Plumetting Investment

Linton

cfw1994 said:

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 👀

Unfortunately the future is unpredictable. One cannot base a strategy on the possibility of a once in over 100 years event when there is a far greater chance of an equity crash with larger potential losses.

in any case we don’t know what was the reasoning behind the choice of portfolio, nor is it clear where the losses came from as it would seem that the portfolio may have changed in the past couple of years. We don’t even know if there was any reasoning.

QrizB

In light of the OP's portfolio having been built by an (I)FA, the OP should really be asking them some of these questions.

Qyburn

FIREDreamer said:

VWRL 75% Global Equity (Vanguard)
GLTL   25% UK Gilts (iShares)

I know we can't predict the future with total confidence, but is now the right time to put a pile of cash into a long dated Gilt fund, is expected to stop falling and start rising soon?

Linton

Qyburn said:

FIREDreamer said:

VWRL 75% Global Equity (Vanguard)
GLTL   25% UK Gilts (iShares)

I know we can't predict the future with total confidence, but is now the right time to put a pile of cash into a long dated Gilt fund, is expected to stop falling and start rising soon?

It depends on why you want to put the cash into a gilt fund.  If putting the money into a gilt fund well before last year’s crash was the right thing to do then it is probably even more right now, assuming your circumstances have not changed.

Why a long dated gilt fund? The longer the date the more volatile the fund.

With equity after a crash you can generally expect a fairly quick return to previous values thanks to temporarily excess returns. Gilts don’t work like that.

Qyburn

Linton said:

Qyburn said:

FIREDreamer said:

VWRL 75% Global Equity (Vanguard)
GLTL   25% UK Gilts (iShares)

I know we can't predict the future with total confidence, but is now the right time to put a pile of cash into a long dated Gilt fund, is expected to stop falling and start rising soon?

Why a long dated gilt fund? The longer the date the more volatile the fund.

I may have used the wrong terminology, maybe I should have said "over 15 years" which seems long to me.  I was referring to the example ETF suggested in the post I quoted.

dunstonh

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.

Its not complicated and you saying it is complicated doesn't mean it is.  Maybe it is just too complicated for you.

You are accusing the adviser of believing their own hype when the adviser almost certainly isn't running the portfolio.   And when you had your discussions with that adviser, what made you think it was hype?  Oh hold on, you haven't spoken with them.  You have just made that up that bit about hype.

You say the op should sell funds and rebalance to an asset allocation appropriate to their circumstances.  So, in your discussion with the OP, what are those circumstances?   oh hold on again, you haven't spoken with them to ascertain their circumstances.

And how should the asset allocation differ to how it is now.  If you look at the asset mix of the funds, it appears to be in the ballpark of expectation.

You say multi-asset funds should be used and maybe 4 or 5 of them.    So, lets say they use 5 multi-asset funds that each have around 15 underlying investment funds.   You are now saying you want a portfolio of 75 funds because a portfolio of 19 is too many funds.     And lets not forget that multi-asset funds cost more than holding the same underlying single sector funds directly.   

Your own situation doesn't matter here.  You don't have to worry about concentration risk or fund houses coming to you saying that they don't want you to place any more money with them or capping the amount you can place with them.   When you are talking in the billions of pounds, you find doors open and doors close.      The regulator is not looking at Mr blogs portfolio of £200k.  They are looking at the centralised investment proposition.   How would the use of just 3 funds satisfy the regulator in respect of concentration risk?

I completed my annual PI renewal proposal last week and, as usual, concentration risk was part of it.  Questions on limits given to fund houses or funds were in there because the liability insurers are concerned about too much with one provider, fund house, country/region etc.

Look at this portfolio and use UK equity as an example as that is often an area that has a higher weighting allocated to it. They could use a single FTSE all share tracker.  However, it uses three index trackers for the core, each with different fund houses (Vanguard, L&G and Dimensional).   Has the use of three index trackers instead of one created an additional cost?  No.       Now look at Japan.  Japan won't have much allocated to it.  So, they can get away with Fidelity Index Japan as the sole Japanese fund.    

And whilst you are boasting about 20 years averaging 8% for keeping it simple, here is 9.36% by having some regulated structure and process using index trackers to meet the underlying asset allocations.



The bottom line is that there are many different ways to invest and many different opinions.  There are many different strategies and structures that can be used.   You need to accept that a whole load of methods and styles are fine and your way isn't the only way.

Grandst2

The IA mixed investments 40-85% benchmark has lost around 5% over the last 2 years

and the IA mixed investments 20-60% benchmark has lost around 7%. The vanguard lifestrategy 20 has lost around 15%. If you're 27% down without any withdrawals then you really need to go back to the adviser and find out why the performance is far worse than the benchmarks and a cheap fund. The adviser has access to many more model portfolio services and platforms than direct investors so there's no excuse for poor performance.

Bostonerimus1

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 agree about the assessment of the OP's fund and that we really need a bit more information about how it was developed and to what ends to provide a well reasoned critique, but my gut says it's driven by industry vanity more than anything else.

Your final point is well taken as I have stable income sources apart form my DC and other investments. I could just use a single global equity index and be fine. However, my 3 funds are a legacy from when I was working and was offered separate US and International (ex- US) equity trackers. My bond component was a US-bond tracker and the Wellesley multi-asset fund and I sold the US bond tracker to buy into a workplace DB pension and that kept my overall asset allocation stable. That allocation now has a higher percentage of equites than when I retired as I've stopped rebalancing.

Bostonerimus1

dunstonh 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.

Its not complicated and you saying it is complicated doesn't mean it is.  Maybe it is just too complicated for you.

You are accusing the adviser of believing their own hype when the adviser almost certainly isn't running the portfolio.   And when you had your discussions with that adviser, what made you think it was hype?  Oh hold on, you haven't spoken with them.  You have just made that up that bit about hype.

You say the op should sell funds and rebalance to an asset allocation appropriate to their circumstances.  So, in your discussion with the OP, what are those circumstances?   oh hold on again, you haven't spoken with them to ascertain their circumstances.

And how should the asset allocation differ to how it is now.  If you look at the asset mix of the funds, it appears to be in the ballpark of expectation.

You say multi-asset funds should be used and maybe 4 or 5 of them.    So, lets say they use 5 multi-asset funds that each have around 15 underlying investment funds.   You are now saying you want a portfolio of 75 funds because a portfolio of 19 is too many funds.     And lets not forget that multi-asset funds cost more than holding the same underlying single sector funds directly.   

Your own situation doesn't matter here.  You don't have to worry about concentration risk or fund houses coming to you saying that they don't want you to place any more money with them or capping the amount you can place with them.   When you are talking in the billions of pounds, you find doors open and doors close.      The regulator is not looking at Mr blogs portfolio of £200k.  They are looking at the centralised investment proposition.   How would the use of just 3 funds satisfy the regulator in respect of concentration risk?

I completed my annual PI renewal proposal last week and, as usual, concentration risk was part of it.  Questions on limits given to fund houses or funds were in there because the liability insurers are concerned about too much with one provider, fund house, country/region etc.

Look at this portfolio and use UK equity as an example as that is often an area that has a higher weighting allocated to it. They could use a single FTSE all share tracker.  However, it uses three index trackers for the core, each with different fund houses (Vanguard, L&G and Dimensional).   Has the use of three index trackers instead of one created an additional cost?  No.       Now look at Japan.  Japan won't have much allocated to it.  So, they can get away with Fidelity Index Japan as the sole Japanese fund.    

And whilst you are boasting about 20 years averaging 8% for keeping it simple, here is 9.36% by having some regulated structure and process using index trackers to meet the underlying asset allocations.



The bottom line is that there are many different ways to invest and many different opinions.  There are many different strategies and structures that can be used.   You need to accept that a whole load of methods and styles are fine and your way isn't the only way.

Yes the portfolio is too complicated for me. It will be too complicated for many other too including the IFA/FA as they are probably paying for another firm to develop the portfolio. So I'm curious as to how they manage a portfolio they didn't develop themselves? Do they get instructions from the "Wealth Management" company or just leave things alone as I would do?

I was not specific about how the OP or the IFA/FA should rebalance their portfolio precisely because I don't know their circumstances. The IFA/FA should certainly be talking to the OP and developing a plan...but as the advisor probably didn't develop the portfolio in the first place that might be a challenge.

A 4 or 5 fund portfolio does not need to be all multi-asset funds and the utility of a "fund of funds" portfolio vs a few index trackers would be an interesting study, but we get into the apples vs oranges argument.

FYI I am not boasting about 8% return, just showing that you can get ok returns with a simple portfolio and minimal management and very low costs.  You don't need a complicated (at least for me) portfolio to do ok. There will be lots of higher returning portfolios and many lower returning too, including the OP's fund over the last couple of years. I wish that we had more posts from people with success stories with IFA portfolios as I think we get a selection bias for horror stories. The OP might be over reacting to a high risk portfolio that is actually appropriate to their circumstances, but the advisor should be doing more to explain things to the OP and letting them know how the portfolio is being managed.

dunstonh

Yes the portfolio is too complicated for me. It will be too complicated for many other too including the IFA/FA as they are probably paying for another firm to develop the portfolio. So I'm curious as to how they manage a portfolio they didn't develop themselves? Do they get instructions from the "Wealth Management" company or just leave things alone as I would do?

There are different methods.  Some outsource the lot to a DFM.  Some buy in the fund research and asset allocation models and marry them up.

Its a long way from the days when there was no structure and process.  

I wish that we had more posts from people with success stories with IFA portfolios as I think we get a selection bias for horror stories.

The nature of the internet is that people post when they dont know things or think they have an issue.