Fund performance with Financial Advisor only gained 5.74% in five and a half years.

Bostonerimus1

cleverdic said:

masonic said:

cleverdic said:

Mothman said:

It amazes me why someone would start a thread then refuse to provide the required information to enable people to answer their question.  They are asking for people to critique the return they gave experienced but then say they don't want to list the funds in case people critique the IFA's choices, yet the two things are inextricably linked. As the old saying goes 'You can lead a horse to water but you can't make them drink'.

Because as I have stated, it is an active fund. Only 6 of the 18 assets within the fund today were held at the beginning of 2018. I'm not going to publish the history of what was bought or sold over the last 5.5 years.

Knowing that the portfolio has substantially changed is a useful caveat, but knowledge the current portfolio composition is still essential if you want opinions about its appropriateness, or whether it should be changed.

cleverdic said:

I've now stated this a number of times, I'm seeking to get a sense of what would be expected from a medium growth with risk fund for my own personal circumstances. I think most people commenting on this thread understand what I am trying to evaluate here.

Would you be more comfortable sharing detailed information about your personal circumstances? Preferably the same information you shared with your adviser 5 years ago, and anything you let them know changed over those intervening years. It would be terribly unfair to berate an adviser for putting you into a portfolio based on information you disclosed that we don't know about.

Once again, "medium growth with risk fund" could mean anything to anyone. It's like saying you live in a nice house, asking us if the valuation you've obtained is fair, but telling us neither where in the country you are located or any detailed information about the house.

I hope I have not come across as someone trying to berate my IFA. It's probably for that reason I am reluctant, nay unwilling to disclose the investment. It could be a bloodbath or otherwise so that is another reason I don't wish to disclose. So many people have picked up on my terminology and how I am describing my investment. Well it's just proof that I am out of my depth when discussing this subject and thus seeking friendly opinions.
   
I have already outlined my personal circumstance but happy to repeat.
Back in 2018, I was approaching retirement. I wanted to invest £100K representing around 20% of a balanced cash/property/investment portfolio. I did not have any future plans or needs for this money, for example to provide an annuity, except for it to hopefully attract a better rate of return than a savings account. I was very happy to accept an investment which I believe would offer a medium growth (my words. I've also seen the word "balanced" used to describe the investment), I was not looking to provide income, or a low return very safe or conversely potentially high return but high risk. I was happy to accept risk in order to achieve the growth. I was not looking for the fast buck and I was fully prepared to take a loss which indeed happened in March 2020 when lockdown began.

Now fully retired and 5.5 years later and after seeing at first hand the affects of Covid and other UK and world events and how it has significantly affected the investment at any given time, I see my investment is now 5.74% higher than when I first started. (I did take out £10K around 2 years ago). I am assuming these UK and world events would affect any similar investment. My own personal circumstances have not materially changed during that period. The balance of my portfolio remains roughly the same. Does 5.74% represent a fair return or should I be investigating an alternative? 

Throughout this thread, I have tried to refine my original question as I received more input. I have seen one liners express a simple message. I have seen fascinating discussions on investing in general, way over my head, and I have also come across folk that are desperate to open the bonnet, get their magnifying glass out and scrutinise the engine in minute detail. That is a fair point but I'm keeping the bonnet closed. I'm not asking for any opinion at all on how the investment is shaped and whether changing the makeup, no of funds or type of funds could offer more. I can see though that this is exercising quite a few folk here.

I can however, categorically state that the investment has yielded 5.74% in 5.5 years. I'll also add that I see the percentage change daily and if I look at the performance over the last 30 days, I see a high of 6.32% and a low of 3.47%. I just want to know if I should start thinking about alternatives based on the return I'm seeing against the expectation I laid out back in 2018. I have to say though that I am already forming my own opinion on what to do based on people here willing to make the contribution, whether I like it or not. I do appreciate all input.

If you are in mostly long term bonds then 5% gain from 5 years might be a good return, but you say something about "medium growth" and that implies an equity component and that should probably have done far better than 5% over 5 years. So you see that without knowing your funds or even asset allocation people simply cannot answer your question. I will say that actively trading in 18 funds sounds inappropriate for someone approaching retirement whether done personally or by an advisor. I would be very disappointed by your results and here is why...I have a portfolio that's 85% equities and 15% bonds that has returned 8% a year on average since 2018. Now someone can actually have a stab at seeing if that's a sensible return for that very undetailed description of my portfolio. The answer is yes. There's no definition of "medium risk"  in terms of asset allocation so people can't answer your question. 

Simply put your advisor might be a genius or a complete fool.

masonic

I think the main issue is that it is not a return that marries up with a medium risk portfolio as understood by most in this forum, but it could be a reasonable return for a different kind of portfolio. 

To pick some examples, M&G Optimal Income, a well regarded actively managed tactical bond fund, returned 6.7% over 5 years after charges of 0.63% per year were deducted. The underlying performance is remarkably similar. The multi-asset fund L&G Multi Index 3 returned 5.4% over 5 years after charges of 0.31% per year were deducted. Both fell in excess of 10% in early March 2020. That's two examples of well regarded funds with similar Covid volatility that have generated similar returns to your investments. 

I therefore think it is likely that your adviser, having performed a thorough exploration of your appetite to risk, deemed you to be a lower risk investor than you present yourself in this thread. I'd be inclined to defer to your adviser's opinion on this matter, as they would know you far better than anyone here could. As such, it may be unwise for you to be seduced by higher risk - higher return investments.

The second supposition I'd venture is that your portfolio is bond-heavy, which can be appropriate for a medium-low risk investor. Unfortunately you've been invested through the worst period for bond investments in living memory, and have paid the price through past returns. However, with interest rates having risen from near-zero levels to what seems to be approaching their peak, bond prices have largely stabilised and the future returns are now considerably higher than they were just a year ago. Over the long term, this could mean higher returns than if the bond crash hadn't happened, and as an asset class they are much more attractive as an investment than they once were.

The dilemma you have is that you by your own admission don't know enough to evaluate your investments and decide which alternative options might be appropriate/equivalent to what you currently hold, so you will need to pay someone else for advice if you are to make a change. Most of the negative comments have been around the cost of advice being a drag on your returns, or that it didn't do you much good. But you don't seem to be expressing a desire to start taking responsibility for your own investing, so starting again with a different adviser may not bring the ongoing costs down significantly, and could result in more up front costs to be paid.

Ultimately, I think you need to be prepared for 5 year periods where your investment returns are low, possibly even dipping into negative territory, and need to accept that financial advice will be a drag on returns but is necessary for some people.

On the basis of the information you've provided, I think your investment performance is explicable and while it never hurts to explore alternatives, the recent return is an indication only that the universe has been a little unfair to you, like countless other investors whose timing was unlucky.

Cus

I think 5.74% for 5.5 years on a balanced or medium risk is slightly disappointing. 
Unless this IFA performs other functions and services for you, you might as well remove the funds and place them in a simple multi asset medium risk fund of funds product.

Linton

Cus said:

I think 5.74% for 5.5 years on a balanced or medium risk is slightly disappointing. 
Unless this IFA performs other functions and services for you, you might as well remove the funds and place them in a simple multi asset medium risk fund of funds product.

The problem is that "medium risk" for an experienced investor may be very different to that for someone with no knowledge. For example Trustnet shows that the average fund in the Mixed Investment 20%-60% sector, ie 20%-60% equity, fell nearly 25% in the 2008 crash.  I would consider that medium risk,. but I suspect the OP would not and would have complained about that level of loss.

Over the past 5.5 years the average fund in the 20%-60% sector returned about 10%.VLS40 managed about 13%

The average fund in the next sector down (0%-35%) returned about 2%.  Very close to VLS20

Cus

Linton said:

Cus said:

I think 5.74% for 5.5 years on a balanced or medium risk is slightly disappointing. 
Unless this IFA performs other functions and services for you, you might as well remove the funds and place them in a simple multi asset medium risk fund of funds product.

The problem is that "medium risk" for an experienced investor may be very different to that for someone with no knowledge. For example Trustnet shows that the average fund in the Mixed Investment 20%-60% sector, ie 20%-60% equity, fell nearly 25% in the 2008 crash.  I would consider that medium risk,. but I suspect the OP would not and would have complained about that level of loss.

Over the past 5.5 years the average fund in the 20%-60% sector returned about 10%.VLS40 managed about 13%

The average fund in the next sector down (0%-35%) returned about 2%.  Very close to VLS20

Yes it's guesswork but based on the OP's comments I guessed that the 20-60% sector was kind of where he would ultimately want to be based on words like accepting a loss, medium growth, no annuity.  Hence my opinion that the return is slightly disappointing.