Passive investing

[Deleted User]

Thrugelmir said:

Deleted_User said:

Cus said:

But if that's going to have a chance of working, you need to know what you are doing better than most, or choose someone who does.

Choosing active investments is a job active fund managers do; usually with the help of sophisticated software. There is no need for multiple layers of charges if you want help with stock picking. 

You are obviously out of your depth in terms of knowledge.  

Obviously

grumiofoundation

jamesd said:

grumiofoundation said:

Are blended benchmarks common? 

Yes. You'll find them in just about every mixed asset fund because at a minimum those are likely to combine equities and bonds and neither alone will be adequate to illustrate potential performance.

To be honest I assumed this would be the case (obviously the utility of such blended benchmarks could be questionable) and was interested to see what they were.

But as I posted above the first 5 multi-asset funds I looked at from VG, L and G, Blackrock MyMap, HSBC and fidelity all said not benchmarked. 

[Deleted User]

grumiofoundation said:

jamesd said:

grumiofoundation said:

Are blended benchmarks common? 

Yes. You'll find them in just about every mixed asset fund because at a minimum those are likely to combine equities and bonds and neither alone will be adequate to illustrate potential performance.

To be honest I assumed this would be the case (obviously the utility of such blended benchmarks could be questionable) and was interested to see what they were.

But as I posted above the first 5 multi-asset funds I looked at from VG, L and G, Blackrock MyMap, HSBC and fidelity all said not benchmarked. 

The utility of benchmarking funds which track a bunch of indices is limited. Benchmarking is a must for active funds; answers the question on long term performance.  If a fund tracks an index or even a bunch of indices, all you are measuring is a tracking error.   If for whatever reason a multi-asset fund isn’t reporting a benchmark, you can always benchmark the underlying components.

For example Van’s LifeStrategy series has about 20% of its equities in Vanguard’s FTSE all share.  You can see that its tracking the index well enough. https://www.vanguardinvestor.co.uk/investments/vanguard-ftse-uk-all-share-index-unit-trust-gbp-acc

dunstonh

RoadToRiches said:

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. Except when its a Vanguard fund as we those that pray at the church of Vanguard cannot see past their bias.

So what Church do you subscribe to then?

Not being biased to any one fund house, provider, platform or method but retain an open mind as the best option in one area is unlikely to be the best in another and years from now it's likely a different option will be better.  

There are two retail financial companies in the UK that appear to have a devout fellowship.  SJP and Vanguard.

bostonerimus

RoadToRiches said:

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. Except when its a Vanguard fund as we those that pray at the church of Vanguard cannot see past their bias.

So what Church do you subscribe to then?

Stick to low cost index funds. Once you have your strategy set it doesn't matter what you buy or where you buy it as long as the fees are low and the returns closely track the relevant benchmarks. This is not rocket science. It's simple to invest, but there are lots of people who want to make it seem complicated when it's not.

[Deleted User]

RoadToRiches said:

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. Except when its a Vanguard fund as we those that pray at the church of Vanguard cannot see past their bias.

So what Church do you subscribe to then?

Some subscribe to sacrificing their bodies by placing them strategically between the investments and investors and letting the streams of money to flow through while they sleep. 

JohnWinder

jamesd said:

For UK investors in UK funds FCA research showed that active commonly beat passive and that outperformance was often persistent so the basis of your claim isn't accurate.

I'll dig it up again later...

Tempus fugit. Has anyone seen it yet?

The jury may be asked to disregard that assertion until the exhibit A is tendered.

Prism

JohnWinder said:

jamesd said:

For UK investors in UK funds FCA research showed that active commonly beat passive and that outperformance was often persistent so the basis of your claim isn't accurate.

I'll dig it up again later...

Tempus fugit. Has anyone seen it yet?

The jury may be asked to disregard that assertion until the exhibit A is tendered.

Well until we get around the issue that people are very unlikely to select a fund randomly it makes a discussion about x% of active funds fail to beat their benchmark a bit pointless - especially for an area like UK equity which suggests that the numbers are closer. Trying to find an active global or US fund that beats the index is a fair bit harder.

2nd_time_buyer

Sorry, I have not read the whole thread but to me the debate is not between passive and active.

... but between low fees and high fees. And ultimately value.

From my understanding, there is little evidence to say that high fee (active funds?) perform better on average than low fee (passive funds?). You could argue that picking the right find is the key but then the key active ingredient is you.

There is also little evidence that IFAs are better at picking investments than the layman. However, they might be be better at picking the right one for your circumstances.

... the exceptions to the above is if you are privvy to more information than the market or that the investor is large enough to sway the market.

... so for most people passive funds are likely to better value (Unless you know better or want to take a bigger gamble).

dunstonh

There is also little evidence that IFAs are better at picking investments than the layman. However, they might be be better at picking the right one for your circumstances.

The layman is typically clueless about investing and has no understanding of investing.   Do not mistake the contributors of this board as being typical consumers.     The contributors here have a higher level of knowledge compared to the layman.

IFA qualifications include training on portfolio building, different strategies and methodology.   So, compared to the layman, they are in a much better position.    Very different to how it was 10 years ago where there was virtually nothing in the IFA qualifications about portfolio structure etc.     However, the primary requirement of any investment advice is suitability.    The IFAs job is to put something in place that is suitable for the individual and structured accordingly.   Nowadays that means the IFA buys in the data for the asset weightings as virtually impossible for a typical sized IFA firm to do that in-house.  They buy in the research, governance and due diligence.   The IFA effectively picks the funds from that research, governance & due diligence to match.     So, you could say that the IFA is more of a facilitator/coordinator of all the data and software that they buy in.   That is not to say that all IFAs are doing it.  There will be some dinosaurs out there winging it.     Basically, you have three camps.  Those that pay for the data, governance, due diligence etc and use that to build the portfolio.   Those that use a DFM and get the client to pay for it and those that are still living in the 1990s and winging it.   

... so for most people passive funds are likely to better value (Unless you know better or want to take a bigger gamble).

I would say for the layman DIY investor, multi-asset is likely to be the best option rather than a portfolio of passive funds (unless looking at 100% equity - where a global tracker would fit).    The layman is generally cautious (through lack of experience and knowledge).  So, it's likely they should have gilts, bonds, cash etc in their mix.   A multi-asset fund like VLS or HSBC GS fits perfectly for them.  A lot of contributors on this site invest at a higher volatility level than the average consumer.