Investing in Global Trackers and other similar investments

DoneWorking

cheerfulcat said:

DoneWorking said:

I'm learning more about what I don't know every day.
But I'm noting it all down.

I'm now starting to wonder wether I do need an IFA to set up a more comprehensive investment plan

I'd do the cash savings ladder and let them concentrate on investing the £175k

Probably make less return 
But I'm concerned at my lack of knowledge

I have started reading the various articles recommended but I can see it's going to take time to develop my knowledge to a point where I feel confident that I am making the right decisions

Yes, the cost of hiring an IFA will come out of your returns. But going DIY and making a botch of it could well cost a whole lot more, to the point of being disastrous. 

Also, you have said that you are elderly and that you simply want to protect your capital from inflation. You have had some well-meaning but I feel quite inappropriate ( given your circumstances ) suggestions here which seem to have confused the issue further. 

An IFA would be a far better source of personalised advice than a bunch of random internet people!

Some of the comments have been below the belt 
I personally do not think there is anything to be gained in being rude
I'm happy to accept criticism but do it without being rude or offensive 

cheerfulcat

I have to say that I haven’t seen any rude or offensive remarks directed at you. 

DoneWorking

cheerfulcat said:

I have to say that I haven’t seen any rude or offensive remarks directed at you. 

Most people have been very helpful

Maybe I'm just over reacting

I think it's best to deal with people the way you would speak to your mother or father

With respect

eskbanker

DoneWorking said:

cheerfulcat said:

I have to say that I haven’t seen any rude or offensive remarks directed at you. 

Most people have been very helpful

Maybe I'm just over reacting

I think it's best to deal with people the way you would speak to your mother or father

With respect

That's all very laudable, but it isn't a particularly realistic benchmark for online discussion forums, although the forum rules do set out expectations:

1. Keep it kind and keep it clean.

Be respectful, polite, friendly and mindful of the impact of your posts to other community members, Forum Ambassadors and MSE staff – everyone is human here. This rule is non-negotiable.

DoneWorking

eskbanker said:

DoneWorking said:

cheerfulcat said:

I have to say that I haven’t seen any rude or offensive remarks directed at you. 

Most people have been very helpful

Maybe I'm just over reacting

I think it's best to deal with people the way you would speak to your mother or father

With respect

That's all very laudable, but it isn't a particularly realistic benchmark for online discussion forums, although the forum rules do set out expectations:

1. Keep it kind and keep it clean.

Be respectful, polite, friendly and mindful of the impact of your posts to other community members, Forum Ambassadors and MSE staff – everyone is human here. This rule is non-negotiable.

The forum guidelines are more or less what I said

Stated simply

Be polite and respectful

Often you will have no idea of the person you are responding to or their circumstances

bostonerimus

JakeHyde said:

Ray_Singh-Blue said:

If you search "take a peek at my hand" you'll find a diary thread documenting my 7 year journey from gung ho chancer to supine passive- head.

Awesome, I'll have a read of this tomorrow, as it's past my bedtime.  But (without looking), it would be great if everyone would dare post what they are investing in.  I haven't invested in an index fund yet, but I hope to do so tomorrow, and if I can't decide on which index's to invest in I think I will just go for the SNP500 for this tax year, and take my time picking a number of other index's  after the 5th.

I'll bite, but just as an example that you have to consider your own circumstances carefully to come up with an appropriate asset allocation and portfolio. What I'm invested in probably won't suit you and the exact funds won't be available to you as I live in the US.

My circumstances...I'm retired with a DC pot that's way larger than I need to live comfortably and I actually live on a DB pension and income from a rental property.

Here is what I have

VTSAX (US equity Index) 50%
VTIAX (International equity index) 24%
VWINX(Wellesley Income fund - 60% bonds) 10%
Deferred Annuity  5%
Cash 5%
Rental 6%

So I have hardly any bonds, my cash is in the bank and a long term saving account getting 2%. The annuity grows at a minimum of 3% every year. So I have regular income from the DB pension and the rental property. My cash and deferred annuity along with my own home and rental property provide a worst case store of capital and I let the rest ride on the stock market and very rarely look at it.

Thrugelmir

GazzaBloom said:

Thrugelmir said:

GazzaBloom said:

Thrugelmir said:

My suggestion would be to explore broader investment vehicles such as multi asset. This would provide a broader diversification of underlying investments. Less volatile as well. With an ever decreasing time horizon chasing speculative returns may not be worthwhile. Given the broader economic challenges of rising interest rates, rising inflation and QT combining. 

Over time there's always a fad for something in particular. The hype grows then momentum propels the asset class upwards in value. A self fulfilling prophecy so to speak. There's a detachment from reality, i.e. the underlying financial fundamentals of the companies themselves. With regards to global equity funds as time has past. The net returns are being generated by fewer and fewer companies. Personally I'd be wary. The pandemic and recent geo political events have shown how fragile globalisation actually is. When push comes to shove. All the old rifts and historical disagreements rapidly re-emerge. As self interest prevails. 

But don't some multi-asset funds hold those select few companies that drive the index performance as well? Apple & Microsoft not only drive the S&P500 index but also are key holdings in at least Aviva and Standard Life multi-asset default pension funds, selected to provide the capital growth for the fund.

I wouldn't consider holding an index as chasing speculative returns, a fund manager selecting a few high flying stocks to drive the capital growth of a multi-asset fund is though. 

Multi asset will dilute the influence of a small number of companies on the potential return. The mega caps cannot grow infinitum. There's a generation of investors who've never experienced a full on bear market and volatility that accompanies it. Risk tolerance is far higher than I've ever known it in all my years of investing.

Yes agreed, but holding the index you hold the current mega caps and their eventual replacements as they decline with no investment decisions required where a fund manager will need to make active stock picking and timing decisions as to when to change out his holdings.

If you are alluding to me being part of a generation of investors who have never experienced a bear market you are incorrect, I have been investing in stocks funds since 2003 and luckily a final salary pension before that so I've been through the 2007/8 crash and extended recovery period, I didn't panic sell, I kept dollar cost averaging in month by month.

I fail to see how index funds will be particularly disadvantaged to a multi-asset fund by a bear market, there will be no safe places to hide and a strong temperament is required. If you hold low costs equities index funds and low cost bonds index funds at a 60/40 or 70/30 ratio they are unlikely to fare much differently to a typical multi-asset managed fund, except you will be paying lower fees.

Mega caps have only existed more recently. Their valuations owe much to the volume of money pouring into passively managed investment vehicles. Meta shows how suddenly a stock can be rerated in a single day. Tesla how investors can overpay for a stock. As the entry into the SP500 was so well flagged that many investors (such as BG) bagged a comfortable profit for doing nothing. Passive funds were forced to pay over the odds to reweight their holdings. 

As investors (and through our working careers) we are all shaped by our personal experiences. As I know that Complancencey / over confidence is a weakness as an investor. What lies ahead is very different to the crisis in the banking sector which ended up benefiting people as interest rates fell. 

An investment manager will weight and adjust a multi asset fund to meet it's risk targetted objectives. An individual investor will have picked one or more index funds for their portfolio with no particular risk objectives in mind.

P933alilli

Some of the messges im reading on here about bonds dont fill me with much optimism nor the ones on certain other forums saying that the 60-40 portfolio is dead or on life support at best! 

GeoffTF

Thrugelmir said:
Mega caps have only existed more recently. Their valuations owe much to the volume of money pouring into passively managed investment vehicles.

Mega cap valuations owe nothing to market weighted trackers. They do not trade at all as valuations change. New investors buy all the stocks in their free float market proportions, and exert the same upward pressure on all of them.

Thrugelmir said:
Tesla how investors can overpay for a stock. As the entry into the SP500 was so well flagged that many investors (such as BG) bagged a comfortable profit for doing nothing. Passive funds were forced to pay over the odds to reweight their holdings.

The S&P 500 is not a simple market weighted index. It has a rule that companies have to be profitable to be included in the index. That had unfortunate results for S&P 500 investors when Tesla became profitable. You avoid that problem by investing a simple market weighted tracker. They did not have any problem with Tesla. They bought it when it was an unprofitable tiddler, and passively held it as it grew.

GazzaBloom

Thrugelmir said:

GazzaBloom said:

Thrugelmir said:

GazzaBloom said:

Thrugelmir said:

My suggestion would be to explore broader investment vehicles such as multi asset. This would provide a broader diversification of underlying investments. Less volatile as well. With an ever decreasing time horizon chasing speculative returns may not be worthwhile. Given the broader economic challenges of rising interest rates, rising inflation and QT combining. 

Over time there's always a fad for something in particular. The hype grows then momentum propels the asset class upwards in value. A self fulfilling prophecy so to speak. There's a detachment from reality, i.e. the underlying financial fundamentals of the companies themselves. With regards to global equity funds as time has past. The net returns are being generated by fewer and fewer companies. Personally I'd be wary. The pandemic and recent geo political events have shown how fragile globalisation actually is. When push comes to shove. All the old rifts and historical disagreements rapidly re-emerge. As self interest prevails. 

But don't some multi-asset funds hold those select few companies that drive the index performance as well? Apple & Microsoft not only drive the S&P500 index but also are key holdings in at least Aviva and Standard Life multi-asset default pension funds, selected to provide the capital growth for the fund.

I wouldn't consider holding an index as chasing speculative returns, a fund manager selecting a few high flying stocks to drive the capital growth of a multi-asset fund is though. 

Multi asset will dilute the influence of a small number of companies on the potential return. The mega caps cannot grow infinitum. There's a generation of investors who've never experienced a full on bear market and volatility that accompanies it. Risk tolerance is far higher than I've ever known it in all my years of investing.

Yes agreed, but holding the index you hold the current mega caps and their eventual replacements as they decline with no investment decisions required where a fund manager will need to make active stock picking and timing decisions as to when to change out his holdings.

If you are alluding to me being part of a generation of investors who have never experienced a bear market you are incorrect, I have been investing in stocks funds since 2003 and luckily a final salary pension before that so I've been through the 2007/8 crash and extended recovery period, I didn't panic sell, I kept dollar cost averaging in month by month.

I fail to see how index funds will be particularly disadvantaged to a multi-asset fund by a bear market, there will be no safe places to hide and a strong temperament is required. If you hold low costs equities index funds and low cost bonds index funds at a 60/40 or 70/30 ratio they are unlikely to fare much differently to a typical multi-asset managed fund, except you will be paying lower fees.

Mega caps have only existed more recently. Their valuations owe much to the volume of money pouring into passively managed investment vehicles. Meta shows how suddenly a stock can be rerated in a single day. Tesla how investors can overpay for a stock. As the entry into the SP500 was so well flagged that many investors (such as BG) bagged a comfortable profit for doing nothing. Passive funds were forced to pay over the odds to reweight their holdings. 

As investors (and through our working careers) we are all shaped by our personal experiences. As I know that Complancencey / over confidence is a weakness as an investor. What lies ahead is very different to the crisis in the banking sector which ended up benefiting people as interest rates fell. 

An investment manager will weight and adjust a multi asset fund to meet it's risk targetted objectives. An individual investor will have picked one or more index funds for their portfolio with no particular risk objectives in mind.

You can't possibly know the rationale or risk objectives of every individual investor.

Data shows that managed funds fare worse than index funds in downturns:

• In the correction of mid-1990, the S&P 500 fell 14.7%, but the average actively managed fund fell 17.9%
• In the bear market of the summer of 1998, the S&P 500 dropped 19%, compared to 22.2% for the average managed fund
• In its 2008 Indices Versus Active (SPIVA) scorecard, Standard & Poor’s concluded: “The belief that bear markets favour active management is a myth. A majority of active funds in eight of the nine domestic equity style boxes were outperformed by indices in the negative markets of 2008. The bear market of 2000 to 2002 showed similar outcomes.”

Your relentless and prevalent "end is nigh" pessimism and dislike for index funds is widely noted here and it may be borne of your personal investing experience, I have no idea, but if that is your personal experience it does not change the historical data. My personal experience has lead me to have negative feelings towards a typical managed fund.

No-one knows the future, yes, we may be in for a prolonged downturn unlike any other we've seen,  but that does not mean that the performance of a typical multi-asset managed fund will fare dramatically better than a portfolio of stock/bonds index funds. Well researched historical data bears this out.

Investing in index funds does not equate to "over confidence" for some it in fact may be quite the opposite.