First Time DIY Portfolio

AlanP_2

In the event of another COVID I would hope that active managers would stick to their style and mandate.

If I chose an active fund that was advertised as investing in their choices from the UK FTSE 100 I would be very peeved if they arbitrarily decided to go into crypto so why would I be happy if they went to cash?

I might decide to sell up equities  and go into cash and then try and time a reentry but my fund managers shouldn't be unless they have that very broad mandate. The wealth preservers such as PNL or CGT for example could as there mandate is flexible enough.

MK62

Bostonerimus1 said:

As I don't rely on my DC pension money or other invested accounts for any income, and because their size is so much larger than I will ever spend, I simply don't worry and I can be pretty sanguine about the ups and downs of the markets.

Which makes you quite a bit removed from the typical retirement investor..........one could even ask the question that since you don't need any investment returns, why do you take on any investment risk at all?......but of course, that's entirely your choice.

Hoenir

RichardS said:

Also, if we had a sudden outbreak of a new dangerous virus somewhere in the world tomorrow, what would my current active fund managers be doing?  Would they suddenly move everything into cash and then buy stock again after a likely fall in the markets?. 

Not possible to simply move everything into cash. As sellers have to find willing buyers. If sellers exceed buyers in any given market scenario. Then the laws of supply and demand kick in. Until an equilibrium is established and the market settles down. There'll be the more experienced vultures who'll keep their powder dry and bide them time. Selectively picking off stocks as trades come up on offer. 
In 2022 some 90% of global stock trading by value was conducted in just 110 stocks. There's not the liquidity in some company's shares to handle a mass panic scenario. 

Bostonerimus1

MK62 said:

Bostonerimus1 said:

As I don't rely on my DC pension money or other invested accounts for any income, and because their size is so much larger than I will ever spend, I simply don't worry and I can be pretty sanguine about the ups and downs of the markets.

Which makes you quite a bit removed from the typical retirement investor..........one could even ask the question that since you don't need any investment returns, why do you take on any investment risk at all?......but of course, that's entirely your choice.

I take investment risk precisely because I don't need the money and I think there's a good probability that over the next 30 years it will grow considerably and I can give more away to family and charity.

LHW99

In 2000 / 2007-8 / 2022, I just stopped looking (almost ).

They say dead investors get the best results because they don't fiddle, so I played "dead"

Linton

I am dependent for about 25% of my ongoing income and most of my one-off expenditure on my investments.  My portfolio is designed to withstand about 10 years of economic storms, barring the end of the world as we know it, so I would do nothing in the event of another Covid or any other such scenario for at least 5 years.  After then I may consider reducing expenditure.  The opportunities for non-essential expenditure would probably be reduced anyway as was the case for Covid.

Obviously major changes in global economic circumstances such as the recent rise in bond interest rates may change the tactics, but the strategy would not alter.

Fund managers should not change their strategy in response to events unless their remit explicitly gave them the authority to do so.

leosayer

RichardS said:

Also, if we had a sudden outbreak of a new dangerous virus somewhere in the world tomorrow, what would my current active fund managers be doing?  Would they suddenly move everything into cash and then buy stock again after a likely fall in the markets?. Is that situation the sort of situation where managed funds clearly have an advantage over passive index tracking?   What do people with passive index tracking portfolios do in that type of scenario, do they sit tight and ignore it or do they adjust their portfolios fund allocations?   With passive index tracking is it really just a case of creating a portfolio and then just sticking with it?

One should not expect an active equity fund manager to predict short-term market moves. Whilst a manager may take advantage of a price-drop to add to an existing holding when an opportunity arises, liquidating an entire portfolio on the expectation that markets will continue to fall wouldn't generally happen.

Likewise, trying to time the market by selling and buying funds (active or passive) in anticipation of further falls is akin to gambling and it usually leads to worse outcomes than just sitting tight. It is a painful experience but if an investor doesn't have the stomach for such volatility then maybe they should adjust the % of equities in their portfolio.

Beddie

RichardS said:

I suppose why I started this thread was that through reading some books and watching YouTube videos etc I was getting the message (maybe I misunderstood?) that 9 times out of 10 the index beats the managed fund over the long term. That seems simple.  9 times out of 10 the cheap option beats the expensive option. It’s obviously not that simple.  If I was 20 years old and just starting out I don’t think I would hesitate and go for a straight index fund. But at 57 and with a £200k pension and a £25k ISA to play with it feels very different. 

Active v passive is a separate argument to attitude to risk. You've decided passive is the way forward, so go with that. I've mainly used active funds over the years and with hindsight should have put it all in a S&P 500 or global tracker.

As for risk, losses etc., as others have said you need to split the portfolio into funds/bonds/cash. Money market funds pay over 5% at the moment, you could have some in there to reduce risk. But beyond that, a split of 60/40, 40/60 or whatever you feel comfortable with is the way forward.

I'm in my 50s too and am about 60/20/20 shares/bonds/money market, which feels reasonably comfortable. I still worry just as much as you about falls. But, as many others have said here, in the longer term shares will(should!) give better returns than cash or bonds.

JohnWinder

‘If I told you 5 years ago that there would be a global pandemic and Pfizer would be the leading manufacturer of a vaccine to combat the virus with sales of over $70 billion in 2021-22, you would probably have dumped your S&P 500 Index fund and put all your money into Pfizer (PFE). But for the five years ending Sept. 18th, PFE is essentially flat while the S&P 500 ETF (SPY) has gained 67%. The lesson for investors - sock picking would not be any easier, even if we knew the future.’

https://oncoursefp.com//images/Vectors Oct23 final.pdf.

 ‘Another Morningstar study analyzed tactical allocation funds which are sold on the promise that the fund manager can deftly change the fund’s stock/bond mix to maximize returns. Sounds nice in theory, but how has it done in the real world? Morningstar analyzed the performance of 34 tactical allocation funds for the ten years ending April 30, 2023. The annualized average return of these funds was 2.3% compared to the 7.5% return of the 60% stock/40% bond Vanguard Balanced Index Fund (VBIAX). Even worse, only 12 of the original 34 funds were still in business on April 30, 2023. Morningstar took a snapshot of each fund's portfolio on April 30, 2013, and calculated the performance of the holdings over the ensuing ten years – the do- nothing option. Of the 34 funds, 30 yielded worse returns than if the manager had kept the original allocation.’

https://oncoursefp.com//images/Vectors Sept 23 final.pdf 

‘buying and holding, come what may, still generated better returns over the past 21 years, albeit by a narrow margin of around 0.76% per year.’ https://www.morningstar.com/portfolios/staying-invested-beats-timing-marketheres-proof 

dunstonh

 ‘Another Morningstar study analyzed tactical allocation funds which are sold on the promise that the fund manager can deftly change the fund’s stock/bond mix to maximize returns. Sounds nice in theory, but how has it done in the real world?

Very well with many multi-asset portfolio/funds with underlying passives.    e.g. HSBC GS vs VLS.