Suggested portfolio

dunstonh

When you say “sectors”, do you mean “I want 40% in tech” or “I want 30% in Uruguay”? 

It is quite clear what I meant by sectors and I have used the UK phrasing as this is a UK site.  It is not a Canadian site.     You are the one that keeps going on by industry.  No-one else is.

I think you are being obtuse intentionally.

If you buy a multi-asset fund you delegate these secondary decisions to the vendor of the fund.  They are invariably more qualified and in a better position to make such decisions than a financial advisor.  

Who says the financial adviser is making such decisions?         There won't be many advisers in the UK making those decisions.   It isn't their job or remit.     I don't know why you think it is.

[Deleted User]

This is another straw man. You buy your advice on “sector” allocation from someone else and resell it, congrats.  The point is its just another unnecessary layer of financial advisors and charges. 

Audaxer

Deleted_User said:

The use of single sector funds is not complex.  It requires more knowledge than a multi-asset fund but not much more.  It is how you achieve your target sector allocation.   The use of multiple multi-asset funds  can achieve it but it would be far harder and more complicated (especially if you use fund of funds like VLS or HSBC GS) than using single sector funds.

What are you talking about?  Nobody should be buying multiple asset allocation funds. 

If the original poster did want to use multi asset funds for his £380k portfolio, I can't see any problem splitting it 50/50 between, for example, VL60 and HSBC Global Strategy Balanced, rather than investing the whole amount in the same fund house. 

Prism

In the UK some examples of sectors are:

UK All companies
UK Gilts
Global
North America
Healthcare
Infrastructure

There are of course others too.

I'm sure we all know how to use the term region too but that doesn't discount the fact that the term sector includes regions along with other classes of assets.

As far as I am concerned Vanguard LifeStrategy is a collection of single sector funds. It is generic and cheap. It doesn't make it the best option for all situations.

dunstonh

Deleted_User said:

This is another straw man. You buy your advice on “sector” allocation from someone else and resell it, congrats.  The point is its just another unnecessary layer of financial advisors and charges. 

So, it is ok for others to buy in that data and research and use it as long as they are not British IFAs.    Of course, we could just all make it up like Canadian bloggers and pretend that is the best option just as you are.

Are you struggling to answer why you think it is bad to use more than 4 single-sector funds unless your name is Vanguard or you are a Canadian blogger?

When determining investment policy, risk and asset allocation, the number one decision is equity vs fixed income.  

And going back to this point.  No it is not.  The percentage weighting between the two asset types should not be set until you know what the underlying assets are going to be.

You could have two portfolios split 50/50 between fixed interest and equities and have a very different risk level.   The overall risk of the portfolio is what matters.    So, how you split the asset classes comes after you decide the investment method.

[Deleted User]

Audaxer said:

Deleted_User said:

The use of single sector funds is not complex.  It requires more knowledge than a multi-asset fund but not much more.  It is how you achieve your target sector allocation.   The use of multiple multi-asset funds  can achieve it but it would be far harder and more complicated (especially if you use fund of funds like VLS or HSBC GS) than using single sector funds.

What are you talking about?  Nobody should be buying multiple asset allocation funds. 

If the original poster did want to use multi asset funds for his £380k portfolio, I can't see any problem splitting it 50/50 between, for example, VL60 and HSBC Global Strategy Balanced, rather than investing the whole amount in the same fund house. 

Not a big deal but completely unnecessary. Like having two almost identical 75’ TVs using the same technology and hanging on the same wall but by different manufacturers. 

That’s not what duns was talking about though.  He is trying to fine tune underlying assets by mixing and matching multi-asset funds. 

DT2001

Deleted_User said:

Cus said:

The 3 points have validity if it replicates a multi fund exactly but you said this

"I am not going to persuade a self-serving IFA but single sector funds should not be used. Its bad investment advice"

The fact that choosing a multi asset managed fund that does exactly the above in using single sector funds is ok, yet choosing a similar, but with perhaps tuned differences (e.g. choosing a different active provider or passive index, or a very slightly different sector perspective) is bad investment advice in my opinion is wrong.  No need to kvetch.

And yet it is bad investment advice.  You are either 

1. Reproducing a single fund but at a higher cost and with more complexity and charges or
2. Slicing and dicing the market and betting on sectors while reducing diversification (also at a higher cost).

Simple is beautiful.  

Last but not least, Dan Bortolotti (author of popular books on investments) at Canadian Couch Potato also recommends simple model portfolios; not one of them gets anywhere near 10 funds.  Dan has a special section called “bad investment advice”, which debunks claims promoted by a British IFA in this thread: https://canadiancouchpotato.com/

Do you mind telling us how many funds you hold as your posts show you to be very well read?

In one of the couchpotato podcasts “the value of simple” they suggest that 3 ETFs creating an equivalent of the Canadian single Vanguard ETF 80/20 or 60/40 would be cheaper. Not sure if that is still true. Holding 3 will need manual rebalancing and if still contributing potentially trading costs.

Whilst I think I understand your point you do not like the look of bonds? So when do you decide to tinker with diversification and does that not then defeat the object of an almost invest and forget strategy?

[Deleted User]

Prism said:

In the UK some examples of sectors are:

UK All companies
UK Gilts
Global
North America
Healthcare
Infrastructure

There are of course others too.

I'm sure we all know how to use the term region too but that doesn't discount the fact that the term sector includes regions along with other classes of assets.

As far as I am concerned Vanguard LifeStrategy is a collection of single sector funds. It is generic and cheap. It doesn't make it the best option for all situations.

Thanks. Not particularly helpful terminology though. Gilts are a different asset class vs equities. Why would you need a different term when a perfectly good one is readily available?  UK All companies = “a sector”?  Surely a sector is a subset of “all companies”, no?  “Healthcare” - yep.  That’s clearly a sector of the economy.  Still, the point is that, regardless of terminology, duns is pushing beginner investors into complex portfolios with more than 10 funds. 

Most of older investors like myself hold legacy portfolios rather than newer multi-asset vehicles but I do think that multi-asset funds like VLS are the best option for 90% of retirement portfolios. Once you get to high net worth individuals, complex tax affairs, inheritance  or people fascinated with investments and too much spare time, more complex portfolios become a reasonable alternative.  

RogerIrvine

Is that because multi-asset funds like VLS effectively replace having an IFA on an ongoing basis?

Cus

If you look at trustnet which is a popular site on here, under sectors it's seems to have a large variation.  I actually agree with you that sectors should be more linked to industries / businesses. But it isn't in the UK.

Dunstonh wasn't pushing beginner investors to complex portfolios with more than 10 funds. He has suggested that a multi asset fund maybe be suitable, and also suggested a portfolio make up that was very similar to VLS with the underlying sectors.

I may agree with you that the added layer of an IFA choosing funds for you is unnecessary in many situations, but your bias and tone against IFA's does you no credit and diminishes your arguments.