All in Vanguard?

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  • A_T
    A_T Posts: 959
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    cogito wrote: »
    Terry Smith, Nick Train and two or three others. Why would I want to invest in an index tracker containing good, bad and indifferent companies when I can invest in the good ones?

    When I look at the companies in the Lindsell Train funds there's only Pearson that I wouldn't want to buy.

    If you're so sure of them why not just buy them then instead of paying Nick Train to do it for you?
  • bundoran
    bundoran Posts: 174
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    bobhopeful wrote: »
    Thank you.

    My main concern is corporate bankruptcy or fraud. Especially after reading about Beaufort Securities. With my total SIPP and life savings invested approaching £1m, if a Fund Manager or platform does a Madoff £50K from FSCS provides little comfort. It is the risk of corporate systemic failure I want to mitigate as far as reasonable.

    There is a world of difference begtween a Beaufort situation, or a Madoff ponzi scheme, and investing in a Vanguard tracker. With Vanguard - and other providers who I'll mention below - they actually buy the constituent index shares/bonds and hold them in a separate ringfenced company which protects investors assets from any creditors of the investment company should the worst happen.
    bobhopeful wrote: »
    As Vanguard alternative accumulation index trackers I have short listed:
    For EM: Fidelity Emerging Markets P
    For Global: Fidelity Index World Fund P
    Global High Yield accumulation is not so easy to find an equivalent for Vanguard, Legal & General Global 100, is a possible although relatively limited in scope.

    Vanguard, HSBC Global, Fidelity and Legal and General have lots of very cheap regional and global tracker funds which are UK domiciled. It is worth taking some time to check them out.

    You have mentioned Fidelity Index World, but I'd point out that it invests in 1658 companies and it has nothing in South and Central America or Emerging Europe, and is underweight in Emerging Asia. Whereas Vanguard Global All Cap invests in 5752 companies worldwide, and HSBC FTSE All World in 2959, and both include a proportionate Emerging Markets element. Legal and General International invests in 2353 companies and covers Emerging Markets too, but chooses to be very underweight in UK stocks.

    There are plenty of choices. :)
  • bostonerimus
    bostonerimus Posts: 5,617
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    cogito wrote: »
    Terry Smith, Nick Train and two or three others. Why would I want to invest in an index tracker containing good, bad and indifferent companies when I can invest in the good ones?

    When I look at the companies in the Lindsell Train funds there's only Pearson that I wouldn't want to buy.

    If you know the "good" companies and the "good" funds then you'd be foolish not to invest in them.
    “So we beat on, boats against the current, borne back ceaselessly into the past.”
  • bowlhead99
    bowlhead99 Posts: 12,295
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    edited 18 June 2018 at 6:03PM
    bobhopeful wrote: »
    As Vanguard alternative accumulation index trackers I have short listed:
    For EM: Fidelity Emerging Markets P
    The Fidelity one tracks MSCI emerging markets, like the Vanguard emerging markets stock index fund, though both of them are tracking a different index (MSCI) to what the Vanguard FTSE emerging markets ETF tracks (i.e. FTSE) so it depends which particular Vanguard product you're giving up to buy the Fidelity one, whether it's a match.

    For Global: Fidelity Index World Fund P
    Not quite global as it only includes developed markets from the MSCI index and ignores all the Emerging markets.

    If you were formerly in one of the global Vanguard Funds such as Global All Cap Index Fund or an ETF such as Vanguard FTSE all world ETF, you'd be losing emerging markets to take on the Fidelity product
    Global High Yield accumulation is not so easy to find an equivalent for Vanguard, Legal & General Global 100, is a possible although relatively limited in scope.
    Presumably by high yield you are looking for high yielding / high dividend companies rather than bonds?

    Maybe something like the iShares World Value Factor ETF might be of interest - on the basis that companies that meet their algorithmic 'value' criteria may also pay a reasonable divi, though it's not the only metric for inclusion. OCF at 0.3% is comparable to the Vanguard all world high dividend yield ETF, and it's an accumulating one like you're looking for

    Alternatively iShares also do a MSCI World Quality Dividend ETF, again similar price at 0.28%. It's not a very big fund though (unlike their Value Factor one at a billion plus) so that would put me off. If you would be willing to take regional finds rather than global finds you could build your own by region (UK dividend, Europe dividend, EM dividend etc). But the ishares range of dividends funds are, unsurprisingly, distributing funds. If you want an index provider to put your money into companies following a formula to get exposure to companies that pay high yields, there may be an implicit assumption that you'd like the yield to be paid to you, giving you fewer options for accumulating versions.

    Still, a bit of income here and there is useful for periodic rebalancing and for paying platform fees etc.
    Cognito, thanks but with respect can we bang the drum for active fund management on another thread? I only invest in low fee trackers (for the reasons normally advocated which I am sure you know even if you choose to disagree). Thanks.
    Still, your preference to hunt for funds that *don't* just give you the result of a cheap market-cap weighted index as might be selected by tracker fans "for the reasons usually advocated"... and to instead seek out companies paying higher yields, for example... is responsible for Vanguard, iShares et al paying MSCI and FTSE to just make up some custom formulae on what to put into a 'high dividend' index because they figure they can find enough customers to buy it.

    To enable a "smart beta" index to capture extra divs while trying to avoid companies that only have a high historic yield because they're going bust or paid an unsustainably high div last time around, means you need a pretty tricksy set of rules. In an "active" version of the same type of fund you would do that initial filtering and then have a human make some judgements to fine tune whatever poor results come out of the computer and Vanguard themselves offer such a fund at about double the price of their high div yield ETF.

    I haven't really found a smart dividends index fund that I like (not that I'm investing for income myself, but parents are). No doubt you would see some passive investing advocates simply using traditional cap-weighted trackers and taking their "income" cashflows from the capital gains part of their total return, and if they didn't like the volatility in certain parts of the economic cycle from using cap weighted trackers which held both div and growth stocks, they would buy some bonds as well. You presumably don't actually want the income for its own sake, if you're going for an accumulation version
  • Alexland
    Alexland Posts: 9,653
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    edited 18 June 2018 at 7:16PM
    A_T wrote: »
    If you're so sure of them why not just buy them then instead of paying Nick Train to do it for you?

    For most people it would be a lot cheaper to pay the fund management fee than incur all the trade costs in trying to replicate the portfolio's positioning and weightings which would change over time.

    Without wanting to 'bang the drum' for active in a passive thread there can be advantages to taking both approaches in moderation.

    I like Vanguard but use different fund managers in each account as there's no reason to bet the ranch on a single fund manager.

    Alex
  • bostonerimus
    bostonerimus Posts: 5,617
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    I think people should stop worrying about fraud or platform failure....assuming they stick with reputable companies and don't invest with someone that sends them an unsolicited email or offers "8% return guaranteed". You should worry far more about asset allocation and if you are using active funds you should understand the risks and character of each fund and maybe not go all in on a single fund manager. That's not something I worry about with an index fund. One cap weighted total US equity index fund is much like another so I don't mind having a large amount in that one index fund.
    “So we beat on, boats against the current, borne back ceaselessly into the past.”
  • aroominyork
    aroominyork Posts: 2,802
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    cogito wrote: »
    When I look at the companies in the Lindsell Train funds there's only Pearson that I wouldn't want to buy.
    I think the commentary about Pearson in Global Equity's 31/3/18 factsheet makes a credible case for seeing the company as a value bet.
  • Glen_Clark
    Glen_Clark Posts: 4,397 Forumite
    bobhopeful wrote: »
    if a Fund Manager or platform does a Madoff .
    Madoff was able to keep his frauds secret by effectively operating as a one man band - so no-one else could find out what he was up to, even sometimes encouraging his clients to keep quiet by suggesting with a nod and a wink that they were benefitting from insider trading.
    If I knew any other fund managers or platforms like that I would be worried for their clients.
    “It is difficult to get a man to understand something, when his salary depends on his not understanding it.” --Upton Sinclair
  • bobhopeful
    bobhopeful Posts: 33 Forumite
    bundoran wrote: »
    There is a world of difference begtween a Beaufort situation, or a Madoff ponzi scheme, and investing in a Vanguard tracker. With Vanguard - and other providers who I'll mention below - they actually buy the constituent index shares/bonds and hold them in a separate ringfenced company which protects investors assets from any creditors of the investment company should the worst happen.


    Isn't the problem for investors that with Beaufort Securities it was confirmed that ring-fencing does not mean protected.

    The law allows the Administrators to use ring-fenced client assets to pay their sometimes substantial costs..
  • dunstonh
    dunstonh Posts: 116,044
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    Beaufort was a DFM. So, it was effectively running its own investment fund. As they focused on niche/specialist areas using illiquid investments, it is going to take a long time to sell those.

    Where funds use liquid conventional assets, the need for a specialist administrator is unlikely. e.g. fund contains shares in 100 companies. Sales on those can be made very quickly.

    If you go into investments with niche/specialist areas, especially illiquid areas, then this is one of the increased risks you take if the fund fails. If you stick to mainstream liquid investments, then a failure is less likely to see the scale of administration costs that Beaufort has.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
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