 because the yield is 1%.  Stocks at a PE of 30 make them comparatively "cheap".  Clearly the difference is because bonds are 100% guaranteed whereas stocks cashflows (and face value) are risky hence a risk premium. But when you have an economy that seems to be positioned for more fiscal spending and MMT (WHILST DOING WHATEVER IT CAN TO MAINTAIN RATES LOW GIVEN THE DEBT BURDEN), these cash flows become a lot less riskier.  And so perhaps stocks PE should be more closer to bonds PE of 100...

Aminatidi

itwasntme001 said:

Aminatidi said:

itwasntme001 said:

In my view (and I could easily be wrong) I think CGT and PNL will outperform equities and even the best performing funds of today.

Why do you think that?

Or do you mean the long-term view?

Longer term view.  Equities don't owe anyone anything and they are the riskiest asset class there is.  With the Western world heavily in debt, demographics working against growth and the largest inequalities since the robber baron days, it seems entirely possible financial assets are setup for long term negative real returns.

Which means aligning your interest with managers who HAVE to protect wealth becomes even more important.  Taking a multi-asset approach is part of this as well.  You don't ever want to rely on 100% equities no matter your age or risk tolerance.

Yeah not a chance I could go 100% equities.

I don't know how you backtest with funds that haven't been around long enough but I'm looking very closely at Fundsmith.

a 50/50 between Fundsmith and Capital Gearing Trust appears to have good returns low volatility and low correlation and if you put stock in Trustnet FE ratings doesn't appear especially "risky".

No risk now reward   I know there's a big passive fan base on here and without getting into it too much it's just not something I seem to find myself doing even if it's what I suggest other people do.