Plumetting Investment

wjr4

KWEEKUM said:

This was set up by a Financial Adviser via a very well respected company

Which company?

Cus

wjr4 said:

KWEEKUM said:

This was set up by a Financial Adviser via a very well respected company

Which company?

Ha, it would be unlikely they would be well respected on this forum, unless they were a company starting with V and only did passive funds

Beddie

Speak to your adviser and ask them to explain how the portfolio meets your current and future needs. 

JohnWinder

dunstonh said:

The number of funds is high but not worrying so (its only two funds more than a frequently recommended portfolio fund on this site).  It looks like a core and satellite approach and that method always has more funds.

I’m yet to hear a justification for the complexity of this portfolio, which puts the customer’s interest  front and centre, but there might be one. However, it surely can’t be that the number of funds is similar to the number in a blended ‘off the shelf’ product from HSBC, Blackrock or Vanguard. Owning the latter product can mean never having to worry about ‘is the mix right?’, or pay sizeable fees to have the mix ‘rebalanced’ etc - it’s all done at tiny cost in a ‘one fund’ choice.

To suggest it’s ok to own 18 funds because VLS has 17 would be like saying it’s ok to own 3000 separate stocks in your portfolio because a global equity fund holds 3500, as we all think the latter is a suitable choice. Let’s guide someone out of the woods.

Linton

JohnWinder said:

dunstonh said:

The number of funds is high but not worrying so (its only two funds more than a frequently recommended portfolio fund on this site).  It looks like a core and satellite approach and that method always has more funds.

I’m yet to hear a justification for the complexity of this portfolio, which puts the customer’s interest  front and centre, but there might be one. However, it surely can’t be that the number of funds is similar to the number in a blended ‘off the shelf’ product from HSBC, Blackrock or Vanguard. Owning the latter product can mean never having to worry about ‘is the mix right?’, or pay sizeable fees to have the mix ‘rebalanced’ etc - it’s all done at tiny cost in a ‘one fund’ choice.

To suggest it’s ok to own 18 funds because VLS has 17 would be like saying it’s ok to own 3000 separate stocks in your portfolio because a global equity fund holds 3500, as we all think the latter is a suitable choice. Let’s guide someone out of the woods.

IThe point about the large number of underlying funds in the VLS series is perfectly valid in my view.  It is not to simply say that how Vanguard construct  their funds must automatically be right for a small private investor. 

More importantly it raises the deeper question of why vanguard use 17 underlying funds. If anyone’s investment objectives can be effectively achieved with a global equity tracker and a global bond tracker in some proportions why don’t Vanguard slash their costs  by doing this? Is it to make their funds seem more complex than they need to be in order to fool their customers?

The answer I believe is to achieve objectives. If Vanguard want a stable consistent product they need separate funds to achieve a specific balance, much like a cake manufacturer wants its walnut whips or whatever to always taste the same.

 

Applying this idea of constructing portfolios to meet objectives to my own investments….The overall portfolio consists of about 20 funds which if listed  in alphabetical order would no doubt attract much incredulity and criticism. However it is divided into 3 parts, each intended to achieve different objectives.  Having a 9 fund growth portfolio does not seem too surprising if one wants to avoid particular concerns about a global market capitalisation weighted allocation. It is difficult to see how this could be achieved with fewer funds.

Similarly with the high income part. The requirement is to generate a high diversified income from both equity and bonds from around the world. Around 10 funds must be pretty close to the minimum. Finally there are 2 Wealth Protection funds.

Perhaps the OPs portfolio can be seen in a similar light.

dunstonh

I’m yet to hear a justification for the complexity of this portfolio, which puts the customer’s interest  front and centre, but there might be one.

It doesn't look at all complicated and  funds used suggest a core and satellite approach with consideration to liquidity concerns/concentration risk.

 However, it surely can’t be that the number of funds is similar to the number in a blended ‘off the shelf’ product from HSBC, Blackrock or Vanguard.

You are applying double standards.   You think its ok for the likes of Vanguard but not ok for anyone else.

Bostonerimus1

dunstonh said:

KWEEKUM said:

This was set up by a Financial Adviser via a very well respected company

The number of funds is high but not worrying so (its only two funds more than a frequently recommended portfolio fund on this site).  It looks like a core and satellite approach and that method always has more funds.

And there you have a major reason why so many people are dissuaded from DIY. There is this idea that you need to have a complicated portfolio to be successful and beat some ill defined benchmark. I hope there are IFAs out there that have implemented simple and sensible portfolios for their clients and have produced good results, but this is another example of a financial advisor believing their own hype. The OP has a ridiculous portfolio. They should develop a plan to sell some funds and rebalance to a more manageable portfolio with an asset allocation appropriate to their circumstances. Even with a satellite approach I would keep the number of funds in single digits and with the advent of multi-asset funds 4 or 5 funds will be more than adequate. Personally I've had the vast majority of my money in just 3 funds for the last 20 years and that portfolio has returned an annual average of 8% with little to no management and very low fees.

Bostonerimus1

JohnWinder said:

dunstonh said:

The number of funds is high but not worrying so (its only two funds more than a frequently recommended portfolio fund on this site).  It looks like a core and satellite approach and that method always has more funds.

I’m yet to hear a justification for the complexity of this portfolio, which puts the customer’s interest  front and centre, but there might be one. However, it surely can’t be that the number of funds is similar to the number in a blended ‘off the shelf’ product from HSBC, Blackrock or Vanguard. Owning the latter product can mean never having to worry about ‘is the mix right?’, or pay sizeable fees to have the mix ‘rebalanced’ etc - it’s all done at tiny cost in a ‘one fund’ choice.

To suggest it’s ok to own 18 funds because VLS has 17 would be like saying it’s ok to own 3000 separate stocks in your portfolio because a global equity fund holds 3500, as we all think the latter is a suitable choice. Let’s guide someone out of the woods.

The theory and mechanics of portfolio construction and how you include bonds, equities, small, mid or large cap and various geographies and to what end will cause infinite debate and academic research. But I assume both Vanguard and the financial advisor industry are looking at the same research to develop the Vanguard multi-asset funds and the OPs portfolio...so why not just use the Vanguard all in one fund. At least it implements an automatic rebalancing strategy and I wonder how the OP's portfolio has been managed in the last 2 years? Fees might also be a reason to choose a single fund of funds. We've gone over from owning portfolios of individual shares to funds containing many shares for risk mitigation and convenience and so why do people persist in owning portfolios of individual funds that do the same of the far more convenient "fund of funds" products. Of course you might want to do some active management and implement some rebalancing or momentum strategies, but I think the bigger reason we still see 20 fund portfolios is to give Wealth Managers and IFA/FAs something to do.

Ultimately we use funds and develop portfolios for convenience and to spread risk across many stocks, bonds or asset classes and to achieve goals like long term growth or income. The OP has obviously not been well served over the last few years so maybe the strategy from the advisor was well intentioned, but how have they tactically managed the portfolio and what should be done now? The OP is obviously worried at the losses and rather than asking us they should be asking their IFA/FA what is to be done? With my portfolio of 3 funds I once did a bit of rebalancing, but now I consciously do nothing and with 3 funds it's easy to see what's happening. The problem with having 20 funds visible is "seeing the wood for the trees" and being paralyzed by the complexity. The IFA/FA  needs to earn their fee and talk to their client.

Linton

Bostonerimus1 said:

dunstonh said:

KWEEKUM said:

This was set up by a Financial Adviser via a very well respected company

The number of funds is high but not worrying so (its only two funds more than a frequently recommended portfolio fund on this site).  It looks like a core and satellite approach and that method always has more funds.

And there you have a major reason why so many people are dissuaded from DIY. There is this idea that you need to have a complicated portfolio to be successful and beat some ill defined benchmark. I hope there are IFAs out there that have implemented simple and sensible portfolios for their clients and have produced good results, but this is another example of a financial advisor believing their own hype. The OP has a ridiculous portfolio. They should develop a plan to sell some funds and rebalance to a more manageable portfolio with an asset allocation appropriate to their circumstances. Even with a satellite approach I would keep the number of funds in single digits and with the advent of multi-asset funds 4 or 5 funds will be more than adequate. Personally I've had the vast majority of my money in just 3 funds for the last 20 years and that portfolio has returned an annual average of 8% with little to no management and very low fees.

In my view,  a portfolio should be designed to provide identifiable benefits to the owner rather than as an arena for playing games like chasing a benchmark. In order to fully determine a justifiable design those benefits should be quantified in terms of sums of money, timeframes and risk. Until we know the objectives of the OPs portfolio and how they relate to its structure it is impossible to say much about the quality of the design.  I agree that the number of funds should be minimised but focusing on this factor seems like judging an engineering design simply on the length of its parts list .

Regarding your portfolio I think you have said that your needs are covered by other more secure income. If that is the case is it possible  3 funds are too many?

cfw1994

Linton said:

Bostonerimus1 said:

dunstonh said:

KWEEKUM said:

This was set up by a Financial Adviser via a very well respected company

The number of funds is high but not worrying so (its only two funds more than a frequently recommended portfolio fund on this site).  It looks like a core and satellite approach and that method always has more funds.

And there you have a major reason why so many people are dissuaded from DIY. There is this idea that you need to have a complicated portfolio to be successful and beat some ill defined benchmark. I hope there are IFAs out there that have implemented simple and sensible portfolios for their clients and have produced good results, but this is another example of a financial advisor believing their own hype. The OP has a ridiculous portfolio. They should develop a plan to sell some funds and rebalance to a more manageable portfolio with an asset allocation appropriate to their circumstances. Even with a satellite approach I would keep the number of funds in single digits and with the advent of multi-asset funds 4 or 5 funds will be more than adequate. Personally I've had the vast majority of my money in just 3 funds for the last 20 years and that portfolio has returned an annual average of 8% with little to no management and very low fees.

In my view,  a portfolio should be designed to provide identifiable benefits to the owner rather than as an arena for playing games like chasing a benchmark. In order to fully determine a justifiable design those benefits should be quantified in terms of sums of money, timeframes and risk. Until we know the objectives of the OPs portfolio and how they relate to its structure it is impossible to say much about the quality of the design.  I agree that the number of funds should be minimised but focusing on this factor seems like judging an engineering design simply on the length of its parts list .

Regarding your portfolio I think you have said that your needs are covered by other more secure income. If that is the case is it possible  3 funds are too many?

I doubt the OP asked their FA to lower their SIPP from £357k to £260k……wonder what the benefits were that were offered 👀