40-60% Funds Worried

Linton

ChainsawCharlie said:

ChainsawCharlie said:

Eschatologist said:

@ChainsawCharlie

Out of interest why are you investing in 3 pretty much identical funds, are they all on different platforms?

Your paying much more in fees for some of this funds which will be overlapping the Vanguard fund:

Liontrust MA Passive Interm Passive S Acc OCF = 0.38%
£9,325 invested

Fund Fee = £35 PA

Royal London Sustainable Div C Acc OCF = 0.77%
£9,312 Invested

Fund Fee = £71 PA

Vanguard Lifestrategy 60% OCF = 0.22%
£17,060 Invested

Fund Fee = £37 PA

If your after a higher weighting in a specific index it would be cheaper to just invest in that index fund/ETF.

It might not seem like much but these fees eat into your investments and reduce your returns by quite a lot over time, chipping away at your compound interest.

From reading your posts I think you could benefit from looking into the Boglehead investment Idology, it might ease your mind.

google bogleheads as I can't post links yet.

This isn't financial advice but if it were me I'd consolidate everything into the Vanguard Lifestrategy 60%:

Vanguard Lifestrategy 60% OCF = 0.22%
£35697  Invested

Fund Fee = £78 PA

That would be £65 a year cheaper, which means you would get £65 more in accumulation each year.

A very good point, unfortunately this is the legacy I have been left with following my poor choice of an idiot IFA , who I have now sacked.
I would like nothing more to sell it all down and place everything into VLS , but my portfolio is currently down in value by approx £5000 and I am bothered I would crystallise the loss, but in my novice opinion maybe I wouldn't make such a loss, because if I did sell down and reinvest the proceeds back into VLS then I would also be buying at a lower price.....or is this inaccurate and too simplistic?

What's everyone's view on this, situation with these funds  highlighted by  Eschatologist must admit it looks valid, overlapping and higher cost for the Royal London

As I mentioned they were the choice of my IFA
But my question is, in order to consolidate them into VLS would mean selling Liontrust and Royal London, jointly approx £1,300 down in value, bit then am I really losing this if I move them into VLS which is also down?

Dont look at it as selling Liontrust etc and buying VLS60.  Look at it as selling those shares that Liontrust etc happen to be investing in and buying those held by VLS60.  If all the funds are investing in much the same underlying investments then moving funds wont make any difference.  On the other hand if the funds are invested in different sorts of things.......

Personally I think you are faffing around about things that dont matter very much.  When you started this thread you were worried about a drop in value of an average of around 8% in a few months.  Now you are getting concerned about charge differences  of 1/20th of that per year.  Then you were concerned abut bonds.  Now you are looking at minor charge differences without considering the detailed bond allocation of these funds at all.

As long as you are invested broadly and in line with your risk tolerance and objectves it really does not matter very much which funds you use.  Over the past 10 years (well 9 years and 6 months) VLS60 has performed pretty consistently around the average of the RL and Liontrust funds.  There is no evidence that the lower charges made any significant consistent difference nor that the IFA chose particularly badly.




So I suggest you just leave things as they are and move your mind onto other things.

Eschatologist

Fees do make a difference, why pay more when you don't have to?

https:/ /www.which.co.uk/money/investing/types-of-investment/investment-funds/are-fund-charges-eating-into-your-returns-as43q0j6wsrq

Linton

Eschatologist said:

Fees do make a difference, why pay more when you don't have to?

https:/ /www.which.co.uk/money/investing/types-of-investment/investment-funds/are-fund-charges-eating-into-your-returns-as43q0j6wsrq

But not enough difference to over-ride other considerations.  As you see from the graph VLS60's lower fees did not in the past 10 years move it past the other two funds being considered.

Linton

Collyflower1 said:

Ive just been having a casual scan through the thread as i'm in VLS60. I'm wondering if i have the right/wrong end of the stick. If the bonds part, ie.40% earns a yield of 3.1% per year will that show up as interest sometime in the future? As previously discussed unless a major world disaster unfolds then whatever the amount held in bonds, 40% of the portfolio , thats what you'll get back as the bonds mature in c.9-12 years time....plus 3.1% per annum interest (potentially?) And is this interest compounded? Then hopefully if the market performs, then Bob's your uncle? 

The problem is the asset value.  If you bought the bonds when they were issued and cashed in at maturity you would be right.  However if you buy into a bond fund the one thing that is guaranteed is that you wont be doing either. So if you bought a  6% bond recently it could have cost you perhaps £185 so you are only getting 100/185 X 6= 3.2% on your investment and you will have a  85/185=46%  capital loss should you cash in at maturity.

Eschatologist

Linton said:

Eschatologist said:

Fees do make a difference, why pay more when you don't have to?

https:/ /www.which.co.uk/money/investing/types-of-investment/investment-funds/are-fund-charges-eating-into-your-returns-as43q0j6wsrq

But not enough difference to over-ride other considerations.  As you see from the graph VLS60's lower fees did not in the past 10 years move it past the other two funds being considered.

I'm pretty sure those graphs are only showing you the funds performance and not factoring in the on going charges, transaction cost, performance fee and platform costs.

Linton

Eschatologist said:

Linton said:

Eschatologist said:

Fees do make a difference, why pay more when you don't have to?

https:/ /www.which.co.uk/money/investing/types-of-investment/investment-funds/are-fund-charges-eating-into-your-returns-as43q0j6wsrq

But not enough difference to over-ride other considerations.  As you see from the graph VLS60's lower fees did not in the past 10 years move it past the other two funds being considered.

I'm pretty sure those graphs are only showing you the funds performance and not factoring in the on going charges, transaction cost, performance fee and platform costs.

Published fund performance is always after fund charges/performance fees etc, ie they are what you actually get if you bought the fund.  In general platform and transaction costs are independent of the fund and are primarily dependent on the platform you choose to use.

JohnWinder

So if you bought a  6% bond recently it could have cost you perhaps £185 so you are only getting 100/185 X 6= 3.2% on your investment and you will have a  85/185=46%  capital loss should you cash in at maturity.

Yes, that’s the problem, but it’s not unique to an old highly priced bond. So the other bond investing approach you could have used recently (if it’s available) is to buy a bond maturing at the same time, but buy it recently at issuance for £100 and hold to maturity. This way you would get exactly the same return as with the 6% bond, above, because the new bond would have had a coupon of much less than 6%, so that what you don’t lose out from a capital loss (compared with the 6% bond) you will lose out with a lower interest payment than 6% for the life of both bonds. In essence, it doesn’t matter which bond, of these two or any other (same default risk) with the same time to maturity, they will all give the same yield to maturity; they have to, or bond buyers would swap from one to the other until they offered the same value. Same yield to maturity, just a different way of delivering it to you: capital value change and interest payments. Bonds old or new, the yield is the same.

Ive just been having a casual scan through the thread as i'm in VLS60. I'm wondering if i have the right/wrong end of the stick. If the bonds part, ie.40% earns a yield of 3.1% per year will that show up as interest sometime in the future? As previously discussed unless a major world disaster unfolds then whatever the amount held in bonds, 40% of the portfolio , thats what you'll get back as the bonds mature in c.9-12 years time....plus 3.1% per annum interest (potentially?) And is this interest compounded? Then hopefully if the market performs, then Bob's your uncle? 

It’s worth more than casual, surely.

Yes. 

Well, subject to the discussion just above. And subject to something dramatic happening, like interest rate changes in 9-12 years time, but bond values don’t jump around as much as other assets. There won’t be compounding of money distributed by the fund to you each year. Yes, how do you know my uncle?

sebtomato

adindas said:

The bond should be expected to hedge equity during the bear market, in reality they fail especially if you choose the wrong type of bonds.

True, bonds used to move in opposite directions to stocks, but not the case anymore. 

JohnWinder

  True, bonds used to move in opposite directions to stocks, but not the case anymore. 

….recently. Nor have they always. https://upfina.com/stock-bond-correlations/ 

GazzaBloom

Been reading this thread with interest. I don't hold any bonds only 100% equities but will be building some wrapped cash inside my pension from next year and still musing over whether it's worth just holding stocks/cash or buy some bonds instead of some of the cash. The answer I had in mind until this year would have been buy bonds but I'm not sure having seem the bond fund declines this year, many bonds funds I look at are down a lot more than my 100% stock fund.