Annual Review - Rebalancing and Changes to Investments Concerns

GSP

Deleted_User said:

One can certainly take lots of views but when looking at a 13 fund “conservative” portfolio which sinks like a stone and requires wholesale changing, a reasonable view would be “I am dealing with BS artist”.  Its not OK.  Someone’s retirement is at stake; and its not the advisors.   International and asset diversification can be easily achieved with a single cost-efficient fund from one of 3-4 highly reputable providers. The type of allocation which avoided nose bleeding losses in 2000, 2008, 2020 and 2022. And recovers quickly.   And one can stick with it rather than change annually. The future is uncertain but financial salesman’s BS is clear. 

It seems the general consensus on here at least seems to be why 13 funds instead of 3. For my untrained eye it certainly seems confusing seeing all the names currently attached alongside each investment.
As JohnWinder, what would these 3 funds be and what % in equities, bonds etc.
This is something I will raise with my advisor. To what answer I may get?
Thanks

dunstonh

It seems the general consensus on here at least seems to be why 13 funds instead of 3.

That is certainly not the consensus.

GSP

dunstonh said:

It seems the general consensus on here at least seems to be why 13 funds instead of 3.

That is certainly not the consensus.

Do you know why people choose between 3 funds and 10 funds plus and what are the advantages of having a more diversified portfolio if the outcome will not be too dissimilar, if that’s true!

dunstonh

GSP said:

dunstonh said:

It seems the general consensus on here at least seems to be why 13 funds instead of 3.

That is certainly not the consensus.

Do you know why people choose between 3 funds and 10 funds plus and what are the advantages of having a more diversified portfolio if the outcome will not be too dissimilar, if that’s true!

Some people have different opinions and investing is about opinion.    Some people may want a global tracker if they are 100% equity and go with a broad GDP match.  others may want underlying passives but want different weightings to each country.    That may require a fund for each region/country.  Then if you factor in fixed interest securities, you have different types of bonds.  

[Deleted User]

GSP said:

Deleted_User said:

One can certainly take lots of views but when looking at a 13 fund “conservative” portfolio which sinks like a stone and requires wholesale changing, a reasonable view would be “I am dealing with BS artist”.  Its not OK.  Someone’s retirement is at stake; and its not the advisors.   International and asset diversification can be easily achieved with a single cost-efficient fund from one of 3-4 highly reputable providers. The type of allocation which avoided nose bleeding losses in 2000, 2008, 2020 and 2022. And recovers quickly.   And one can stick with it rather than change annually. The future is uncertain but financial salesman’s BS is clear. 

It seems the general consensus on here at least seems to be why 13 funds instead of 3. For my untrained eye it certainly seems confusing seeing all the names currently attached alongside each investment.
As JohnWinder, what would these 3 funds be and what % in equities, bonds etc.
This is something I will raise with my advisor. To what answer I may get?
Thanks

What you find is that intermediaries who make money on complexity do like it.  For most other people who researched pros and cons, simple is beautiful and adds a lot of value in itself.  But harder to explain high fees for “simple”. 

I do think you need to invest a little time and a few quid in reading up so that you understand what you are putting money into.  Just following advice will always cause doubts and questions.  Having said all this, VLS 60 or similar funds from the likes of HSBC, Blackrock or Fidelity provide all the diversification one needs in a single cost-efficient wrapper. And are based on solid research by the very best financial experts in the world. 

GSP

dunstonh said:

GSP said:

dunstonh said:

It seems the general consensus on here at least seems to be why 13 funds instead of 3.

That is certainly not the consensus.

Do you know why people choose between 3 funds and 10 funds plus and what are the advantages of having a more diversified portfolio if the outcome will not be too dissimilar, if that’s true!

Some people have different opinions and investing is about opinion.    Some people may want a global tracker if they are 100% equity and go with a broad GDP match.  others may want underlying passives but want different weightings to each country.    That may require a fund for each region/country.  Then if you factor in fixed interest securities, you have different types of bonds.  

Still trawling through and trying to digest the information.
My advisor states:
” Investing in a single or limited range of asset classes or sectors may lead to greater volatility and therefore carry a greater investment risk”.

[Deleted User]

GSP said:

dunstonh said:

GSP said:

dunstonh said:

It seems the general consensus on here at least seems to be why 13 funds instead of 3.

That is certainly not the consensus.

Do you know why people choose between 3 funds and 10 funds plus and what are the advantages of having a more diversified portfolio if the outcome will not be too dissimilar, if that’s true!

Some people have different opinions and investing is about opinion.    Some people may want a global tracker if they are 100% equity and go with a broad GDP match.  others may want underlying passives but want different weightings to each country.    That may require a fund for each region/country.  Then if you factor in fixed interest securities, you have different types of bonds.  

Still trawling through and trying to digest the information.
My advisor states:
” Investing in a single or limited range of asset classes or sectors may lead to greater volatility and therefore carry a greater investment risk”.

More motherhood statements.  Its all true and there are simple products on the market that do all this diversification for you. 

Linton

Deleted_User said:

GSP said:

dunstonh said:

GSP said:

dunstonh said:

It seems the general consensus on here at least seems to be why 13 funds instead of 3.

That is certainly not the consensus.

Do you know why people choose between 3 funds and 10 funds plus and what are the advantages of having a more diversified portfolio if the outcome will not be too dissimilar, if that’s true!

Some people have different opinions and investing is about opinion.    Some people may want a global tracker if they are 100% equity and go with a broad GDP match.  others may want underlying passives but want different weightings to each country.    That may require a fund for each region/country.  Then if you factor in fixed interest securities, you have different types of bonds.  

Still trawling through and trying to digest the information.
My advisor states:
” Investing in a single or limited range of asset classes or sectors may lead to greater volatility and therefore carry a greater investment risk”.

More motherhood statements.  Its all true and there are simple products on the market that do all this diversification for you. 

Simple? Why does Vanguard Life Strategy 60 which invests in funds rather than directly in low level investments need to hold about 17 .  Wouldn't a single equity global tracker and a single global bond fund do the job at least as well?

GSP said:

dunstonh said:

It seems the general consensus on here at least seems to be why 13 funds instead of 3.

That is certainly not the consensus.

Do you know why people choose between 3 funds and 10 funds plus and what are the advantages of having a more diversified portfolio if the outcome will not be too dissimilar, if that’s true!

Answering @GSPs question, one needs to hold a moderate number of separate funds if one wants allocations not available with "simple" funds.  This may be desirable in particular if one's aim is something other than maximum long term growth.  In retirement your desire to obtain a stable inflation-matching income sufficient to meet your needs may be more important than maximisimg wealth at death.

 As we have seen recently relying on a bond allocation with underlying investments with times to maturity of decades can cause concerns.  More sophisticated management of non equity investments should be beneficial. A single fund is unlikely to provide this

On the equity side you may wish for a higher allocation in safer investments, possibly with significant income generation, than is given by an index fund.  Global alcohol or soap manufacturers or other defensive or value stocks may be more appropriate than morf Teslas.  And then there is the question of typically > 60% US equity with its high concentration on the tech giants. 

Coming back to the question of the number of funds, I would say one needs sufficient funds to meet one's objectives and implement one's strategy but no more.  If one wants to have a lower US% than in a global index one needs separate funds for each geography.   You can buy tech funds, getting extra non-tech investments is more difficult possible requiring at least one more fund.  The number of funds in the OPs portfolio is not unreasonable for a portfolio contructed in this way.

 Not having seen them I have no idea whether the OPs investments  actually satisfy my requirements for a retirement portfolio.

[Deleted User]

Simple? Why does Vanguard Life Strategy 60 which invests in funds rather than directly in low level investments need to hold about 17 .  Wouldn't a single equity global tracker and a single global bond fund do the job at least as well?

This is a long and detailed discussion and I feel its a red herring + unhelpful to the OP. There are arguments for and against VLS60 vs 2 tracker funds.  But its splitting hair.  Either solution is very simple from users point of view and both solutions are well diversified, cost efficient and solid. From the management point of view VLS does rebalancing for you while 2 trackers require a little bit of very simple management.  But there is always temptation to not rebalance when an asset class is down.

Answering @GSPs question, one needs to hold a moderate number of separate funds if one wants allocations not available with "simple" funds.  This may be desirable in particular if one's aim is something other than maximum long term growth.  

Really? Isn’t it the exact opposite? People start messing by getting niche “growth”, “Momentum” or “Emerging Markets” funds to try and squeeze beta (a little more return).  Invariably they do it by taking on extra risk. 

As we have seen recently relying on a bond allocation with underlying investments with times to maturity of decades can cause concerns.  More sophisticated management of non equity investments should be beneficial. A single fund is unlikely to provide this

Perhaps. And I have messed with fixed income allocation over the last couple of years too.  But holding internationally diversified bond tracker would have worked out ok for UK investors. Plus a cash buffer. 

Coming back to the question of the number of funds, I would say one needs sufficient funds to meet one's objectives and implement one's strategy but no more.  

Having 1 fund has significant advantages over a similarly diversified portfolio of stocks and bonds of multiple funds. Management simplicity, protection against psychological needs “to mess”, protection from investing errors and bad judgement  and the ability for a spouse to easily take over the management are all highly valuable. And, of course, no need for a costly intermediary.  

GSP

Linton said:

Deleted_User said:

Answering @GSPs question, one needs to hold a moderate number of separate funds if one wants allocations not available with "simple" funds.  This may be desirable in particular if one's aim is something other than maximum long term growth.  In retirement your desire to obtain a stable inflation-matching income sufficient to meet your needs may be more important than maximisimg wealth at death.

This is true in that I am not looking to maximise wealth, but decrease my fund over time where little growth partly offsets expenditure.

Eleven months ago I enjoyed seeing the fund grow to levels higher than when I started despite all the withdrawals, but in hindsight maybe some profit taking into cash should have happened then as it was all too good to be true.

I would have been quite happy with a modest 3% growth annually, which would have offset my expenditure to a large extent.

I wonder with nearly 70% equities, there is too much volatility in there?