Challenge to Financial Advisers

daimes

dunstonh said:

So I'll make it easier for you.... come up any portfolio you want an I'll show you a better alternative based on risk and return over the past 10 years... Lets both exclude tech funds.

How about we go to the Racing Post and look at yesterday's results and debate  who won the 3.15 at Lingfield?
After all, that is exactly what you are doing with your portfolio build.

You are clearly losing your rag because no-one agrees with you or your crystal ball.   You are coming over as a Grandiose Dillusionist.  We get it.  You have invented the wheel and are now the master of the universe and everyone must bow before you.

Ah stop being such a baby!

If my so called new toy is capable of defeating the entire adviser community, what does that say about you guys?

Of course you're missing the point... by all means use whatever historic performance you want... hell put Tesla stocks in if you like.  It won't do you any good.

It's about risk not just return.. if I wanted a high return tech fund I'd use L&G global tech index tracker... but it's too risky!

You see, unlike you guys I've looked very closely and analysed every fund out there, and literally millions of  combination of funds.. you should be doing exactly the same thing instead of throwing your toys out of the pram and whimpering that the bad person with a calculator has beaten you!

You may be smart but you don't seem to understand Financial Economics very well. The concept is volatility (and for you sophists out there, skew and kurtosis), are highly reliable measures of long-term risk-value. It's why the banking community use them to price currency, equity and interest rate derivatives.

Stop prevaricating and start demonstrating!

daimes

Bostonerimus1 said:

... But, I was not interested in maximizing return, but maximizing the probability of hitting goals that would make me financially independent. 

Who isn't!

You appear to know very little about probability. Volatility risk is at the heart of market outcome probability. 

Maximising return with minimal risk is how best to achieve your "financially independent" goals.

Bostonerimus1

InvesterJones said:

daimes said:

No more prevaricating, put up or shut up. 

I'm afraid this isn't the kind of forum where users get to dictate what other users do.

I have already made a suggestion if you're playing the backwards game: Nvidia.

That isn't what financial advisers do, of course. Read the article here about what financial advisers do: https://www.moneysavingexpert.com/savings/best-financial-advisers/

I agree with the OP's point that portfolio construction is not difficult, but they argue the point in a very unappealing way which does nothing to win anyone over. Throwing a few "moments" into the discussion is not going to impress or move the discussion along. Also, as you allude to, most financial advisors are not in the business of portfolio construction and at their best they provide holistic financial solutions for their clients. I have criticisms of the portfolios generated by the software at portfolio services companies and maybe the OP should do some research into those companies so they can direct their ire more accurately.

daimes

LHW99 said:

So >70% return over 14 years. I'm happy.

Seriously? 3.9% pa return over 14 years will deliver more than 70%...

daimes

Cus said:

Thanks @daimes for this attempt to entertain, unfortunately these forums are not the place. 

Do you think this is supposed to be entertaining?

I put out a very simple challenge to clever people like you because I have concerns that uninformed people are paying year after year for so called investment advice.

I friend of mine has just invested €1m euros through an financial adviser company. I can't show you the portfolio but put it this way, I probably could have done better with a random number generator.

This is far from entertaining! It is starting to be depressingly revealing.

kimwp

Even a pigeon on a chess board knows the difference between a poop it has already done and a poop it hasn't done yet and the general advice there is to not engage.

Bostonerimus1

daimes said:

Cus said:

Thanks @daimes for this attempt to entertain, unfortunately these forums are not the place. 

Do you think this is supposed to be entertaining?

I put out a very simple challenge to clever people like you because I have concerns that uninformed people are paying year after year for so called investment advice.

I friend of mine has just invested €1m euros through an financial adviser company. I can't show you the portfolio but put it this way, I probably could have done better with a random number generator.

This is far from entertaining! It is starting to be depressingly revealing.

This could have been entertaining and enlightening, but you have made it depressing. Most people on here are not Financial Advisors and there are many DIYers, so you won't get much of an argument that paying for portfolio construction and investment advice on an ongoing basis isn't value for money. Some on here are index investors and will agree with keeping costs down, but they won't seek to beat markets or select sectors so you are asking the wrong people to come up with competing portfolios. My 35 year history of 8% to 9% annual average returns using simple Boglehead investing principles and a US equity Index, International ex-US equity Index and a US bond index has served me well through several market crashes and is something I would recommend to most people apart from the bonds which should be more global. My best advice to you would be to stop trying to score points and just be a bit nicer. Put a smile on your face and it will be the best investment you can make.

daimes

Bostonerimus1 said:

This could have been entertaining and enlightening, but you have made it depressing. Most people on here are not Financial Advisors and there are many DIYers, so you won't get much of an argument that paying for portfolio construction and investment advice on an ongoing basis isn't value for money. Some on here are index investors and will agree with keeping costs down, but they won't seek to beat markets or select sectors so you are asking the wrong people to come up with competing portfolios. My 35 year history of 8% to 9% annual average returns using simple Boglehead investing principles and a US equity Index, International ex-US equity Index and a US bond index has served me well through several market crashes and is something I would recommend to most people apart from the bonds which should be more global. My best advice to you would be to stop trying to score points and just be a bit nicer. Put a smile on your face and it will be the best investment you can make.

I'll put a smile on my face when I have something to smile about.

About 4 years ago my next door neighbour showed me his portfolio. We live in Euroland and his so called adviser  put him in 90% sterling assets.... just before BREXIT.

Over two years I helped him fight the adviser company, then the ombudsman until he finally received compensation of 30% of his fund. The problem is that people like my neighbour would have been hopelessly lost without help and the poor advice would have gone unanswered.

I say well done to all those people brave enough to go it alone and I wouldn't argue too much with your approach (but see below). But surely the adviser community can do better to help people who are unfamiliar with investing without charging them ridiculous annual management fees year after year for little or no value.

We need to bring more science to portfolio design, the difference it will make to most people's savings experiences over the long term could be massive.

PS
Don't invest in bonds / bond funds with duration 7+ years and never invest in overseas fixed interest. The interest rate/currency risk is too much for no extra return. Bonds only have credit risk premium and no equity risk premium.

Long dated government bonds should probably only be used by insurance companies / pension funds for hedging long dated liabilities, not by individual investors.

So...for individuals...
Global for equities/property.
Local/short/corporate for fixed interest.
Index linked bonds ... perhaps but not much.

Linton

(Removed by Forum Team)

One cannot propose a sensible portfolio unless one knows, for example:
1) Timescale, 1 year or 30 years? If you really are thinking about 10 years you may be best advised to take significant  advantage of the currently high interest rates rather than risk a crash devastating your savings with insufficient time to recover.
2) How much return is needed? There is no point in chasing more than you need by adding unnecessary risk to your portfolio.
3) Are you planning to take a steady income or wanting a specific lump sum after a significant time period ?
4) Investor psychology - will you panic and sell out completely at the bottom of the next 50% (or in your case 70%) equity crash.  One will come along every decade or so.  You dont want a portfolio whose gyrations keep you awake at night.

If you are are investing life-changing amounts of money portfolio construction is about appropriateness given the answers to the type of questions suggested above.  Chasing maximum returns to get top of the returns list is both pretty irrelevent and often counter-productive

Your definition of risk in terms of annual volatility is pretty irrelevent in the real world.  What happens in the event of a real equity crash or a major change in global economic circumstances has nothing to do with Gaussian distributions, kurtosis, skew etc. What is the Gaussian probability of having 2 40%+ falls in 8 years as happened in 2000-2008? Investment returns are only Gaussian for small variations and if you care about small variations over a year you should not be investing anyway.

I think you will find that many of the longer term investors on this forum are investing a major part of their total assets.  Would you have the confidence to invest nX£100K in your proposed portfolio?  This is the sort of money many people in the future  will have in their pension pots.  They will need to manage it themselves or get an IFA to manage it for them if they are non-numerate and/or have minimal knowledge of investing and have little interest in learning.  You can't manage >> £100K  seeing investing as some sort of game.  The real world is very different

Finally, the detailed construction of a portfolio is a secondary matter for both an IFA and their customers.  Many buy in that sort of expertise rather than  creating a unique one for each customer. More important are issues like tax and inheritance, and questions like how much should one contribute to a pension to retire early.

Linton

daimes said:

Bostonerimus1 said:

This could have been entertaining and enlightening, but you have made it depressing. Most people on here are not Financial Advisors and there are many DIYers, so you won't get much of an argument that paying for portfolio construction and investment advice on an ongoing basis isn't value for money. Some on here are index investors and will agree with keeping costs down, but they won't seek to beat markets or select sectors so you are asking the wrong people to come up with competing portfolios. My 35 year history of 8% to 9% annual average returns using simple Boglehead investing principles and a US equity Index, International ex-US equity Index and a US bond index has served me well through several market crashes and is something I would recommend to most people apart from the bonds which should be more global. My best advice to you would be to stop trying to score points and just be a bit nicer. Put a smile on your face and it will be the best investment you can make.

I'll put a smile on my face when I have something to smile about.

About 4 years ago my next door neighbour showed me his portfolio. We live in Euroland and his so called adviser  put him in 90% sterling assets.... just before BREXIT.

Over two years I helped him fight the adviser company, then the ombudsman until he finally received compensation of 30% of his fund. The problem is that people like my neighbour would have been hopelessly lost without help and the poor advice would have gone unanswered.

I say well done to all those people brave enough to go it alone and I wouldn't argue too much with your approach (but see below). But surely the adviser community can do better to help people who are unfamiliar with investing without charging them ridiculous annual management fees year after year for little or no value.

We need to bring more science to portfolio design, the difference it will make to most people's savings experiences over the long term could be massive.

PS
Don't invest in bonds / bond funds with duration 7+ years and never invest in overseas fixed interest. The interest rate/currency risk is too much for no extra return. Bonds only have credit risk premium and no equity risk premium.

Long dated government bonds should probably only be used by insurance companies / pension funds for hedging long dated liabilities, not by individual investors.

So...for individuals...
Global for equities/property.
Local/short/corporate for fixed interest.
Index linked bonds ... perhaps but not much.

Bostonerimus1 is in the US!

One thing I agree with you is that long dated bond funds are far too risky to be worth buying as we have seen with the rapid rise in interest rates.   Individual gilts may be justified to meet specific objectives if you can  hold until maturity and ideally buy at under par.

I would also agree that you need global equities.  However to minimise single point failures you also need a broad balance of sectors.  With the importance of multi national giants sector diversification is more important than geographic diversification.