Have passive funds had their day?

dealyboy

I read with sadness Monevator's review of performance of its 'Slow and Steady' passive portfolio https://monevator.com/the-slow-and-steady-passive-portfolio-update-q4-2022/, the tone was quite sombre; they, like us, give good, honest and sensible information and guidance.

I detected some pessimism. What do MSEs think?

Of course there are many ways to skin a cat (not mine ... sorry what a horrible expression), passive funds and vehicles vary considerably. I would include in the consideration the major global indexes, multi-asset funds and even the actively managed risk funds. Is it time to think outside the box? a new paradigm for a different world?

Alistair31

It’s a bad day, not a bad life. 

ChesterDog

I hope not.

I'm around 60٪ in VWRP.

Plus another 10 each in IHCU and INRG.

Pretty sure that will be fine.

dealyboy

My skin is HSBC Global Strategy, an even mix of Dynamic and Balanced, with a 7-year outlook. I'm sticking but should I twist?

Linton

I think it is a mistake to consider passive and active funds as fundamentally different.  My approach is: Any fund invests in underlying assets in line with its remit.  Any fund has charges. Any fund has a performance history. So some of the key questions in priority order are
 - Is the fund compatible with your strategy for achieving your objectives?
 - Is the fund necessary: do the underlying investments fill gaps in your overall portfolio?
 - Does the the performance in different economic conditions indicate anything that requires further investigation?.
 - lastly whether the charges are appropriate.

Active or passive does not appear on the list.

mark_cycling00

The "slow and steady" has a 25% allocation to gov bonds, 10% bonds, 10% emerging markets and hardly any UK.

So it could be this allocation that has been the problem rather than the funds themselves.

VWRP would have beaten his portfolio by 40% although still returning a loss for the year

Linton

dealyboy said:

My skin is HSBC Global Strategy, an even mix of Dynamic and Balanced, with a 7-year outlook. I'm sticking but should I twist?

In principle that looks like a sensible portfolio.  In my view current conditions are irrelevent if you invest so broadly. Any change could well be for the worse.  However one could question whether it is too high a risk with such a short duration.  Is the 7 year timescale seriously important?

dunstonh

dealyboy said:

My skin is HSBC Global Strategy, an even mix of Dynamic and Balanced, with a 7-year outlook. I'm sticking but should I twist?

Why would you change it?

The article is about a portfolio of passive funds with management decisions and, if I speed read it correctly, a lazy portfolio.

The performance of that  portfolio is down to the asset mix and not the fact it is passive.   Its heavier in EM than most people would have,  it has property share which most dont bother with nowadays, index linked gilts, again, not used much, and gilts, which most will have - all areas that have not been having a good period and is light in UK equity, which was the best area.   In other words, the management decisions on this portfolio didnt pay off in 2022.   In another year it could be that those are the best areas.  They just happened to not be in 2022.

bd10

Have passive funds had their day? Not at all. They offer what it says on the tin by and large, cheap and effective exposure to the underlying.

The real question is not so much passive vs. active but rather more high level asset allocation: What % bonds, if any, what % equities, what about corporate bonds, commodities, precious metals etc etc? What's the outlook for growth, inflation/monetary policy? Not all asset classes fare equally well in all cycles and personally, I do not use the past decade for any guidance for the next 5+ years, all started Jan '22, totally different macro-setup since then.

Trackers/ETF/ETC can then be used to implement the allocation efficiently. That would be my starting point: overall outlook, then asset allocation, then implementation with cheap trackers if available or a low cost active fund as back-up.

Reg_Smeeton

I’ve been following the Slow and Steady series for a few years, I didn’t think there was any real pessimism in the post, beyond that 2022 was a poor year, as you’d expect from time to time. 

The other posts above re: asset mix, management decisions etc are all perfectly fine debates, but I still think the overarching theme of the Slow and Steady portfolio was and continues to be the timeless advice such as invest regularly, keep costs low, avoid chopping and changing etc

Nebulous2

I've been putting modest sums from my part-time earnings in a SIPP for about 16 months now. I left it in cash until June when I bought some VWRP at around the June bottom. Since then I've made several more purchases when the price has dropped. I've no huge enthusiasm, or expectations in the short-term, but at todays price I'm several hundred pounds ahead. 

I'd just drip it in every month, but somewhat frustratingly Fidelity doesn't allow a monthly purchase from cash held, only from new contributions. 

After getting burned with active funds, one in particular, I've decided passive is better suited to my knowledge level / experience.