Fund Selection

chiang_mai

I'm very surprised that so many of the usual suspects, those who are normally quite vocal on most subjects, don't have anything to say on this subject. I would have expected some of them to offer a couple of tips at least and am wondering why they're silent!

Regardless, from my novice perspective, avoiding concentration and/or gaps in any area is important......not too much invested per sector, creating the right capitalisation and geographic balances etc. I rarely opt for a single country fund because I think the Fund Manager needs lattitude and somewhere to go when times get tough in one particular country.....I particlarly like the Artemis Smartgarp Global Emerging Markets Fund for this reason, because it spans China, Emerging Markets (non-Asia) and Developed Asia. I also like to try and understand investment flows and what other people are buying. Morningstar displays investment flow data and I think it;s good to see if everyone else is selling when you're considering buying and trying to understand why! 

I percieve, without any real supportive evidence, that most sucessful funds have a maximum life span and size, before they begin to fail or become mediocre. As a general rule, the longer they've been sucessful and the bigger they've become, the greater the risk that they will soon fail or become ordainary once again and I've witnessed this repeatedly......it's the 15 minutes of fame syndrome.   

chiang_mai

The biggest problem areas for me personally are asset allocation and risk classifiction, I often have great difficulty trying to decide at what level I should be invested, that meets my appetite for risk. Because I am older, some of the guidelines suggest I ought to hold a fairly low level of equities, under 50%. But it's not easy to make a decent return with only 45% in equities, and also, what do you do with the other 55% that makes it earns its living! At times I have ignored this guideline and I've invested up top 80%+ in equities. This of course causes panic when there are market wobbles.  Understanding and being comfortable with your asset allocation, over time, is much harder than it appears, for me at least.

Regarding Risk: I use Morningstar, Trustnet and Kiid to help establish the risk level of a fund but often they don't agree, sometimes they are almost opposites. Artemis Smartgarp GEMS is rated at 90 by Morningstar yet it's only a Kiid risk level 5. Their UK fund on the otherhand is rated at 73 by MS but is a Kiid risk level 6. The rating systems don't work well 100% of the time hence there comes a point where it's necessary to put them aside and understand the risk at a detail level rather than trying to classify them into risk buckets. 

ircE

chiang_mai said:

I'm very surprised that so many of the usual suspects, those who are normally quite vocal on most subjects, don't have anything to say on this subject. I would have expected some of them to offer a couple of tips at least and am wondering why they're silent!

You've said something like this a couple of times now. In a public forum you are welcome to make posts and ask for comments, but that doesn't mean others are entitled to respond, or to respond in a specific way...

Also, you will know this board is much heavier on the "savings" than the "investments" side of things i.e. much of the discussions are around savings accounts. If you'd like more engaging conversation on investments I suggest you try other communities like Citywire and Lemon Fool.

chiang_mai

ircE said:

chiang_mai said:

I'm very surprised that so many of the usual suspects, those who are normally quite vocal on most subjects, don't have anything to say on this subject. I would have expected some of them to offer a couple of tips at least and am wondering why they're silent!

You've said something like this a couple of times now. In a public forum you are welcome to make posts and ask for comments, but that doesn't mean others are entitled to respond, or to respond in a specific way...

Also, you will know this board is much heavier on the "savings" than the "investments" side of things i.e. much of the discussions are around savings accounts. If you'd like more engaging conversation on investments I suggest you try other communities like Citywire and Lemon Fool.

Yes of course, there is no obligation on anyones part to respond, I was merely thinking aloud. It's just that in the nine years that I've attended here, and I've only ever engaged on the subject of investing, there has always been a core of members eager to correct any inaccuracy or misperception. Yet when the opportunity arises to be constructive and explain the fund selction process, they are mostly all quiet, which made me wonder. Anyway, having wondered, I have now moved on and I've posted a stickie on my screen, reminding me not to mention it again!  

thunderroad88

chiang_mai said:

ircE said:v

chiang_mai said:

I'm very surprised that so many of the usual suspects, those who are normally quite vocal on most subjects, don't have anything to say on this subject. I would have expected some of them to offer a couple of tips at least and am wondering why they're silent!

You've said something like this a couple of times now. In a public forum you are welcome to make posts and ask for comments, but that doesn't mean others are entitled to respond, or to respond in a specific way...

Also, you will know this board is much heavier on the "savings" than the "investments" side of things i.e. much of the discussions are around savings accounts. If you'd like more engaging conversation on investments I suggest you try other communities like Citywire and Lemon Fool.

Yes of course, there is no obligation on anyones part to respond, I was merely thinking aloud. It's just that in the nine years that I've attended here, and I've only ever engaged on the subject of investing, there has always been a core of members eager to correct any inaccuracy or misperception. Yet when the opportunity arises to be constructive and explain the fund selction process, they are mostly all quiet, which made me wonder. Anyway, having wondered, I have now moved on and I've posted a stickie on my screen, reminding me not to mention it again!  

If you want more useful or in-depth discussion on investing in funds, bonds, ITs etc then Citywire probably offers more…there are a greater number of more seasoned contributors there. This section of the MSE forum is great if you want to discuss the latest 0.1% movements in savings accounts or log in problems, but the investment threads seem to be more geared to helping those who are very new to investing and require basic suggestions …there is some useful information at times though which is why I keep looking in

OldScientist

chiang_mai said:

ircE said:

chiang_mai said:

I'm very surprised that so many of the usual suspects, those who are normally quite vocal on most subjects, don't have anything to say on this subject. I would have expected some of them to offer a couple of tips at least and am wondering why they're silent!

You've said something like this a couple of times now. In a public forum you are welcome to make posts and ask for comments, but that doesn't mean others are entitled to respond, or to respond in a specific way...

Also, you will know this board is much heavier on the "savings" than the "investments" side of things i.e. much of the discussions are around savings accounts. If you'd like more engaging conversation on investments I suggest you try other communities like Citywire and Lemon Fool.

Yes of course, there is no obligation on anyones part to respond, I was merely thinking aloud. It's just that in the nine years that I've attended here, and I've only ever engaged on the subject of investing, there has always been a core of members eager to correct any inaccuracy or misperception. Yet when the opportunity arises to be constructive and explain the fund selction process, they are mostly all quiet, which made me wonder. Anyway, having wondered, I have now moved on and I've posted a stickie on my screen, reminding me not to mention it again!  

It may also be because for many of us investing is as simple as picking:
1) A world equity index fund, but possibly adding some tilt (e.g., small caps or REITS)
2) A fixed income index fund (e.g., global bonds, UK gilts, MMF, or other cash), but possibly using more than one fixed income fund to tailor the overall duration.
3) Other things such as small amounts of gold, other commodities, crypto, etc. to taste.

Many years ago, I used to have separate funds by region (including an index fund and active fund for some regions) and by cap (for selected regions, e.g., UK small cap). If I remember rightly, the portfolio peaked at about 15 or so funds before I started a process of simplification (now in retirement I'm down to 5 funds plus cash - I'm considering removing two more). My criteria for picking the active funds were largely based on previous performance, ongoing costs, a low turnover (i.e., a buy and hold management style), and some difference in holdings from the index. I realised two things a) the amount of work needed to maintain it was not worth any performance or other gains and b) in the event of my death, my OH (who has little interest in these things) would not be able to manage such a complex portfolio even with detailed instructions.

chiang_mai

thunderroad88 said:

If you want more useful or in-depth discussion on investing in funds, bonds, ITs etc then Citywire probably offers more…there are a greater number of more seasoned contributors there. This section of the MSE forum is great if you want to discuss the latest 0.1% movements in savings accounts or log in problems, but the investment threads seem to be more geared to helping those who are very new to investing and require basic suggestions …there is some useful information at times though which is why I keep looking in

Thank you for the tip. I personally am not looking for more indepth engagement on this subject but it struck me several times that many others do want to see the basics set out and have said as much on a couple of occiaisons. It was that thought that made me want to post up a straw man thinking that others who professed to be more seasoned investors, might chip in and help out. What more can be said, apart from oh well.

chiang_mai

OldScientist said:

It may also be because for many of us investing is as simple as picking:
1) A world equity index fund, but possibly adding some tilt (e.g., small caps or REITS)
2) A fixed income index fund (e.g., global bonds, UK gilts, MMF, or other cash), but possibly using more than one fixed income fund to tailor the overall duration.
3) Other things such as small amounts of gold, other commodities, crypto, etc. to taste.

Many years ago, I used to have separate funds by region (including an index fund and active fund for some regions) and by cap (for selected regions, e.g., UK small cap). If I remember rightly, the portfolio peaked at about 15 or so funds before I started a process of simplification (now in retirement I'm down to 5 funds plus cash - I'm considering removing two more). My criteria for picking the active funds were largely based on previous performance, ongoing costs, a low turnover (i.e., a buy and hold management style), and some difference in holdings from the index. I realised two things a) the amount of work needed to maintain it was not worth any performance or other gains and b) in the event of my death, my OH (who has little interest in these things) would not be able to manage such a complex portfolio even with detailed instructions.

I like the idea of keeping things simple but my jury is still out as to whether that is the right way or not for me personally or indeed anyone over age 65 or so. I can't help but feel that index trackers, for older investers such as myself, represent a risk to the downside when the market turns down since there is no alternative but to take the ride down or to cash out at a loss. If I was 20 or 30 something there would be no argument from me, trackers are the way to go. But at 75, hmmm, there may be better alternatives plus it's never too late to learn new things.  

snarffie

chiang_mai said:

I like the idea of keeping things simple but my jury is still out as to whether that is the right way or not for me personally or indeed anyone over age 65 or so. I can't help but feel that index trackers, for older investers such as myself, represent a risk to the downside when the market turns down since there is no alternative but to take the ride down or to cash out at a loss. If I was 20 or 30 something there would be no argument from me, trackers are the way to go. But at 75, hmmm, there may be better alternatives plus it's never too late to learn new things.  

If you like the idea of keeping things simple and see trackers as the way to go if you are younger, why doesn’t this apply at the age of 65? You potentially have 20-30 years of investing in you.  As long as you have a good cash buffer to ride out downturns, you should be grand?  I wonder if at 75, assuming you don’t want to leave anything to an inheritance, maybe just look at annuities or an annuities/tracker mix?  It keeps things simple at an age where that might be a good thing.

I think that’s where I am right now, but I do try to understand alternative approaches because as you say, it's (almost) never too late to learn new things!  As others have mentioned, other forums might be a better resource (even consult with an IFA?) for more esoteric approaches?

Alexland

chiang_mai said:

I can't help but feel that index trackers, for older investers such as myself, represent a risk to the downside when the market turns down since there is no alternative but to take the ride down or to cash out at a loss

That's why you diversify into cash, bonds and maybe other stuff so that you can both continue to draw income from an un-crashed asset and you can rebalance (sell high, buy low) into the crashed asset so it recovers quicker and stronger. When you are diversified you can see market crashes as an opportunity not a threat especially if you are naughty enough to over-rebalance into them.

I quite enjoy calculating how much gain I will make when equities recover to a previous valuation as a result of a rebalance during a crash. Now bonds have attractive yields again, cash is roughly keeping up with inflation and stock market valuations are looking rather optimistic then it's much less attractive to remain 100% equities. The investing landscape is very different to 5 years ago.