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  • FIRST POST
    • JustAnotherSaver
    • By JustAnotherSaver 11th Aug 19, 8:08 PM
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    JustAnotherSaver
    For those familiar with Lars Kroijer and his views
    • #1
    • 11th Aug 19, 8:08 PM
    For those familiar with Lars Kroijer and his views 11th Aug 19 at 8:08 PM
    I've been meaning to ask this on here for some time now but keep failing to get round to it. There was a bit in the book that if i remember right i wanted to refer to but it looks like i've left the book at work. There was also a thread on here i saw within the last month or so that made me think of this even moreso but i've ended up leaving it that long that i can't find it now. Typical


    Someone on here, i forget who, suggested i read the book, so i started & a lot of what he says seems to make sense to me. "Do you have an edge" gets repeated throughout. No i certainly do not is my answer.

    A couple years ago i had another book suggested to me on here & Lars Kroijer seems to be basically echoing that one, or at least so far as i've read he seems to be echoing it.


    The more i read it the more i agree that not only do i not have an edge but how do 99% of people have an edge? Likely they do not. They're either lucky or i don't know what.


    Which brings me here. From reading in these forums, i could be wrong but it appears that the majority and not the minority believe they have an edge, certainly amongst the regular posters and it makes me wonder - why is that.


    The other book i had (name of which i forget as i've loaned it out although i can try and get the title if it helps any) basically suggested cheap multi asset index trackers (i'm hoping i've got the correct term down there, i have a habit of not doing!) are the best way forward for the average Joe and that historically they outperform managed funds.

    I think this is the point someone on here steps in and says absolutely everything is managed anyway. I don't know enough to argue that point but clearly that person must know what these others are on about when they refer to managed vs otherwise?
    The Lars Kroijer Investing Demystified book i'm reading seems to be going down the same path, as far as i've read.



    The thread on here that i referred to which was posted recently, many spoke of actively managed funds in their portfolio and how it is either totally actively managed or mostly actively managed. So when i'm reading that most people don't have this 'edge' that Lars Kroijer mentions in his book, i'm wondering ... how come most of the regulars on MSE actually do??


    I understand that the responses to this are probably going to result in me questioning life itself and my mind will explode from the pushing and pulling - how people on both sides of the fence make sense and i don't know who's 'right' but what the hell. After reading the book i'm just curious on the stance from others.

Page 4
    • Malthusian
    • By Malthusian 16th Aug 19, 9:44 AM
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    Malthusian
    Not as I remember it, I think it was a standard recommendation at the time from financial advisers etc. as it was boom time in that sector of the markets, the same way property recently has been lapped up by pension funds etc.
    Originally posted by Crashy Time
    "Stick all your money in Japan" was not a standard recommendation from anyone in the UK, not even in the 70s when financial advice was far less regulated and scientific than it is now.

    And endowments weren't invested in Japan funds, they were generally - especially in the 70s and 80s - invested in the insurer's With Profits fund, which would have been unlikely to overweight Japan.

    The endowment scandal was not about endowments underperforming due to betting everything on Japan, but about unrealistic projections of growth that would have not have been met whatever the insurer invested in. And investors spending the money they saved as interest rates decreased, instead of investing it to pay off the capital, to counteract the effect of lower interest rates, lower inflation and lower growth on their endowment.
    • badger09
    • By badger09 16th Aug 19, 11:21 AM
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    badger09
    Surely even a beginner will have enough curiosity to look at the breakdown of fund before buying it?
    Originally posted by DrSyn
    Agreed, and I would expect even a newbie to grasp that a FTSE World Tracker Index Fund is not the same as VLS 100


    So if they wanted a FTSE World Tracker index fund, they would quickly see that the breakdown of the VLS100 is not the same as the WTF.
    Originally posted by DrSyn
    I would argue that most beginners don't know they want a FTSE World Tracker Index Fund when they start investing.

    Consensus on here for newbie investors seems to be to opt for a Global Multi Asset Fund - which is why Vanguard, Blackrock etc are mentioned.

    So, having accepted that premise, how would a newbie investor know that the former was likely to outperform the latter over a 5 year period?.

    I'm probably not explaining myself very well. I'm still on the journey through the hierarchy of competence
    Last edited by badger09; 17-08-2019 at 12:54 PM. Reason: typo
    • Audaxer
    • By Audaxer 16th Aug 19, 11:49 AM
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    Audaxer
    I would argue that most beginners don't know they want a FTSE World Tracker Index Fund when they start investing.

    Consensus on here for newbie investors seems to be to opt for a Global Multi Asset Fund - which is why Vanguard, Blackrock etc are mentioned.

    So, having accepted that premise, how would a newbie investor know that the former was likely to outperform the latter over a 5 year period?.
    Originally posted by badger09
    If a newbie investor was looking for a one fund solution to get started, a global multi asset fund that also contains a percentage of bonds is more likely to be a better choice than either VLS100 or a FTSE World Tracker. If later in their investment journey as they become more experienced, they think they can cope with the volatility of 100% equities, it may then be a choice for them between a FTSE World Tracker or VLS100 or an active portfolio.
    • Malthusian
    • By Malthusian 16th Aug 19, 12:01 PM
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    Malthusian
    So, having accepted that premise, how would a newbie investor know that the former was likely to outperform the latter over a 5 year period?
    Originally posted by badger09
    It wasn't. Both VLS100 and the FTSE World are 100% equities. The reason for Vanguard LS underperforming the FTSE World over the last five years is predominantly Vanguard's lower exposure to the USA. There was no guarantee in 2014 that the USA would continue to outperform other markets, and there is no guarantee that this will continue for the future.

    If you would have been uncomfortable with having 57% of your money invested in the United States then a FTSE World tracker wouldn't have been a good choice. Never mind that it would have done better with hindsight.
    • Alexland
    • By Alexland 16th Aug 19, 2:12 PM
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    Alexland
    I agree there is no evidence to suggest that a FTSE World will do better than VLS100 going forward and to reduce the very high US or remove home UK bias then an All-World or All-Cap index tracker may be a better choice for a 100% equities investor. Still for a multi asset fund this matters less as there is the additional bond diversification so VLS60/80 or HSBC GS Balanced/Dynamic are fine.
    • badger09
    • By badger09 16th Aug 19, 3:04 PM
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    badger09
    @ Audaxer, Malthusian & Alexland

    Thanks

    Surely even a beginner will have enough curiosity to look at the breakdown of fund before buying it?

    So if they wanted a FTSE World Tracker index fund, they would quickly see that the breakdown of the VLS100 is not the same as the WTF.
    Originally posted by DrSyn
    But the purpose of my earlier post was to point out to DrSyn that
    the choice of VLS100 rather than a FTSE World Index Tracker did not mean ignorance of the make up of each, which I think is his implication.

    As Alexland says, there is no evidence to suggest that a FTSE World will do better than VLS 100 going forward.

    I'm actually invested in both and will watch relative performance with interest.
    • Linton
    • By Linton 16th Aug 19, 3:30 PM
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    Linton
    It wasn't. Both VLS100 and the FTSE World are 100% equities. The reason for Vanguard LS underperforming the FTSE World over the last five years is predominantly Vanguard's lower exposure to the USA. There was no guarantee in 2014 that the USA would continue to outperform other markets, and there is no guarantee that this will continue for the future.

    If you would have been uncomfortable with having 57% of your money invested in the United States then a FTSE World tracker wouldn't have been a good choice. Never mind that it would have done better with hindsight.
    Originally posted by Malthusian

    I believe that the underperformance of VSL100 over the past 5 years is caused more by the higher allocation to the UK. The evidence for this belief is that the VLS100's allocations are very close to the FTSE All-World with the addition of extra UK. However the FTSE World and FTSE All-World indexes have given very similar performance in the same time period despite the FTSE World having a 10% higher US allocation.

    Note that although in the past 2-3 years the US has performed better than other markets that was not the case for the previous 2-3 years.


    Given the composition of the FTSE100 I am happy to predict that VLS100 will continue to underperform the FTSE World for the next 5 years.
    • Thrugelmir
    • By Thrugelmir 16th Aug 19, 5:26 PM
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    Thrugelmir
    someone who had a globally diversified portfolio (as LK recommends) wouldn`t have been burned by the Japanese meltdown
    Originally posted by Crashy Time

    Easy with hindsight to make such comments. Was a very different investment era compared to a couple of decades later.
    ““there really is no such thing as ‘the future’, singular. There are only multiple, unforeseeable futures, which will never lose their capacity to take us by surprise.””
    ― Niall Ferguson
    • Alexland
    • By Alexland 16th Aug 19, 5:38 PM
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    Alexland
    Japan would have been significant within a diversified cap weighted equity portfolio at the time.

    • fjh
    • By fjh 16th Aug 19, 6:02 PM
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    fjh
    I am a learner !! so please can you clarify- when talk of a World tracker - does that mean for example- HSBC FTSE All-World index or Fidelity Index World W Fund? + others? And as such these are 'immediate ' to buy in / sell unlike the Woodford funds?
    Please excuse my ignorance but have struggled on this albeit I 'like' what 'Lars' says due to its simplicity- and yes I have read his and AJ Bell's books -
    • Linton
    • By Linton 16th Aug 19, 6:17 PM
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    Linton
    I am a learner !! so please can you clarify- when talk of a World tracker - does that mean for example- HSBC FTSE All-World index or Fidelity Index World W Fund? + others? And as such these are 'immediate ' to buy in / sell unlike the Woodford funds?
    Please excuse my ignorance but have struggled on this albeit I 'like' what 'Lars' says due to its simplicity- and yes I have read his and AJ Bell's books -
    Originally posted by fjh

    Yes they are typical world trackers. There would be no problem selling them whenever you wanted. That applies to almost all funds: Woodford's problems are highly specific to his funds' particular circumstances, I cannot off-hand think of any other mainstream equity fund which has ever had the same difficulties.


    Sometimes funds may stop people buying units. This is not unusual in small sectors which become very popular such as Emerging Markets where there are insufficent sensible investment opportunities for all the money that people want to invest.
    • ColdIron
    • By ColdIron 16th Aug 19, 6:30 PM
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    ColdIron
    I am a learner !! so please can you clarify- when talk of a World tracker - does that mean for example- HSBC FTSE All-World index or Fidelity Index World W Fund? + others? And as such these are 'immediate ' to buy in / sell unlike the Woodford funds?
    Originally posted by fjh
    I wonder if the use of 'immediate' means getting a real time quote such as when buying a tracker via an EFT and by 'unlike the Woodford funds' they mean funds in general. Obviously with the exception of Woodford's Equity Income which can't be bought or sold at all. If so the two funds mentioned are actual funds (OEICs), not ETFs, so they have a daily forward priced valuation point
    Last edited by ColdIron; 16-08-2019 at 7:15 PM.
    • Thrugelmir
    • By Thrugelmir 16th Aug 19, 6:34 PM
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    Thrugelmir
    What happened to the Japanese markets is a valuable warning to investors.
    Originally posted by Linton
    A fair comment. In summary economic stagnation. Something that Central banks have been desperate to avoid in the past decade. QE being the primary weapon. The ageing (declining) Western population isn't helping matters either.
    ““there really is no such thing as ‘the future’, singular. There are only multiple, unforeseeable futures, which will never lose their capacity to take us by surprise.””
    ― Niall Ferguson
    • Alexland
    • By Alexland 16th Aug 19, 6:49 PM
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    Alexland
    I am a learner !! so please can you clarify- when talk of a World tracker - does that mean for example- HSBC FTSE All-World index or Fidelity Index World W Fund? + others? And as such these are 'immediate ' to buy in / sell unlike the Woodford funds?
    Originally posted by fjh
    Buying a tracker should be significantly more liquid than a failing active fund with unlisted shares - the "All" means it includes circa 10% emerging market exposure as opposed to being developed markets only. All costs a bit more but gives additional diversification.

    If you want immediate then you could buy a World ETF (such as Blackrock iShares SWDA) or All-World ETF (such as Vanguard VWRL) or if you are happy to wait for the fund manager to action the change you could use an OEIC fund such as Fidelity World or HSBC FTSE All-World funds.

    There are a number of other differences between ETFs and OEICs that are worth understanding.

    All of these are 100% equities with circa 50% downside risk in adverse market conditions.

    Alex
    • Crashy Time
    • By Crashy Time 16th Aug 19, 9:06 PM
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    Crashy Time
    "Stick all your money in Japan" was not a standard recommendation from anyone in the UK, not even in the 70s when financial advice was far less regulated and scientific than it is now.

    And endowments weren't invested in Japan funds, they were generally - especially in the 70s and 80s - invested in the insurer's With Profits fund, which would have been unlikely to overweight Japan.

    The endowment scandal was not about endowments underperforming due to betting everything on Japan, but about unrealistic projections of growth that would have not have been met whatever the insurer invested in. And investors spending the money they saved as interest rates decreased, instead of investing it to pay off the capital, to counteract the effect of lower interest rates, lower inflation and lower growth on their endowment.
    Originally posted by Malthusian
    No, the advice was stick SOME of your money in Japan, and in my case it performed well, and I got out just in time, why wouldn`t an investment professional advise someone in say 1985 to put money into Japanese trackers/Unit trusts etc.? I didn`t mention endowments either.
    • Crashy Time
    • By Crashy Time 16th Aug 19, 9:13 PM
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    Crashy Time
    Easy with hindsight to make such comments. Was a very different investment era compared to a couple of decades later.
    Originally posted by Thrugelmir
    So you are saying that a diversified portfolio wouldn`t have performed better than one heavy on Japan based investments, and that somehow people didn`t know that markets can crash and diversification can offset this to an extent back then?
    • Audaxer
    • By Audaxer 16th Aug 19, 9:26 PM
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    Audaxer
    Given the composition of the FTSE100 I am happy to predict that VLS100 will continue to underperform the FTSE World for the next 5 years.
    Originally posted by Linton
    Most of the UK allocation of VLS100 is actually in the FTSE All Share Index rather than the FTSE 100 index, although I appreciate that may not make much difference to your prediction.
    • Alexland
    • By Alexland 16th Aug 19, 9:59 PM
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    Alexland
    So you are saying that a diversified portfolio wouldn`t have performed better than one heavy on Japan based investments
    Originally posted by Crashy Time
    In the graph I posted above a diversified cap weighted portfolio would have been around 40% Japan at the time. Still global investment returns over the last 40 years have been satisfactory despite some stuff that got very big then small again in Japan.

    Most of the UK allocation of VLS100 is actually in the FTSE All Share Index rather than the FTSE 100 index, although I appreciate that may not make much difference to your prediction.
    Originally posted by Audaxer
    FTSE100 is around 80% of the FTSE All Share index anyway so VLS is heavy on both.

    Alex
    • fjh
    • By fjh 17th Aug 19, 8:57 AM
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    fjh
    I wonder if the use of 'immediate' means getting a real time quote such as when buying a tracker via an EFT and by 'unlike the Woodford funds' they mean funds in general. Obviously with the exception of Woodford's Equity Income which can't be bought or sold at all. If so the two funds mentioned are actual funds (OEICs), not ETFs, so they have a daily forward priced valuation point
    Originally posted by ColdIron
    Thanks for replies.
    Yes my poor choice of word ‘immediate ‘ does reflect desire to have same ‘timing’ as FTSE shares rather than the - unit trust style of having to wait and sell almost ‘blind’ as to what price you may get.
    • Alexland
    • By Alexland 17th Aug 19, 9:38 AM
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    Alexland
    In which case start learning about ETFs such as the SWDA and VWRL that I mentioned above. ETFs have no FSCS protection and its generally best to stick with the larger ones to reduce the bid ask spread when you buy and sell. Avoid synthetic or leveraged ones unless you really understand the extra risk. Some platforms will charge more to trade ETFs and less to hold them ongoing.

    Alex
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