Annual Review - Rebalancing and Changes to Investments Concerns

GSP

My advisor IS retiring in a years time when asked, and he said he is putting the feelers out there to take the business on. He said it will be a national firm or a local firm, but his uncomfortable body language when asked suggests this is further down the road than he was telling me.
He said he would not ‘disappear’ straight away once clients moved over and would help with the transition.

Think there was a post suggesting companies like True Potential were taking over retiring IFA’s business at 8% a client, which is an awful lot of money if true.

Personally, I’d like a fresh start and will be seeking an IFA of my own choosing.

[Deleted User]

A messy and really expensive collection of overlapping funds with ESG tilt; some of them shouldn’t be touched with a barge pole.  Yes, it is quite similar to what you had before. 

One would need to do an “X-ray” to understand what exactly has changed, but country and even asset allocations are certainly different between the two sets. Its not the same portfolio with only the fund names being different but underlying assets being the same if thats what you are asking. 

bostonerimus

GSP said:

bostonerimus said:

Deleted_User said:

To respond to the question raised by JohnWinder on having both VLS20 and a UK mid cap fund: VLS20 is 20% equity of which about 25% is UK. MidCap I guess would be 20% of that which gives a total of 1%. So no, holding VLS20 dies not make the holding of a UK midcap fund unnecessary if you want to have a non trivial allocation.

Yes, but the 20% VLS that is in stocks overlaps with all the other puny funds in this portfolio.  Why bother with VLS? Just get a bond fund and increase your stock funds a bit. Looks like someone is a little bipolar and can’t decide which strategy to use. 

There are other puzzling choices in this mess.  For example, why have 2 European funds (3% each!)? This is someone going for complexity purely for the sake of complexity.  I would be stunned if having a single European fund with 6% allocation resulted in a meaningfully different performance. He is chasing performance in the active Blackrock fund while hedging his bets with a passive HSBC one.  Except that chasing performance does not work, and in any case 3% allocation isn’t meaningful. But this is detail.  

There's some algorithm at work here that is trying to optimize some ultimately meaningless parameter and when someone turns the handle this portfolio drops out. It's a case of analysis and modeling getting out into the wild and being used by marketing people and advisors to sell services with unnecessary complication. I get back to my question about how this portfolio is designed for retirement income drawdown to meet the client's actual requirements...it looks like not at all to me.

As far as I know I’m invested in my advisor’s recommended funds which hopefully will make enough returns as whole to get me through until we die. And as for cash, it’s going that at each review my anticipated drawdown level is made for the following year, with everything rebalanced at this time.

Comparing my existing funds and the recommended funds I posted earlier today, apart from reading posts suggesting these are just too many funds, are these quite similar overall that anyone can tell?

Thanks

It sounds as if your advisor isn't doing much, if anything, specifically for you and rebalancing 16 funds and/or buying some and selling others is an exercise in futility IMO. I don't think you are getting anything of value out of this relationship...you have a risky, complicated, overlapping and expensive portfolio. I have set myself up for drawdown by keeping a couple of years worth of cash in the bank, partial annuitization, and then basically 3 investment funds; a multi-asset income fund with high quality bonds and dividend stocks that produces a yield of 3% /year and a domestic and an international equity index fund for long term growth.

GSP

bostonerimus said:

GSP said:

bostonerimus said:

Deleted_User said:

To respond to the question raised by JohnWinder on having both VLS20 and a UK mid cap fund: VLS20 is 20% equity of which about 25% is UK. MidCap I guess would be 20% of that which gives a total of 1%. So no, holding VLS20 dies not make the holding of a UK midcap fund unnecessary if you want to have a non trivial allocation.

Yes, but the 20% VLS that is in stocks overlaps with all the other puny funds in this portfolio.  Why bother with VLS? Just get a bond fund and increase your stock funds a bit. Looks like someone is a little bipolar and can’t decide which strategy to use. 

There are other puzzling choices in this mess.  For example, why have 2 European funds (3% each!)? This is someone going for complexity purely for the sake of complexity.  I would be stunned if having a single European fund with 6% allocation resulted in a meaningfully different performance. He is chasing performance in the active Blackrock fund while hedging his bets with a passive HSBC one.  Except that chasing performance does not work, and in any case 3% allocation isn’t meaningful. But this is detail.  

There's some algorithm at work here that is trying to optimize some ultimately meaningless parameter and when someone turns the handle this portfolio drops out. It's a case of analysis and modeling getting out into the wild and being used by marketing people and advisors to sell services with unnecessary complication. I get back to my question about how this portfolio is designed for retirement income drawdown to meet the client's actual requirements...it looks like not at all to me.

As far as I know I’m invested in my advisor’s recommended funds which hopefully will make enough returns as whole to get me through until we die. And as for cash, it’s going that at each review my anticipated drawdown level is made for the following year, with everything rebalanced at this time.

Comparing my existing funds and the recommended funds I posted earlier today, apart from reading posts suggesting these are just too many funds, are these quite similar overall that anyone can tell?

Thanks

It sounds as if your advisor isn't doing much, if anything, specifically for you and rebalancing 16 funds and/or buying some and selling others is an exercise in futility IMO. I don't think you are getting anything of value out of this relationship...you have a risky, complicated, overlapping and expensive portfolio. I have set myself up for drawdown by keeping a couple of years worth of cash in the bank, partial annuitization, and then basically 3 investment funds; a multi-asset income fund with high quality bonds and dividend stocks that produces a yield of 3% /year and a domestic and an international equity index fund for long term growth.

Just interested how your funds have performed over the last year? Sorry, when you mean “a yield of 3%/ year”, that doesn’t mean growth p.a., or does it?
I’d be interested in 3% growth as the planner I have created sees us through with that rate, if it’s guaranteed.

Last month my advisor sent an email to all clients which read:
“Recently I read an article from Aviva which recounted their discussions with Greg Davies, an expert in investor psychology – with a Ph.D. in behavioural finance – at the behavioural fintech Oxford Risk. I thought it worth sharing the main part of it with you as it helps explain the emotional aspects of investing and why it is better to sit tight, even when it feels painful to do so:

“…….We asked Greg how investors should manage their emotions to ensure they successfully navigate markets, particularly during periods of volatility.

Greg believes investors should follow four basic rules, which are simple but can be difficult to follow:

• Create a safety net, an emergency buffer of savings, equal to around four months of spending.
• Put the rest of your money to work, and “don’t leave it sitting in a bank account earning virtually zero for year after year after year”. Greg believes this is for most investors “the most behaviourally costly” mistake of all.
• Diversify “because any one thing you invest in can go to zero forever, but if you’re well diversified, that should not happen”.
• Leave your investment alone.The challenge in applying these rules is that each is emotionally difficult to carry out, even though not following them can prove very costly”.

You can see on point 3 they believe in diversity. Is anyone right, or wrong?

[Deleted User]

The first two bullets are not for retirees.  Which is Boston’s point: they are sending you irrelevant and generic material. 

Diversification is important, yes. But it has nothing to do with the number of funds. By having a bunch of concentrated funds you are reducing diversification. Something like VLS 60 is far more diversified than your whole portfolio. 

bostonerimus

GSP said:

bostonerimus said:

GSP said:

bostonerimus said:

Deleted_User said:

To respond to the question raised by JohnWinder on having both VLS20 and a UK mid cap fund: VLS20 is 20% equity of which about 25% is UK. MidCap I guess would be 20% of that which gives a total of 1%. So no, holding VLS20 dies not make the holding of a UK midcap fund unnecessary if you want to have a non trivial allocation.

Yes, but the 20% VLS that is in stocks overlaps with all the other puny funds in this portfolio.  Why bother with VLS? Just get a bond fund and increase your stock funds a bit. Looks like someone is a little bipolar and can’t decide which strategy to use. 

There are other puzzling choices in this mess.  For example, why have 2 European funds (3% each!)? This is someone going for complexity purely for the sake of complexity.  I would be stunned if having a single European fund with 6% allocation resulted in a meaningfully different performance. He is chasing performance in the active Blackrock fund while hedging his bets with a passive HSBC one.  Except that chasing performance does not work, and in any case 3% allocation isn’t meaningful. But this is detail.  

There's some algorithm at work here that is trying to optimize some ultimately meaningless parameter and when someone turns the handle this portfolio drops out. It's a case of analysis and modeling getting out into the wild and being used by marketing people and advisors to sell services with unnecessary complication. I get back to my question about how this portfolio is designed for retirement income drawdown to meet the client's actual requirements...it looks like not at all to me.

As far as I know I’m invested in my advisor’s recommended funds which hopefully will make enough returns as whole to get me through until we die. And as for cash, it’s going that at each review my anticipated drawdown level is made for the following year, with everything rebalanced at this time.

Comparing my existing funds and the recommended funds I posted earlier today, apart from reading posts suggesting these are just too many funds, are these quite similar overall that anyone can tell?

Thanks

It sounds as if your advisor isn't doing much, if anything, specifically for you and rebalancing 16 funds and/or buying some and selling others is an exercise in futility IMO. I don't think you are getting anything of value out of this relationship...you have a risky, complicated, overlapping and expensive portfolio. I have set myself up for drawdown by keeping a couple of years worth of cash in the bank, partial annuitization, and then basically 3 investment funds; a multi-asset income fund with high quality bonds and dividend stocks that produces a yield of 3% /year and a domestic and an international equity index fund for long term growth.

Just interested how your funds have performed over the last year? Sorry, when you mean “a yield of 3%/ year”, that doesn’t mean growth p.a., or does it?
I’d be interested in 3% growth as the planner I have created sees us through with that rate, if it’s guaranteed.

Last month my advisor sent an email to all clients which read:
“Recently I read an article from Aviva which recounted their discussions with Greg Davies, an expert in investor psychology – with a Ph.D. in behavioural finance – at the behavioural fintech Oxford Risk. I thought it worth sharing the main part of it with you as it helps explain the emotional aspects of investing and why it is better to sit tight, even when it feels painful to do so:

“…….We asked Greg how investors should manage their emotions to ensure they successfully navigate markets, particularly during periods of volatility.

Greg believes investors should follow four basic rules, which are simple but can be difficult to follow:

• Create a safety net, an emergency buffer of savings, equal to around four months of spending.
• Put the rest of your money to work, and “don’t leave it sitting in a bank account earning virtually zero for year after year after year”. Greg believes this is for most investors “the most behaviourally costly” mistake of all.
• Diversify “because any one thing you invest in can go to zero forever, but if you’re well diversified, that should not happen”.
• Leave your investment alone.The challenge in applying these rules is that each is emotionally difficult to carry out, even though not following them can prove very costly”.

You can see on point 3 they believe in diversity. Is anyone right, or wrong?

Over the last year my funds are down 17% and the 3%/year yield I mentioned is the dividend that the multi-asset fund pays, my equity index funds also pay 2% in dividends each year. Has your advisor mentioned using some income versions of funds to give you some regular payouts? The thing is I'm not at all concerned about the drop because of my annuity income.

I also believe in diversity and my 3 funds give me the diversity I want...in retirement I am not overweighting risky things like Emerging Markets I just essentially buying the world stock markets. Your portfolio funds have a lot of overlap so having a lot of them isn't making the portfolio more diverse. Also a generic article about holding tight right now isn't specifically helping you with your drawdown strategy which is what IFA's should be doing right now.

[Deleted User]

bostonerimus said:

GSP said:

bostonerimus said:

GSP said:

bostonerimus said:

Deleted_User said:

To respond to the question raised by JohnWinder on having both VLS20 and a UK mid cap fund: VLS20 is 20% equity of which about 25% is UK. MidCap I guess would be 20% of that which gives a total of 1%. So no, holding VLS20 dies not make the holding of a UK midcap fund unnecessary if you want to have a non trivial allocation.

Yes, but the 20% VLS that is in stocks overlaps with all the other puny funds in this portfolio.  Why bother with VLS? Just get a bond fund and increase your stock funds a bit. Looks like someone is a little bipolar and can’t decide which strategy to use. 

There are other puzzling choices in this mess.  For example, why have 2 European funds (3% each!)? This is someone going for complexity purely for the sake of complexity.  I would be stunned if having a single European fund with 6% allocation resulted in a meaningfully different performance. He is chasing performance in the active Blackrock fund while hedging his bets with a passive HSBC one.  Except that chasing performance does not work, and in any case 3% allocation isn’t meaningful. But this is detail.  

There's some algorithm at work here that is trying to optimize some ultimately meaningless parameter and when someone turns the handle this portfolio drops out. It's a case of analysis and modeling getting out into the wild and being used by marketing people and advisors to sell services with unnecessary complication. I get back to my question about how this portfolio is designed for retirement income drawdown to meet the client's actual requirements...it looks like not at all to me.

As far as I know I’m invested in my advisor’s recommended funds which hopefully will make enough returns as whole to get me through until we die. And as for cash, it’s going that at each review my anticipated drawdown level is made for the following year, with everything rebalanced at this time.

Comparing my existing funds and the recommended funds I posted earlier today, apart from reading posts suggesting these are just too many funds, are these quite similar overall that anyone can tell?

Thanks

It sounds as if your advisor isn't doing much, if anything, specifically for you and rebalancing 16 funds and/or buying some and selling others is an exercise in futility IMO. I don't think you are getting anything of value out of this relationship...you have a risky, complicated, overlapping and expensive portfolio. I have set myself up for drawdown by keeping a couple of years worth of cash in the bank, partial annuitization, and then basically 3 investment funds; a multi-asset income fund with high quality bonds and dividend stocks that produces a yield of 3% /year and a domestic and an international equity index fund for long term growth.

Just interested how your funds have performed over the last year? Sorry, when you mean “a yield of 3%/ year”, that doesn’t mean growth p.a., or does it?
I’d be interested in 3% growth as the planner I have created sees us through with that rate, if it’s guaranteed.

Last month my advisor sent an email to all clients which read:
“Recently I read an article from Aviva which recounted their discussions with Greg Davies, an expert in investor psychology – with a Ph.D. in behavioural finance – at the behavioural fintech Oxford Risk. I thought it worth sharing the main part of it with you as it helps explain the emotional aspects of investing and why it is better to sit tight, even when it feels painful to do so:

“…….We asked Greg how investors should manage their emotions to ensure they successfully navigate markets, particularly during periods of volatility.

Greg believes investors should follow four basic rules, which are simple but can be difficult to follow:

• Create a safety net, an emergency buffer of savings, equal to around four months of spending.
• Put the rest of your money to work, and “don’t leave it sitting in a bank account earning virtually zero for year after year after year”. Greg believes this is for most investors “the most behaviourally costly” mistake of all.
• Diversify “because any one thing you invest in can go to zero forever, but if you’re well diversified, that should not happen”.
• Leave your investment alone.The challenge in applying these rules is that each is emotionally difficult to carry out, even though not following them can prove very costly”.

You can see on point 3 they believe in diversity. Is anyone right, or wrong?

Over the last year my funds are down 17% and the 3%/year yield I mentioned is the dividend that the multi-asset fund pays, my equity index funds also pay 2% in dividends each year. Has your advisor mentioned using some income versions of funds to give you some regular payouts? The thing is I'm not at all concerned about the drop because of my annuity income.

I also believe in diversity and my 3 funds give me the diversity I want...in retirement I am not overweighting risky things like Emerging Markets I just essentially buying the world stock markets. Your portfolio funds have a lot of overlap so having a lot of them isn't making the portfolio more diverse. Also a generic article about holding tight right now isn't specifically helping you with your drawdown strategy which is what IFA's should be doing right now.

You should mention that you are counting in USD and in GBP you are breaking even (GBP dropped 17% year to date).

Personally, I find “income version of funds” unnecessary  unless transaction costs are high so it costs to sell units. 

Linton

Using Morningstar X-ray on the original portfolio excluding cash and  Aviva deposit fund..

overall asset allocation
71% equity
29% bonds and other non equity

sector allocation: normal

country allocation as a % of all equity
Asia 39% 
Americas 30%
Europe 30%

1year performance  -19%

So the performance is not quite as bad as suggested but still poor. The 3 worst 1year fund performances:
Baillie Gifford American -50%
Jupiter uk mid cap -41%
Baillie Gifford China -39%

So although the country allocation is very unusual, bizarrely so one may think, the main culprit appears to be the use of high risk funds. Chasing returns? Not what one would want in a retirement portfolio.

NannaH

Yield is the income you get from dividends on income funds.
So you could have 3% yield plus X% growth.
Inc. funds are useful for building or  topping up your cash buffer and/or providing income. 

I have a couple of Inc. funds that will hopefully build me a cash buffer of approx £20k over the next 8 years.  Any growth is a bonus, My other 2 funds are accumulation funds for future long term growth.  

bostonerimus

Deleted_User said:

bostonerimus said:

GSP said:

bostonerimus said:

GSP said:

bostonerimus said:

Deleted_User said:

To respond to the question raised by JohnWinder on having both VLS20 and a UK mid cap fund: VLS20 is 20% equity of which about 25% is UK. MidCap I guess would be 20% of that which gives a total of 1%. So no, holding VLS20 dies not make the holding of a UK midcap fund unnecessary if you want to have a non trivial allocation.

Yes, but the 20% VLS that is in stocks overlaps with all the other puny funds in this portfolio.  Why bother with VLS? Just get a bond fund and increase your stock funds a bit. Looks like someone is a little bipolar and can’t decide which strategy to use. 

There are other puzzling choices in this mess.  For example, why have 2 European funds (3% each!)? This is someone going for complexity purely for the sake of complexity.  I would be stunned if having a single European fund with 6% allocation resulted in a meaningfully different performance. He is chasing performance in the active Blackrock fund while hedging his bets with a passive HSBC one.  Except that chasing performance does not work, and in any case 3% allocation isn’t meaningful. But this is detail.  

There's some algorithm at work here that is trying to optimize some ultimately meaningless parameter and when someone turns the handle this portfolio drops out. It's a case of analysis and modeling getting out into the wild and being used by marketing people and advisors to sell services with unnecessary complication. I get back to my question about how this portfolio is designed for retirement income drawdown to meet the client's actual requirements...it looks like not at all to me.

As far as I know I’m invested in my advisor’s recommended funds which hopefully will make enough returns as whole to get me through until we die. And as for cash, it’s going that at each review my anticipated drawdown level is made for the following year, with everything rebalanced at this time.

Comparing my existing funds and the recommended funds I posted earlier today, apart from reading posts suggesting these are just too many funds, are these quite similar overall that anyone can tell?

Thanks

It sounds as if your advisor isn't doing much, if anything, specifically for you and rebalancing 16 funds and/or buying some and selling others is an exercise in futility IMO. I don't think you are getting anything of value out of this relationship...you have a risky, complicated, overlapping and expensive portfolio. I have set myself up for drawdown by keeping a couple of years worth of cash in the bank, partial annuitization, and then basically 3 investment funds; a multi-asset income fund with high quality bonds and dividend stocks that produces a yield of 3% /year and a domestic and an international equity index fund for long term growth.

Just interested how your funds have performed over the last year? Sorry, when you mean “a yield of 3%/ year”, that doesn’t mean growth p.a., or does it?
I’d be interested in 3% growth as the planner I have created sees us through with that rate, if it’s guaranteed.

Last month my advisor sent an email to all clients which read:
“Recently I read an article from Aviva which recounted their discussions with Greg Davies, an expert in investor psychology – with a Ph.D. in behavioural finance – at the behavioural fintech Oxford Risk. I thought it worth sharing the main part of it with you as it helps explain the emotional aspects of investing and why it is better to sit tight, even when it feels painful to do so:

“…….We asked Greg how investors should manage their emotions to ensure they successfully navigate markets, particularly during periods of volatility.

Greg believes investors should follow four basic rules, which are simple but can be difficult to follow:

• Create a safety net, an emergency buffer of savings, equal to around four months of spending.
• Put the rest of your money to work, and “don’t leave it sitting in a bank account earning virtually zero for year after year after year”. Greg believes this is for most investors “the most behaviourally costly” mistake of all.
• Diversify “because any one thing you invest in can go to zero forever, but if you’re well diversified, that should not happen”.
• Leave your investment alone.The challenge in applying these rules is that each is emotionally difficult to carry out, even though not following them can prove very costly”.

You can see on point 3 they believe in diversity. Is anyone right, or wrong?

Over the last year my funds are down 17% and the 3%/year yield I mentioned is the dividend that the multi-asset fund pays, my equity index funds also pay 2% in dividends each year. Has your advisor mentioned using some income versions of funds to give you some regular payouts? The thing is I'm not at all concerned about the drop because of my annuity income.

I also believe in diversity and my 3 funds give me the diversity I want...in retirement I am not overweighting risky things like Emerging Markets I just essentially buying the world stock markets. Your portfolio funds have a lot of overlap so having a lot of them isn't making the portfolio more diverse. Also a generic article about holding tight right now isn't specifically helping you with your drawdown strategy which is what IFA's should be doing right now.

You should mention that you are counting in USD and in GBP you are breaking even (GBP dropped 17% year to date).

Personally, I find “income version of funds” unnecessary  unless transaction costs are high so it costs to sell units. 

Well for me I'm down 17% because I bought in dollars and I'll sell in dollars. If I move back to the UK I'll certainly be happy to sell at $1.13 / pound rather than $1.30 or $1.40...

I think income versions of funds help UK retirees to automatically manage their drawdown. They are not really necessary, but some might like their "set it and forget it" nature and a portfolio that is less focused on growth and is thinking a bit more about dividends and capital preservation might be more appropriate for the OP. Using an annuity is another approach that is looking viable right now. I don't see anything that the OP's IFA has done to address retirement income strategies. What the OP has is a risky portfolio with a significant tilt towards Asia, I might be persuaded that that's ok for a young investor (although probably not), but not for a retiree. I actually don't think the IFA is doing anything at all.