Passive investing

[Deleted User]

The point on “active” VLS is addressed above. 

The point on VLS 100 vs “tracker” has also been addressed elsewhere  but lets reiterate: 

- VLS 100 has OCF of 22 basis points which is fairly low.  On a 100k investment  it translates to 220 pounds.  Does not begin to compare to the costs incurred by poor sods who pay thousands annually in the fund management costs alone with substantial ongoing “advice” costs and platform costs on top. 

- Vanguard’s FTSE Global All Cap had essentially the same OCF of 0.23%.  It is further on the “passive” scale. Decision on whether to pick VLS 100 or GAC is principally based on wanting to be slightly overweight in Britain (or not).  If one buys into the White Paper argument of risk reduction then its a good call but won’t make a huge difference either way. 

- HSBC FTSE All Cap Tracker costs 0.13%, saving 100 quid annually on 100k.  It tracks a different index than Vanguard’s global All Cap. It excludes small companies.  That’s an active decision.  Small Cap stocks perform well through certain parts of the cycle and have historically outperformed long term.  It holds significantly fewer stocks (thousands companies are missing) which lowers costs.  It is “less passive” than Vanguard’s FTSE Global All Cap. It has noticeably higher holdings in US big tech, like APPL.  The difference in performance  isn’t going to be massive.  For smaller investors holding HSBC funds usually means higher platform costs because Vanguard’s platform costs are low. 

In summary, picking either of these funds is completely reasonable, costs make sense and talking about one or another of these being “weak” = bad investment advice. 

dunstonh

In summary, picking either of these funds is completely reasonable, costs make sense and talking about one or another of these being “weak” = bad investment advice. 

Yet you would be one of the first to call financial advice bad for picking a fund that has returned consistent bottom half performance. Except when its a Vanguard fund as we those that pray at the church of Vanguard cannot see past their bias.

[Deleted User]

dunstonh said:

In summary, picking either of these funds is completely reasonable, costs make sense and talking about one or another of these being “weak” = bad investment advice. 

Yet you would be one of the first to call financial advice bad for picking a fund that has returned consistent bottom half performance. 

False. These funds have different benchmarks and can’t be compared directly in a meaningful way. VLS needs to be benchmarked against a combination of indices. 

Crucially, comparisons over short term (far less than 10 years) do not translate to “consistently underperformed”.  Nor are you accounting for higher platform charges of HSBC FTSE world. 

Each of these funds has done its job and the difference in performance is due to VLS100 having less US tech which outperformed over the short period of time you are concerned with. 

cloud_dog

Deleted_User said:

The point on “active” VLS is addressed above. 

The point on VLS 100 vs “tracker” has also been addressed elsewhere  but lets reiterate: 

- VLS 100 has OCF of 22 basis points which is fairly low.  On a 100k investment  it translates to 220 pounds.  Does not begin to compare to the costs incurred by poor sods who pay thousands annually in the fund management costs alone with substantial ongoing “advice” costs and platform costs on top. 

Why on earth was this brought in to the conversation?  Aspect is erroneous and just sensationalism.  Stick to discussing the funds aspects and the thread will hopefully add value.

[Deleted User]

Regarding “praying at the church of Vanguard”, I use products from 5 providers. Does that make me a pagan?

 Having said this, Vanguard invariably has solid offerings, was first to develop technology which permitted low cost investing and keeps driving the costs down.  Can’t go too wrong with Vanguard.

[Deleted User]

cloud_dog said:

Deleted_User said:

The point on “active” VLS is addressed above. 

The point on VLS 100 vs “tracker” has also been addressed elsewhere  but lets reiterate: 

- VLS 100 has OCF of 22 basis points which is fairly low.  On a 100k investment  it translates to 220 pounds.  Does not begin to compare to the costs incurred by poor sods who pay thousands annually in the fund management costs alone with substantial ongoing “advice” costs and platform costs on top. 

Why on earth was this brought in to the conversation?  Aspect is erroneous and just sensationalism.  Stick to discussing the funds aspects and the thread will hopefully add value.

Because lowering costs in a meaningful way is a good objective for passive investors. As opposed to arguing about whose !!!!!! is more passive or if its worth paying 10 basis points for having small cap. 

bostonerimus

jamesd said:

bostonerimus said:

I'm lazy! For me passive really applies to my management style irrespective of what's in my portfolio, fyi it's mostly cap weighted equity trackers with thousands of stocks and the one active fund I own is Vanguard Wellesley as my small bond allocation.

You're a US person in the US so the research applicable to such situations applies to you, unlike most here.

Even here if there's truly a desire to pay no attention at all, passives can be the better choice, just not on performance grounds unless you take care over where you invest.

I don't get this argument. Investors now invest across the globe and the basic principles of long term investing and not doing silly things applies wherever you are. The UK is not exceptional and neither is the US or anywhere else for that matter. Paying no attention is not what I advocate...I did rebalance when I was working and now that I'm retired I'm  allowing my equity allocation to drift upwards as I'm following the "rising equity glide path". I'm certainly more passive than active, but I'm not catatonic. You could say I'm actively doing nothing...it's all a bit semantic.

Obviously some active funds will beat the market and some will not. There are the ones that are doing well now like Fundsmith and the ones that were a disaster ie Woodford. Using a mostly passive strategy simply means you'll get the market return and that's the same in the US or the UK. Being average has worked out well for me and it's been a relatively simple DIY strategy that has kept me from making big mistakes without the need to pay an IFA to hold my hand.

dunstonh

Deleted_User said:

cloud_dog said:

Deleted_User said:

The point on “active” VLS is addressed above. 

The point on VLS 100 vs “tracker” has also been addressed elsewhere  but lets reiterate: 

- VLS 100 has OCF of 22 basis points which is fairly low.  On a 100k investment  it translates to 220 pounds.  Does not begin to compare to the costs incurred by poor sods who pay thousands annually in the fund management costs alone with substantial ongoing “advice” costs and platform costs on top. 

Why on earth was this brought in to the conversation?  Aspect is erroneous and just sensationalism.  Stick to discussing the funds aspects and the thread will hopefully add value.

Because lowering costs in a meaningful way is a good objective for passive investors. As opposed to arguing about whose !!!!!! is more passive or if its worth paying 10 basis points for having small cap. 

But you are arguing that increasing costs by using VLS100 instead of a global tracker is fine.    It seems strange to be saying that lowering costs is a good objective for passive investors whilst suggesting that the higher cost active fund that is currently Q3 since lunch over a decade ago is a good option.

And those poor sods you say pay thousands annually but get better returns than VLS100 must really regret that they are getting higher returns.

[Deleted User]

dunstonh said:

Deleted_User said:

cloud_dog said:

Deleted_User said:

The point on “active” VLS is addressed above. 

The point on VLS 100 vs “tracker” has also been addressed elsewhere  but lets reiterate: 

- VLS 100 has OCF of 22 basis points which is fairly low.  On a 100k investment  it translates to 220 pounds.  Does not begin to compare to the costs incurred by poor sods who pay thousands annually in the fund management costs alone with substantial ongoing “advice” costs and platform costs on top. 

Why on earth was this brought in to the conversation?  Aspect is erroneous and just sensationalism.  Stick to discussing the funds aspects and the thread will hopefully add value.

Because lowering costs in a meaningful way is a good objective for passive investors. As opposed to arguing about whose !!!!!! is more passive or if its worth paying 10 basis points for having small cap. 

But you are arguing that increasing costs by using VLS100 instead of a global tracker is fine.    It seems strange to be saying that lowering costs is a good objective for passive investors whilst suggesting that the higher cost active fund that is currently Q3 since lunch over a decade ago is a good option.

And those poor sods you say pay thousands annually but get better returns than VLS100 must really regret that they are getting higher returns.

This is circular. See above. 10 basis point reduction furnished by HSBC FTSE is because they exclude small cap.  If thats what you want; perfect choice.  

Thrugelmir

Deleted_User said:

We seem to have a recurring debate on whether a particular fund is “passive” or “active”.  Debates are great but this one is a complete waste of typing energy.  

Informed investors are flexible and use the most appropriate vehicle for the sector of the market that they wish to invest in. Those that don't understand the markets fully quite rightly restrict themselves to a far more limited range of products. No need to debate the topic. Why are you wasting your energy?  Calling the kettle black springs to mind. 

False. These funds have different benchmarks and can’t be compared directly in a meaningful way. VLS needs to be benchmarked against a combination of indices.

I can only assume that this response is down to Vanguards poor performance in their peer groups. 


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