Going it alone....right thing to do?

dunstonh

That does seem to be the case. What is the closest thing a private investor can get to a DFM service?

An IFA on advisory basis or a multi-asset fund.

 My question here is what therefore is the advantage of a portfolio of single sector funds over multi-asset?

Lower charges and difference in opinions.

Bostonerimus1

JohnWinder said:

‘My question here is what therefore is the advantage of a portfolio of single sector funds over multi-asset? ‘

Thirdly, with several funds you can withdraw from the ones that haven’t recently crashed without reducing your holding in the ones that crashed, at such a bad time. But with a multi asset fund you withdraw from every sector, although remember, while those sectors have been crashing the fund managers have been rebalancing every day or so by selling the sectors not crashing and buying into the crashed ones. So when you come to sell, some of the crashed parts you’re selling are actually from the sectors that didn’t crash.

Yes, holding different asset classes in separate funds is useful for certain drawdown strategies, at least psychologically - maybe there have been studies about how they improve pot survivability for various drawdown methods, but I can't remember the exact results. The OP has DB and SP to cover the basics so that gives some flexibility in drawdown timing and amounts and allows the OP to take more risk than many retirees and emphasize equities in their portfolio. Because of the income from DB and SP something like a single multi-asset fund like VLS80 would be a simple and viable solution, or a 3 or 4 index fund "couch-potato" portfolio similar to mine would also be just fine.

Linton

Sanxxx said:

Thanks for the replies, my responses as follows;

.........
@Linton Fair questions. I've been retired nearly two years and been largely living off 'unwrapped' investments/savings to avoid dipping into the pot given the turbulent times. I anticipate needing to dip into the point in c9 months time. I'm building a larger cash reserve to cater for sizable troughs in a 80-100 equities investment.

"Why, in your circumstances, do you want  something other than a straight multi-asset fund?"
 This I need to consider further in regards to level of diversification and 'single points of failure'.

"In my view VLS100, or a lower risk VLS fund, is diversified enough though as an investment nerd I would say that other options are better."
1) Could you provide an example?

"An advised portfolio will consist of specified %s of specified funds.  If the %s change over time because of different levels of return it would be rational to rebalance - if the %s were chosen to achieve some objective why allow them to change?  Rebalancing is imply a matter of selling the ones that are at too high a % and buying more of the funds below their initial allocation.  If you do this once a year it is perhaps a hour or two's work and no particular skill is required."
2) I agree that the admin is trivial and if the only consideration was a variation of 'sell high buy low' then I could consider that however it doesn't seem that easy to judge and there must be a host of other factors for which I come back to my 'insufficient knowledge'

"I believe it would be helpful if you thought more than you have said here at the higher level - what are your life plans, and hence the financial needs to achieve those plans.  Then what is your strategy to provide those needs.  Some of the details you are chasing are really secondary."
Those I largely have sorted, at least in my own mind This is purely about satisfying myself that I can manage, to some degree, my DC pot and then executing.

@Dunstonh "Or use an IFA that works on advisory basis rather than discretionary (or outsources to discretionary)."
I'm not against IFAs full stop , it's just that any service has a price value, I will consider that as a possibility.

"The latter options make it more expensive than using an IFA on advisory or low cost discretionary.   Which appears to defeat your objective."
That does seem to be the case. What is the closest thing a private investor can get to a DFM service?

"If you build a portfolio of single sector funds then you have management decisions and the need to rebalance/adjust weightings (at least once a year).  If you use multi-asset funds then you do not."
A readjustment to % weightings is straightforward admin.3)  My question here is what therefore is the advantage of a portfolio of single sector funds over multi-asset?

Re the 3 points in bold...

1) I like Vanguard FTSE Global All Cap because if you want diversification why restrict yourself to large developed world equities.  .One argument against VLS100 is its high allocation to the UK, much higher than what you would get from a true index tracker.   This leads me to suggest a straight global index tracker would be preferable to VLS100.

2) If a multi-fund portfolio has been developed for you why would you want to change its allocations given you believed you did not have the knowledge to develop it yourself?  The only reason to change a portfolio allocation is because you have  a good reason to believe the current allocation is not suitable for your long term needs. So surely the default view is that the advised portfolio allocations should be protected.

3) OK this gets more complex.  I will explain what I do and why.  It would be impracticable to achieve  without the use of single sector and niche funds.

Firstly I maintain 3 separate and completely independent portfolios because I do not think a single portfolio can adequately satisfy all the conflicting demands of maintaining a stable and secure long term inflation-adjusted income. 
 
a - Long term Growth
b - Income
c - cash and medium term investments

Our needs for the next 10+years or more are held in portfolio (c).  It receives all income and pays out all expenditure. Its size is not a % of the total but fixed according to the need. This means that it is rarely necessary to sell equity, and where it becomes necessary it is done as part of strategic management rather than as an on-going activity.

All day to day on-going  income beyond that provided by guaranteed pensions (State, DB and annuities) is generated by (b) and paid automatically into (c).  Again the portfolio is sized by need, not as a % of the total, on the assumption that 6% income can be generated.  It is built from single sector equity, bond, and infrastructure funds chosen to ensure the income comes from as wide a range of assets and geographies as reasonably achievable so as to minimise the effect of single point failures.

The objective of (a) is to ensure that the income can at least match inflation over the long term.  It is 100% globally highly diversified equity.  The US allocation is restricted to about 40% compared with the 70% of a large companies developed world index tracker which I consider to be too risky as a single point of failure.  Also reducing US gives more space for everywhere else.

Als (a) has a much higher % of small comnpanies than an index fund, partly because I like small companies and secondly to reduce the % allocations to individual very large companies.  Finally I try to provide a fixed Value/Growth balance to reduce future tech boom/busts.

I am not recommending my approach, your needs may be very different to mine.  However it does show what can be done with single sector funds..

Pat38493

Linton said:

1) I like Vanguard FTSE Global All Cap because if you want diversification why restrict yourself to large developed world equities.  .One argument against VLS100 is its high allocation to the UK, much higher than what you would get from a true index tracker.   This leads me to suggest a straight global index tracker would be preferable to VLS100.

Probably worth mentioning that this fund is a global tracker fund that tracks the whole world, even though it has FTSE in the name.  The simplified theory is that you are investing in "all the companies in the world equally".

HSBC and others has an equivalent global tracker fund as well.

Bostonerimus1

Pat38493 said:

Linton said:

1) I like Vanguard FTSE Global All Cap because if you want diversification why restrict yourself to large developed world equities.  .One argument against VLS100 is its high allocation to the UK, much higher than what you would get from a true index tracker.   This leads me to suggest a straight global index tracker would be preferable to VLS100.

Probably worth mentioning that this fund is a global tracker fund that tracks the whole world, even though it has FTSE in the name.  The simplified theory is that you are investing in "all the companies in the world equally".

HSBC and others has an equivalent global tracker fund as well.

If the index is cap weighted you will obviously be biased in some sense to the US and large cap companies. I've never had the desire, or been convinced, to overweight sectors and so just default to something like cap weighting which means that I end up with a portfolio sensitive to Apple, Alphabet, Amazon JPMorgan etc,

leosayer

Bostonerimus1 said:

Pat38493 said:

Linton said:

1) I like Vanguard FTSE Global All Cap because if you want diversification why restrict yourself to large developed world equities.  .One argument against VLS100 is its high allocation to the UK, much higher than what you would get from a true index tracker.   This leads me to suggest a straight global index tracker would be preferable to VLS100.

Probably worth mentioning that this fund is a global tracker fund that tracks the whole world, even though it has FTSE in the name.  The simplified theory is that you are investing in "all the companies in the world equally".

HSBC and others has an equivalent global tracker fund as well.

If the index is cap weighted you will obviously be biased in some sense to the US and large cap companies. I've never had the desire, or been convinced, to overweight sectors and so just default to something like cap weighting which means that I end up with a portfolio sensitive to Apple, Alphabet, Amazon JPMorgan etc,

If you underweight your portfolio to Apple, Alphabet, Amazon etc. then you will be overweight other companies, sectors and/or countries and currencies, on a market-cap basis.

If you are comfortable using your time, energy or skills to predict which companies, sectors or countries will outperform others, or paying someone to do that for you, then go for it but few succeed in beating a globally diversified index fund.

I certainly didn't after 25+ years of fund selection and now that my equity exposure is in global equity index trackers, I am a lot more comfortable.