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    • DennisTenus
    • By DennisTenus 9th Jan 18, 5:07 PM
    • 158Posts
    • 14Thanks
    DennisTenus
    Portfolio Fund Assistance
    • #1
    • 9th Jan 18, 5:07 PM
    Portfolio Fund Assistance 9th Jan 18 at 5:07 PM
    Hi all,

    I need some portfolio fund assistance please. I have 45K cash in IWeb left to buy funds with to form my portfolio with my existing holdings as follows:

    10K Fundsmith
    10K VLS80
    5K Legg Mason IF Japan

    I'm trying to not split it between that many funds to keep costs to the absolute minimum.

    I've had suggestions before of types of things I need to look at to diversify and spread risk but I really need actual fund name suggestions as I'm no expert!

    I'd like a split of active/passive ideally too and i'm in this for the medium to long term (all being well!)

    Thanks in advance.
Page 2
    • chrisgg
    • By chrisgg 9th Jan 18, 9:48 PM
    • 61 Posts
    • 52 Thanks
    chrisgg
    At this stage, it seems it would be over complicating things to add funds such a Fundsmith to your portfolio. As Prism has said, it is difficult given we all have different priorities and concerns.

    If you wanted to split it between active and passive, you could go with VLS 80 (assuming you are comfortable with the above average risk of this fund, and have the temperament/means to hold it in a market crash) and complement it an active multi asset fund such as Baillie Gifford Managed. This has low charges (for an active fund) and a similar equity weighting to VLS 80.

    Based on this, you could gain investment experience of both active and passive, and decide which style suits you best and the one you're most comfortable with.
    • Alexland
    • By Alexland 9th Jan 18, 10:01 PM
    • 2,549 Posts
    • 1,930 Thanks
    Alexland
    You beginning to see the problem? We all have different goals and attitudes to risk. Alexland is worried about a fund with a PE over 20 - I don't lose any sleep about a fund with PE over 40 (btw your Japan fund is 40).
    Originally posted by Prism
    How can you not be concerned about a P/E of 40? Sure some companies don't pay dividends as they reinvest into growth but there should still be earnings on the income statement. Earnings are the measure of the economic viability of the business. If we loose track of earnings we might as well be swapping bitcoins or magic beans. Sure it's nice to have high asset valuations but it's nicer to know there's an underpinning logic acting as a foundation.

    Alex.
    Last edited by Alexland; 09-01-2018 at 10:03 PM.
    • Prism
    • By Prism 9th Jan 18, 10:37 PM
    • 352 Posts
    • 269 Thanks
    Prism
    How can you not be concerned about a P/E of 40? Sure some companies don't pay dividends as they reinvest into growth but there should still be earnings on the income statement. Earnings are the measure of the economic viability of the business. If we loose track of earnings we might as well be swapping bitcoins or magic beans. Sure it's nice to have high asset valuations but it's nicer to know there's an underpinning logic acting as a foundation.

    Alex.
    Originally posted by Alexland
    Well not all my funds have that PE, but the growth ones tend to have something around that. PE is a view of the history of that company but not where they are going. In some ways a high PE is a confirmation that others also believe in the future of that company. Take Amazon - its got a current PE of 315. Is that too high? Lots of people seem to disagree. Ocado is 237, Boohoo is 86, Paypal is 62, Tesla is off the scale. I would rather hold funds with those companies than look for a value fund with a bunch of out of favour companies around the 15-20 mark.

    I didnt go looking for high PE funds - its just the ones I like happen to hold expensive companies. It may or may not be the correct price, i have no idea. Maybe some of those companies will crash and never come back like the UK banks. I have plenty of time to find out - well about 15 years or so. Like I said, it doesn't worry me at this point
    • DennisTenus
    • By DennisTenus 10th Jan 18, 3:44 PM
    • 158 Posts
    • 14 Thanks
    DennisTenus
    Yes, silly question. that's exactly why he listed them...


    Emerging markets ; as opposed to countries with developed markets

    If you don't really know what you're doing with this sort of stuff, there's no shame in recognising that and just putting more money into the VLS80 which covers the larger companies in broad global markets (including emerging markets). The emerging markets content of the equities within your VLS80 is about 7.5% of the equities you have in that fund. However, as you've added other funds such as Fundsmith and the Japan one on the side - which only have companies in developed markets - you will have diluted down the EM content of the overall portfolio. If you buy more VLS80, you will increase it again (as well as also increasing bond content, reducing volatility).

    By having your money in a fund such as VLS80 which allocates it to equities in all major regions (US, UK, Europe, Japan, other developed Asia-Pacific, emerging markets) and across asset classes (equities, government bonds, index linked government bonds, corporate bonds) it is like a ready-made portfolio all within one holding, right off the shelf. It covers the basic major areas you would want, and is far better than not investing at all.

    If you are going to decide that instead of VLS80 being your whole portfolio, you are going to leave space in the 70k total to add other things on top of that (i.e., dilute the VLS80 holding with other stuff), you should probably aim for that 'other stuff' to be areas that VLS80 does not cover. Rather than duplicating the stuff it already covers, or giving more exposure to a particular country or company type.

    The only reason really to add extra funds around the side of the VLS80 in a 'core and satellite' or 'hub and spoke' style, would be if you decide there are other asset classes or global regions or company types which are particularly under-bought by your generalist VLS80 fund, compared to what you want. If that is your goal, you could leave room in the 70k to accommodate them while having VLS80 be the core of your holdings, with the additional holdings just providing little tweaks to tilt the overall portfolio to whatever you like.

    However, to be frank, it sounds like you don't really know what portfolio you want to create and are just reaching out to us for ideas of what you might like to use to create a portfolio you might like. That is a bonkers way of allocating capital. You are just as likely to do harm than good, when messing with the allocations Vanguard gave you.

    The VLS series of funds is designed to be a whole portfolio of developed and emerging markets equities and bonds right off the shelf ; you could use it for an entire portfolio, or more experienced investors might want to complement it with something and add their own slant, if they know what it is they want to do and why they want to slant the portfolio in a particular direction. Likewise, the Fundsmith fund is designed to be a general global developed markets100% equities fund, leaving you to just add a few other things to balance out your overall asset allocation to what you want. The idea of buying VLS80, but then also adding Fundsmith, and then adding more Japan, and then going online and asking everyone around what extra funds they would fancy adding, seems like a mess.

    You don't need a portfolio designed by a committee of forum members with their own tastes and preferences and no vested interest in your actual goals and needs. You just need to buy something simple that isn't too risky/volatile for what you can handle. You can do that by buying VLS or one of their rivals, or by doing a lot more research and creating something uniquely custom just for you.

    With your level of experience it's unlikely you need something uniquely custom just for you. Following that path will just tempt you into doing things you should avoid - like trying to copy what other people with different levels of experience or risk tolerance have done, or just buying funds to stuff into your portfolio because they look nice in the performance charts due to having a high return in the last five to eight years when markets were rising rapidly.
    Originally posted by bowlhead99
    I'm sure I said at the start of this that I'm no expert BUT I am trying to learn, reading lots, asking on forums such as this, getting other advice etc.

    I understand what you are saying but I don't want to put all my eggs in one basket with VLS (like I have seen other people have recommended against in other threads). You can't possibly be telling me that VLS is perfect one solution fits all and will definitely be ok come rain or shine?!? Tell me, what would be a good alternative to VLS that's similar in that it's "simple that isn't too risky/volatile for me"? Baillie Gifford Managed??

    I want to mix it up a bit and some risk. I'm not putting all my money in this either, so I have safety net of probably over 6 months in the very unlikely event I lost my job or something else bad happened, obviously don't know when I might need it but all being well I should be able to leave it for years.

    Yes I am reaching out for ideas, it would have been nice instead of criticising me, to give me some suggestions or pointers like other people have, I'm not going to hold you to it, I may not do it, I'm taking all the information, research and opinions on board.

    So in a nutshell is there really any problem in maybe putting 50% in VLS80 and then the rest in other funds and mixing it up a bit?

    I've been doing the other approach in HL that you mention - buying LOTS of funds I like the look of, some up some down, up at the minute, may not be in crash no, who knows... it's interesting though. How else am I supposed to learn this and become an expert like you (while working full time plus doing many other things)?
    • DennisTenus
    • By DennisTenus 10th Jan 18, 3:55 PM
    • 158 Posts
    • 14 Thanks
    DennisTenus
    You beginning to see the problem? We all have different goals and attitudes to risk. Alexland is worried about a fund with a PE over 20 - I don't lose any sleep about a fund with PE over 40 (btw your Japan fund is 40). Some people like bonds - I don't have any place for them at all right now since they provide such a small return. Some people need their money within 5 years and are concerned about a crash - others are looking for a 30 year + investment and will likely see a few crashes during that time.

    Until you can be sure I would follow Bowlhead99's advice and stick to VLS80 and maybe add a small amount into a diverse fund if you want to assess your own risk level. But have a plan for your goal with it. Saying that, I am assuming you are coping with your Legg Mason IF Japan fund? Did you hold it at the end of 2016 when it dropped around 25% in little over a month? How did or would that make you feel? Since then it is up 55% but that's the easy part.
    Originally posted by Prism
    Yes I am! That's why I like all the opinions on here and will formulate my own opinion/decision in time (rightly or wrongly).

    I haven't had Legg Mason IF Japan that long.... would you recommend I sell some of it when I'm UP on it? Like now....
    • TAMB
    • By TAMB 10th Jan 18, 4:11 PM
    • 5 Posts
    • 5 Thanks
    TAMB
    The S&P500 P/E is currently 26.5, so unless you avoid equities altogether, whatever fund you choose to invest in will likely have a high P/E ratio.
    Originally posted by greatkingrat
    Terry Smith has a much greater focus on Return on Capital than he does on P/E ratios. Something to think about, this is a quote from Charlie Munger (one half of Berkshire Hathaway).

    "Over the long term, it's hard for a stock to earn a much better return than the business which underlies it earns. If the business earns 6% on capital over forty years and you hold it for that forty years, you're not going to make much different than a six percent return - even if you originally buy it at a huge discount.

    "Conversely, if a business earns 18% on capital over twenty or thirty years, even if you pay an expensive looking price, you'll end up with one hell of a result."
    • Eco Miser
    • By Eco Miser 10th Jan 18, 4:17 PM
    • 3,444 Posts
    • 3,234 Thanks
    Eco Miser
    You can't possibly be telling me that VLS is perfect one solution fits all and will definitely be ok come rain or shine?!?
    Originally posted by DennisTenus
    It's not perfect and there are no guarantees, but it's close, and easy to use with little understanding needed. It may be one big basket, but there's loads of little baskets inside.
    There will always be funds that do better, and always be funds that do worse. When the (global) market goes down, VLS will go down, when the market goes up, VLS will go up.


    Alternatives are L&G MI series, Blackrock Consensus, HSBC global.

    Or you could do a lot of studying and roll your own.
    Eco Miser
    Saving money for well over half a century
    • k6chris
    • By k6chris 10th Jan 18, 4:21 PM
    • 221 Posts
    • 380 Thanks
    k6chris

    So in a nutshell is there really any problem in maybe putting 50% in VLS80 and then the rest in other funds and mixing it up a bit?
    Originally posted by DennisTenus
    No none whatsoever. The reason no-one gives an absolute answer is because there is no absolute answer. Some of that is based on your timescales and risk appetite, much is based on second guessing what will happen in the world over the next 10 years (and good luck with that!).

    I am going for 50%(ish) in VLS80 and 50% in smaller managed funds that cover disperate sectors, markets and investement types. Probably more art than science but I will sleep soundly at night.
    EatingSoup
    • Prism
    • By Prism 10th Jan 18, 4:40 PM
    • 352 Posts
    • 269 Thanks
    Prism
    Yes I am! That's why I like all the opinions on here and will formulate my own opinion/decision in time (rightly or wrongly).

    I haven't had Legg Mason IF Japan that long.... would you recommend I sell some of it when I'm UP on it? Like now....
    Originally posted by DennisTenus
    I'll leave that up to you . I have around 10% of my portfolio in Legg Mason Japan which satifies my 10% Japan rough guideline. I'm not selling any unless it gets to about 15% when I will probably consider it. Its my best performing fund. I also like it because its high conviction in few companies and rarely changes. This is partly what makes it a bit volatile.
    • DennisTenus
    • By DennisTenus 10th Jan 18, 6:12 PM
    • 158 Posts
    • 14 Thanks
    DennisTenus
    It's not perfect and there are no guarantees, but it's close, and easy to use with little understanding needed. It may be one big basket, but there's loads of little baskets inside.
    There will always be funds that do better, and always be funds that do worse. When the (global) market goes down, VLS will go down, when the market goes up, VLS will go up.

    Alternatives are L&G MI series, Blackrock Consensus, HSBC global.

    Or you could do a lot of studying and roll your own.
    Originally posted by Eco Miser
    Thanks, going to put some in HSBC Global.

    No none whatsoever. The reason no-one gives an absolute answer is because there is no absolute answer. Some of that is based on your timescales and risk appetite, much is based on second guessing what will happen in the world over the next 10 years (and good luck with that!).

    I am going for 50%(ish) in VLS80 and 50% in smaller managed funds that cover disperate sectors, markets and investement types. Probably more art than science but I will sleep soundly at night.
    Originally posted by k6chris
    Exactly, thanks

    I'll leave that up to you . I have around 10% of my portfolio in Legg Mason Japan which satifies my 10% Japan rough guideline. I'm not selling any unless it gets to about 15% when I will probably consider it. Its my best performing fund. I also like it because its high conviction in few companies and rarely changes. This is partly what makes it a bit volatile.
    Originally posted by Prism
    Well I'll have 7% ish so thats probably ok for me I think, probably will keep it as my most risky fund.
    • DennisTenus
    • By DennisTenus 10th Jan 18, 6:19 PM
    • 158 Posts
    • 14 Thanks
    DennisTenus
    I've noticed that some funds have a lower selling price than than the buy price. Why is this?

    I guess this means for at least a while you are at a loss straight away. Is it to dissuade people from selling quickly?
    • Linton
    • By Linton 10th Jan 18, 6:40 PM
    • 9,392 Posts
    • 9,526 Thanks
    Linton
    I've noticed that some funds have a lower selling price than than the buy price. Why is this?

    I guess this means for at least a while you are at a loss straight away. Is it to dissuade people from selling quickly?
    Originally posted by DennisTenus
    Yes - signing on new unit holders and deleting old unit holders takes administrative effort. If the costs created by frequent traders arent paid by the traders they will be paid for by everyone else who isnt trading, hidden in the overall charge. So in principle a buy/sell split price is fairer all round. But investors tend not to like it because they think, possibly rightly or possibly wrongly, that the split is just an extra cost.
    • DennisTenus
    • By DennisTenus 10th Jan 18, 6:49 PM
    • 158 Posts
    • 14 Thanks
    DennisTenus
    Yes - signing on new unit holders and deleting old unit holders takes administrative effort. If the costs created by frequent traders arent paid by the traders they will be paid for by everyone else who isnt trading, hidden in the overall charge. So in principle a buy/sell split price is fairer all round. But investors tend not to like it because they think, possibly rightly or possibly wrongly, that the split is just an extra cost.
    Originally posted by Linton
    I see. Thanks. I can understand that but some of them the difference is quite considerable. Something to watch out for definitely which I think I missed previously.

    Whats the "general" if there is such a thing, Baillie Gifford Managed fund people mentioned previously thats similar to VLS80? This one...?
    https://iwebfunds.webfg.com/index.php?section=sheet&idShareclass=F0GBR04RNH
    • Alexland
    • By Alexland 10th Jan 18, 7:13 PM
    • 2,549 Posts
    • 1,930 Thanks
    Alexland
    I see. Thanks. I can understand that but some of them the difference is quite considerable. Something to watch out for definitely which I think I missed previously.
    Originally posted by DennisTenus
    I wouldn't avoid a fund just because it has a different buy/sell price - the funds that have the same price are just absorbing the trades in their ongoing admin costs so you pay either way.
    • DennisTenus
    • By DennisTenus 10th Jan 18, 9:52 PM
    • 158 Posts
    • 14 Thanks
    DennisTenus
    I wouldn't avoid a fund just because it has a different buy/sell price - the funds that have the same price are just absorbing the trades in their ongoing admin costs so you pay either way.
    Originally posted by Alexland

    Even if the difference is quite high?


    I assume when HL and other providers/people talk about "rebalancing" a portfolio, they mean to start with someone may decide y% in A and z% in B and w% in C etc, then over time those % move due to up's and down's and so it's not the same % started out at, so rebalancing is getting it back the original % set for A B and C? In simple terms!
    Last edited by DennisTenus; 10-01-2018 at 9:56 PM.
    • AlanP
    • By AlanP 11th Jan 18, 2:05 PM
    • 1,203 Posts
    • 866 Thanks
    AlanP
    Even if the difference is quite high?


    I assume when HL and other providers/people talk about "rebalancing" a portfolio, they mean to start with someone may decide y% in A and z% in B and w% in C etc, then over time those % move due to up's and down's and so it's not the same % started out at, so rebalancing is getting it back the original % set for A B and C? In simple terms!
    Originally posted by DennisTenus
    Yes, that's it in a nutshell. Not all your investments will grow / shrink at the same rate so, to keep aligned to your original Asset Allocation Plan you need to do a bit of maintenance occasionally.

    Buying / Selling to get back to original plan is one way, reallocating future contributions is another way.

    Don't get too stressed about smallish changes in allocation, they will tend to come out in the wash over a year or so.
    • DennisTenus
    • By DennisTenus 11th Jan 18, 2:40 PM
    • 158 Posts
    • 14 Thanks
    DennisTenus
    Yes, that's it in a nutshell. Not all your investments will grow / shrink at the same rate so, to keep aligned to your original Asset Allocation Plan you need to do a bit of maintenance occasionally.

    Buying / Selling to get back to original plan is one way, reallocating future contributions is another way.

    Don't get too stressed about smallish changes in allocation, they will tend to come out in the wash over a year or so.
    Originally posted by AlanP
    Got it, thanks
    • DennisTenus
    • By DennisTenus 11th Jan 18, 2:41 PM
    • 158 Posts
    • 14 Thanks
    DennisTenus
    At this stage, it seems it would be over complicating things to add funds such a Fundsmith to your portfolio. As Prism has said, it is difficult given we all have different priorities and concerns.

    If you wanted to split it between active and passive, you could go with VLS 80 (assuming you are comfortable with the above average risk of this fund, and have the temperament/means to hold it in a market crash) and complement it an active multi asset fund such as Baillie Gifford Managed. This has low charges (for an active fund) and a similar equity weighting to VLS 80.

    Based on this, you could gain investment experience of both active and passive, and decide which style suits you best and the one you're most comfortable with.
    Originally posted by chrisgg
    The Baillie Gifford Managed fund this one?
    https://iwebfunds.webfg.com/index.php?section=sheet&idShareclass=F0GBR04RNH
    • chrisgg
    • By chrisgg 11th Jan 18, 10:27 PM
    • 61 Posts
    • 52 Thanks
    chrisgg
    Originally posted by DennisTenus
    That's the one, yes
    • sixpence.
    • By sixpence. 12th Jan 18, 3:21 AM
    • 138 Posts
    • 31 Thanks
    sixpence.
    My plan/approach is to have tracker funds (including a VLS 60) make up about 85% of my portfolio. The VLS will make up about 73%/85%. I've left the rest to research and play with (15% in other equity funds the VLS doesn't cover like China etc).

    I think Bowlhead has given some pretty sound advice: Either you do research or you stick it all in a VLS
    Last edited by sixpence.; 12-01-2018 at 3:36 AM.
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