Pension and ISA yes, more so the former but wanted to get the lump invested asap in one or both. However Brexit is causing me extra hesitation, naturally. A shorter term fixed rate ISA would alleviate that and give me the time I need to shop around.
Thanks for the numbers @golfaddick and other points made. I'd definitely need the professional input but keen to learn for myself in parallel. Octopus investments has been recommended to me in the past and I'll probably have a poke around there in due course too.
In that case load up a cash ISA before the new tax year. I wouldn't worry about rushing the pension this month. I don't know what you earn, cash in bank etc, but by the sounds of it you will have a large carry forward allowance from the three prior years if you and your employer have not been contributing to a pension and have been working/earning. It very much depends on your circumstances/employed/self employed/salary etc but potentially you could have over £100k of allowance to use.
I think it'd be worth you seeing an advisor in general, as an example you have turned 50, when/what are your retirement plans, you may be better off not having an ISA and loading up the pension, taking the tax relief as you would be able to access in 5 years and earn minimum of 25% from the governments contribution, maybe more if a higher rate tax payer.
These are all general points, and your own personal circumstances need taking into account.
I'd also say that 0.75% AMC /platform charge (call it what you will) is not that good. The main couple of providers I use are 0.4 max(0.20% if you invest over 25k) You could even build in my charge (usually 0.5% but to match theirs I would do 0.35% for the lower amounts). For that you will get my 30 yrs experience & regular review meetings. I don't usually use ETFs (but wounld do if you wanted a cheap option).... much prefer spending another 0.5%pa and get active management from the top names such as Baillie Gifford, Invesco, JP Morgan etc.
A good chunk of my degree (8 years ago so obviously a bit rusty) was looking at ETFs and actively managed funds, and the conclusion that we largely came to was that actively managed did not tend to outperform the market (and therefore ETFs).
Depends if you research the market or not. I can tell you the best UK, US, European & Asian funds over the past 3 & 5 years which have outperformed their peers. In the same sectors there will be activrly managed funds which are complete dogs. An ETF / tracker / passive fun will simply track/mirror the sector it's in.
Well what we did was look at actively managed portfolios and plotted all of the alphas together AND took into account fees for the funds, and also looked at various methods to determine statistical significance in our findings.
Active showed no statistically significant difference to passive. Like you said yourself, you will get funds that a)outperform their peers and b) outperform the market but that comes at the expense of the possibility of being under the market.
Effectively, you are paying someone money for volatility.
Fair enough. But over the long term a constistanly top quartile, actively managed fund, will always outperform a tracker. Yes, you might pay an extra 0.5 -0.75pa in fund charges but this will be outweighed by the extra 10%-20% growth. I've yet to see an ETF or tracker fund be in the top 10% over this period. I'd much prefer to invest in Bailiee Giffords American fund than any US tracker fund you'd care to mention.
Many of the top rated funds ask 1%, especially if the specialise. You really don't know that?
Active fund prices are broadly 600% higher than tracker funds.
There is hardly a manager or fund which has beaten the tracker return over any ten year period and none that have beaten the market over twenty years.
To show statistics to fool the punters, managers close funds when they stop performing, and set up a new fund. So you will be lucky to find a fund which has been running for more than ten years. So the statistics are corrupted by hiding the failure of managers to beat the market and so massage active manager performance by removing the chance of capturing under-performance.
If you could foretell which of the 1% of managers are going to beat the market over the next ten years and when to move to one of the next 1% of managers whose turn is to beat the market for a few years, you would beat the market.
The fact is that the risks involved are not rewarded, statistics prove it. You can measure the return actually obtained by investors and compare to the published returns of fund managers. Guess what, investors get less than market returns and managers on average show higher than market returns by a smidgen.
And guess what, investors have paid 6 times what it would have cost to guarantee getting market returns and avoiding any manager risk.
It's an entirely theoretical position that an active fund manager beats a passive fund.
I have obtained a 5 year return of 12% p.a entirely in tracker funds at a cost of 0.075%. An active manager charging 6 times the price would need to obtain 14.23% p.a to match it, not beat it. The risks involved would expose you to a losses significantly below market returns.
Active funds are used as marketing candy using lies damned lies and statistics.
I'd also say that 0.75% AMC /platform charge (call it what you will) is not that good. The main couple of providers I use are 0.4 max(0.20% if you invest over 25k) You could even build in my charge (usually 0.5% but to match theirs I would do 0.35% for the lower amounts). For that you will get my 30 yrs experience & regular review meetings. I don't usually use ETFs (but wounld do if you wanted a cheap option).... much prefer spending another 0.5%pa and get active management from the top names such as Baillie Gifford, Invesco, JP Morgan etc.
A good chunk of my degree (8 years ago so obviously a bit rusty) was looking at ETFs and actively managed funds, and the conclusion that we largely came to was that actively managed did not tend to outperform the market (and therefore ETFs).
Depends if you research the market or not. I can tell you the best UK, US, European & Asian funds over the past 3 & 5 years which have outperformed their peers. In the same sectors there will be activrly managed funds which are complete dogs. An ETF / tracker / passive fun will simply track/mirror the sector it's in.
Well what we did was look at actively managed portfolios and plotted all of the alphas together AND took into account fees for the funds, and also looked at various methods to determine statistical significance in our findings.
Active showed no statistically significant difference to passive. Like you said yourself, you will get funds that a)outperform their peers and b) outperform the market but that comes at the expense of the possibility of being under the market.
Effectively, you are paying someone money for volatility.
Fair enough. But over the long term a constistanly top quartile, actively managed fund, will always outperform a tracker. Yes, you might pay an extra 0.5 -0.75pa in fund charges but this will be outweighed by the extra 10%-20% growth. I've yet to see an ETF or tracker fund be in the top 10% over this period. I'd much prefer to invest in Bailiee Giffords American fund than any US tracker fund you'd care to mention.
Many of the top rated funds ask 1%, especially if the specialise. You really don't know that?
Active fund prices are broadly 600% higher than tracker funds.
There is hardly a manager or fund which has beaten the tracker return over any ten year period and none that have beaten the market over twenty years.
To show statistics to fool the punters, managers close funds when they stop performing, and set up a new fund. So you will be lucky to find a fund which has been running for more than ten years. So the statistics are corrupted by hiding the failure of managers to beat the market and so massage active manager performance by removing the chance of capturing under-performance.
If you could foretell which of the 1% of managers are going to beat the market over the next ten years and when to move to one of the next 1% of managers whose turn is to beat the market for a few years, you would beat the market.
The fact is that the risks involved are not rewarded, statistics prove it. You can measure the return actually obtained by investors and compare to the published returns of fund managers. Guess what, investors get less than market returns and managers on average show higher than market returns by a smidgen.
And guess what, investors have paid 6 times what it would have cost to guarantee getting market returns and avoiding any manager risk.
It's an entirely theoretical position that an active fund manager beats a passive fund.
I have obtained a 5 year return of 12% p.a entirely in tracker funds at a cost of 0.075%. An active manager charging 6 times the price would need to obtain 14.23% p.a to match it, not beat it. The risks involved would expose you to a losses significantly below market returns.
Active funds are used as marketing candy using lies damned lies and statistics.
Cant highlight text but most of this is total rubbish in my view, The are loads of active fund managers that beat the average year on year and usually beat trackers too. I do daily fund research & not many, if ever, does a tracker fund come out on top. The difference in performance far outways the difference in cost imo.
cant stop - just off to an investment seminar hosted by Invesco.
I have my growing retirement fund in a S&S ISA with Nutmeg which was one 'recommended' by Moneysavingexpert.com. Can't remember exactly what the fees are but they had a link on their website that entitled new customers to no fees for the first 6 months. I am not saying that I am recommending them but the low fees and the option to choose the level of risk I can tolerate in a fully managed fund was what attracted me. No exit fees either so I am free to move without penalty if I so decide. Hope this helps.
Hmmm. For a private pension I was quoted 0% in but 1.66% per annum and a huge exit fee in first 6 years so above has given real food for thought!
sounds like St James Place. Avoid them like the plaque.
It is, are you able to elaborate at all?
RDR, at the start of 2016, was supposed to get away from initial / front end charging. The "Retail Distribution Review" found that Investment Bonds may have been sold instead of some other product or scheme due to their charges & commission structure. Advisers could earn up to 8% commission where most pension & other plans would be 3%-5%. The idea around RDR was that investment schemes carried little or no charges (a max of around 1%) with the advisor getting his "commission" by charging a fee. Therefore there is no bias as the advisors fee (say 3% ) is the same no matter if he advises a pension, an ISA, an Investment Bond, a Structured Product or a VCT.
However, SJP have gone from a front end charge (initial) to a back end charge (exit fee). I believe its 5% for an investment & 6% for a pension - with SJP keeping 3% & the advisor getting the rest. All the products & schemes I listed above carry no exit fees & you could come out of them after 6 months or 6 years and it makes no difference.
PS - SJP advisors obviously only "advise" on SJP products. Its like the last 20 years hasn't happened.
@Dippenhall When it comes to active funds, I am more in your camp than Golfie's, I've been buying Vanguard trackers since you first mentioned this, and you are not the only one to say it, there have been a lot of discussions in the media.
However some people might read your remarks as suggesting that no active funds are worth holding, but I don't think that can possibly be true. As an example, my favourite fund is Lindsell Train Global Equity. I bought my first chunk in Oct 2014 at a price of exactly £1. The price today is £2.31. My biggest regret with this fund - and you are going to like this - is that I took some profits and sold a chunk at the end of July 2016, as i anticipated a Brexit -related fall in equity markets. I sold that chunk at £1.57...It's not an obscure fund by any means and its three biggest holdings are global FMCGs, including my beloved Unilever; but I also learnt that it had invested in both Celtic and Juventus football clubs!
@Dippenhall When it comes to active funds, I am more in your camp than Golfie's, I've been buying Vanguard trackers since you first mentioned this, and you are not the only one to say it, there have been a lot of discussions in the media.
However some people might read your remarks as suggesting that no active funds are worth holding, but I don't think that can possibly be true. As an example, my favourite fund is Lindsell Train Global Equity. I bought my first chunk in Oct 2014 at a price of exactly £1. The price today is £2.31. My biggest regret with this fund - and you are going to like this - is that I took some profits and sold a chunk at the end of July 2016, as i anticipated a Brexit -related fall in equity markets. I sold that chunk at £1.57...It's not an obscure fund by any means and its three biggest holdings are global FMCGs, including my beloved Unilever; but I also learnt that it had invested in both Celtic and Juventus football clubs!
No I am not suggesting that no active fund is going to have periods of out-performing the market. I am saying that it is rarely managers can repeat their success over sustained periods. They have success over three to five years in the main then fall away.
The only way of beating the market through active managers over more than 20 years is either (i) being able to predict which handful of funds from the thousands out there is going to be the one to beat the market long term OR (ii) changing managers to continually capture short term out-performance. Option (i) is rarely attractive to short term investors because their short term performance looks dull when investors are looking year by year to shoot the lights out.
Most people, with the advice from advisers, who earn and justify their existence by churning, take option (ii) and review managers and try to consistently pick the winners. It can work for some but not for the majority, just like the lottery works for some people.
The point that confuses Golfie is that actual returns of punters are lower than actual returns of managers which sounds a bit odd. It's a fact because most people switch out of a manager after under-performing, just before he out-performs and invest with a manager who is about to under-perform. It's a fact borne out by statistics, it's not a 'view".
So what is theoretically the best option i.e invest in active managers because short term performance can beat the tracker, is based on driving by your rear view mirror when it's easy to pick the winners. It, doesn't work in practice looking forward because no one has yet been able to bring astrology to bear on predicting each manager's future performance.
Three random Google results reporting on research into fund manager performance:
FundExpert has analysed the track record of 1,087 funds across all the Investment Management Association sectors.The research, based on analysis of funds with at least seven to 10 year track records, reveals that over 91 per cent of funds are “mediocre at best”.
"However, the study concludes that this result is probably a reflection of survivorship bias, since it finds little evidence of performance persistence from year to year among these managers, and evidence to suggest that the risk-adjusted performance of these experienced managers actually declined over the ten year study sample period, that is, a decline in performance as experience increases!
"On average, managers with lO-year track records at the samefund do not perform better than man- agers with shorter track records. Also, for these experienced managers, superior performance in onefive-year period is not predictive of superior performance over the next five years. However, inferior performance persists, particularly for funds with above average expense ratios."
Very interesting and compelling argument from @Dippenhall there, but I reckon @golfaddick will have some too. I hope so, as I do have quite a few active funds. Would like to hear from others who choose active funds, such as @Rob7Lee.
I think Golfie your question above is aimed at Dippenhall, right?
But looking at my funds, I have 13% of my general savings portfolio in Standard Life UK Ethical. This illustrates another point. If you stick with trackers/ passive funds, you end up holding shares in Big Tobacco, arms manufacturers, etc. Specialist funds like this one help people balance that out a bit.
Very interesting and compelling argument from @Dippenhall there, but I reckon @golfaddick will have some too. I hope so, as I do have quite a few active funds. Would like to hear from others who choose active funds, such as @Rob7Lee.
I think Golfie your question above is aimed at Dippenhall, right?
But looking at my funds, I have 13% of my general savings portfolio in Standard Life UK Ethical. This illustrates another point. If you stick with trackers/ passive funds, you end up holding shares in Big Tobacco, arms manufacturers, etc. Specialist funds like this one help people balance that out a bit.
Yes, it was aimed at @Dippenhall. Will let you have a few of my current top funds;
UK Lindsall Train UK Equity Liontrust UK special Situations
US Baillie Gifford American
Europe Jupiter European
Bonds Royal London Sterling Extra Yield
Only tracker I think is in any portfolios is Vanguard Gilt.
As for Ethical funds. I have usually found if you drill down & find exactly where the fund manager is investing you'd be surprised....anyone with pure ethical reasons wouldnt touch most of them. And where do you stop ? Would you not invest in Sainsbury's because they sell tobacco? I have only one true ethical investor & selecting funds for him can be difficult due to the lack of diversity. He is a human rights lawyer & so has very ethical convictions.
So inspired by your post, I went to check mine. Nul, nic, nada.
Now here's the thing. Since May last year, having just received inheritance money after my Mum passed away, I have been near the top limit that you can hold. I worked out what I would need to earn over 12 months in order to achieve the 1.4% growth that is suggested you get. With one more month to go, I will have to earn £150 in the final draw, in order to clear that threshold. The max I got in any of the last eleven months has been £75. At the moment based on 11 months I am running at 1.22% return (which can be bettered in one or two savings accounts right now, notably Marcus)
@golfaddick I know that "ethical" funds are criticised in the way you describe. However every person has their own idea of ethics. It's ludicrous to suggest that an ethical investor doesn't invest in a retailer because they sell cigarettes. Unfortunately cigarettes are lawful to sell and consume. If Sainsbury's sold crack cocaine then it might be a different matter. But it's good to have a decent fund that doesn't invest in tobacco. You can also put pressure on such a fund. For example, I think SL will come under pressure because they have 3% in boohoo, which is one of the forerunners in "disposable fashion". But if you try to put pressure on Fundsmith to sell its 4% share in Philip Morris, Terry Smith will politely tell you to sell your holding and do one.
Out of interest.....what funds do you use for investing into US & UK equities....
I can only talk from the point of view of an institutional investor, that's what i do as a pension master trust, and not a retail investor so I buy the market with a tracker from the cheapest supplier, in our case L&G, not active funds.
The active manager risk is not rewarded and the cost of monitoring performance and the universe of alternative managers is too high.
Active manager stock picking contributes less than +/- 5% of the value from an investment, 90% is historically down to the asset class chosen. So why pay a 6X premium to a single manager for stock picking when it adds so little value. A premium paid for asset class picking e.g a diversified growth fund/multi asset fund has far higher potential to give an absolute return so that is the only exposure we have to active management. We use the L&G DGF for this.
It's all about crunching big data these days and then the ability to interpret it for structuring asset allocations. L&G have always been crap active managers but have the resources to crunch the data for asset class analysis and hire the best brains. Their scale means they are cheap.
I have watched pension schemes try and capture active manager performance for the last thirty years and they always end up losing their bottle when a few years under-performance creeps in, just like you or i would, and change managers only to see the same cycle repeat itself. The outcome is always average performance, same as they could have achieved with a passive manager at lower cost.
The emotional pressure to believe that it must be possible to beat the market by avoiding the dross in the index by choosing only good companies is compelling, and that's why everyone does it. But it only works in the way of Warren Buffett et al by buying and holding a handful of carefully selected companies for a long time. As is shown on this thread, everyone is looking for the next quick win. But few look back and evaluate if the horse they backed was better than a dull pony of a passive fund strategy.
Retail clients want to see a bang for their buck and you try and give it to them, it's what they demand, but it is not what they need. Unfortunately I have to consider what i think is needed and what risk is commensurate with the potential reward rather than a hopeful punt on one of thousands of funds selling the same promise.
That's your field not mine, but I know the science/theory behind investing does not change according to who is investing. Research proves people invest with their emotional side of their brain not their logical side which accounts for such a wide difference of approaches.
So inspired by your post, I went to check mine. Nul, nic, nada.
Now here's the thing. Since May last year, having just received inheritance money after my Mum passed away, I have been near the top limit that you can hold. I worked out what I would need to earn over 12 months in order to achieve the 1.4% growth that is suggested you get. With one more month to go, I will have to earn £150 in the final draw, in order to clear that threshold. The max I got in any of the last eleven months has been £75. At the moment based on 11 months I am running at 1.22% return (which can be bettered in one or two savings accounts right now, notably Marcus)
Sounds spot on. If the average is 1.4% and some win a million, then the vast majority will earn less than 1.4%.
So inspired by your post, I went to check mine. Nul, nic, nada.
Now here's the thing. Since May last year, having just received inheritance money after my Mum passed away, I have been near the top limit that you can hold. I worked out what I would need to earn over 12 months in order to achieve the 1.4% growth that is suggested you get. With one more month to go, I will have to earn £150 in the final draw, in order to clear that threshold. The max I got in any of the last eleven months has been £75. At the moment based on 11 months I am running at 1.22% return (which can be bettered in one or two savings accounts right now, notably Marcus)
Sounds spot on. If the average is 1.4% and some win a million, then the vast majority will earn less than 1.4%.
Not sure you quite nailed the maths there, but fortunately Martyn Lewis has - or rather he eventually found somebody sufficiently skilled to do it properly. Fascinating article, check out the calculator with its purpose built algorithm
The take out for this thread is that NS&I own use of 1.4% is disingenuous. If I get a run like @cazo above, I think I'd cut and run with my winnings and park them in Marcus or similar.
So inspired by your post, I went to check mine. Nul, nic, nada.
Now here's the thing. Since May last year, having just received inheritance money after my Mum passed away, I have been near the top limit that you can hold. I worked out what I would need to earn over 12 months in order to achieve the 1.4% growth that is suggested you get. With one more month to go, I will have to earn £150 in the final draw, in order to clear that threshold. The max I got in any of the last eleven months has been £75. At the moment based on 11 months I am running at 1.22% return (which can be bettered in one or two savings accounts right now, notably Marcus)
I assume you have accounted for the sneaky one complete calendar month before entering the draw in your calculations?
Buy a bond on 28 February it goes in the April draw. Buy it on 1 March you wait until May!
2 x £25 this month and 1 x £25 last month on premium bonds. Don’t really consider the percentage return as interest rates so low everywhere. Enjoy the small thrill of the monthly draw...
So inspired by your post, I went to check mine. Nul, nic, nada.
Now here's the thing. Since May last year, having just received inheritance money after my Mum passed away, I have been near the top limit that you can hold. I worked out what I would need to earn over 12 months in order to achieve the 1.4% growth that is suggested you get. With one more month to go, I will have to earn £150 in the final draw, in order to clear that threshold. The max I got in any of the last eleven months has been £75. At the moment based on 11 months I am running at 1.22% return (which can be bettered in one or two savings accounts right now, notably Marcus)
Sounds spot on. If the average is 1.4% and some win a million, then the vast majority will earn less than 1.4%.
Not sure you quite nailed the maths there, but fortunately Martyn Lewis has - or rather he eventually found somebody sufficiently skilled to do it properly. Fascinating article, check out the calculator with its purpose built algorithm
The take out for this thread is that NS&I own use of 1.4% is disingenuous. If I get a run like @cazo above, I think I'd cut and run with my winnings and park them in Marcus or similar.
So inspired by your post, I went to check mine. Nul, nic, nada.
Now here's the thing. Since May last year, having just received inheritance money after my Mum passed away, I have been near the top limit that you can hold. I worked out what I would need to earn over 12 months in order to achieve the 1.4% growth that is suggested you get. With one more month to go, I will have to earn £150 in the final draw, in order to clear that threshold. The max I got in any of the last eleven months has been £75. At the moment based on 11 months I am running at 1.22% return (which can be bettered in one or two savings accounts right now, notably Marcus)
Sounds spot on. If the average is 1.4% and some win a million, then the vast majority will earn less than 1.4%.
Not sure you quite nailed the maths there, but fortunately Martyn Lewis has - or rather he eventually found somebody sufficiently skilled to do it properly. Fascinating article, check out the calculator with its purpose built algorithm
The take out for this thread is that NS&I own use of 1.4% is disingenuous. If I get a run like @cazo above, I think I'd cut and run with my winnings and park them in Marcus or similar.
but of course there is the dream...
Seen it thanks.
Jolly good. So for the benefit of everyone else, what that calculator shows is that the average person can expect a return of 1.0% over 12 months. So for those who for whatever reason have £50k cash to park for a year, maybe after an inheritance as was my case, they effectively pay £250 to chase the dream; because they should not expect more than £500 from Ernie, whereas at Marcus they will definitely get £750. I think that's worth knowing even if in the grand scheme of things it's not a lot of money.
The calculator also shows just how lucky @cazo has been.The chances of getting at least £200 in a draw are only 15.6%, and of getting £250, only 5.3%. And he got them in consecutive months.
There's an argument which says that it's better to invest in Premium Bonds, than to entrust your money to Goldman bloody Sachs. I'd like to buy that argument, but I don't know exactly how the money in NS&I is used for the greater good of the country, does anybody know? Either way, I think it suggests NS&I need a boost from the govt. Among other things it has lost its tax advantage it used to have over savings accounts.
So inspired by your post, I went to check mine. Nul, nic, nada.
Now here's the thing. Since May last year, having just received inheritance money after my Mum passed away, I have been near the top limit that you can hold. I worked out what I would need to earn over 12 months in order to achieve the 1.4% growth that is suggested you get. With one more month to go, I will have to earn £150 in the final draw, in order to clear that threshold. The max I got in any of the last eleven months has been £75. At the moment based on 11 months I am running at 1.22% return (which can be bettered in one or two savings accounts right now, notably Marcus)
Sounds spot on. If the average is 1.4% and some win a million, then the vast majority will earn less than 1.4%.
Not sure you quite nailed the maths there, but fortunately Martyn Lewis has - or rather he eventually found somebody sufficiently skilled to do it properly. Fascinating article, check out the calculator with its purpose built algorithm
The take out for this thread is that NS&I own use of 1.4% is disingenuous. If I get a run like @cazo above, I think I'd cut and run with my winnings and park them in Marcus or similar.
but of course there is the dream...
Seen it thanks.
Jolly good. So for the benefit of everyone else, what that calculator shows is that the average person can expect a return of 1.0% over 12 months. So for those who for whatever reason have £50k cash to park for a year, maybe after an inheritance as was my case, they effectively pay £250 to chase the dream; because they should not expect more than £500 from Ernie, whereas at Marcus they will definitely get £750. I think that's worth knowing even if in the grand scheme of things it's not a lot of money.
The calculator also shows just how lucky @cazo has been.The chances of getting at least £200 in a draw are only 15.6%, and of getting £250, only 5.3%. And he got them in consecutive months.
There's an argument which says that it's better to invest in Premium Bonds, than to entrust your money to Goldman bloody Sachs. I'd like to buy that argument, but I don't know exactly how the money in NS&I is used for the greater good of the country, does anybody know? Either way, I think it suggests NS&I need a boost from the govt. Among other things it has lost its tax advantage it used to have over savings accounts.
The "tax advantage" is that the winnings are tax free. If you have savings that pay interest of more than £1,000 pa, then a basic rate tax payer would be liable to pay tax on any interest over the £1,000.
On Premium Bonds, £75 this month and last month. I haven’t worked out the return I’m getting but that isn’t really the point. It’s that my money is safe, I have instant access to it and once a month there is the excitement of checking to see if you have won and the hope that one day you win a big prize, tax free.
So inspired by your post, I went to check mine. Nul, nic, nada.
Now here's the thing. Since May last year, having just received inheritance money after my Mum passed away, I have been near the top limit that you can hold. I worked out what I would need to earn over 12 months in order to achieve the 1.4% growth that is suggested you get. With one more month to go, I will have to earn £150 in the final draw, in order to clear that threshold. The max I got in any of the last eleven months has been £75. At the moment based on 11 months I am running at 1.22% return (which can be bettered in one or two savings accounts right now, notably Marcus)
Sounds spot on. If the average is 1.4% and some win a million, then the vast majority will earn less than 1.4%.
Not sure you quite nailed the maths there, but fortunately Martyn Lewis has - or rather he eventually found somebody sufficiently skilled to do it properly. Fascinating article, check out the calculator with its purpose built algorithm
The take out for this thread is that NS&I own use of 1.4% is disingenuous. If I get a run like @cazo above, I think I'd cut and run with my winnings and park them in Marcus or similar.
but of course there is the dream...
Seen it thanks.
Jolly good. So for the benefit of everyone else, what that calculator shows is that the average person can expect a return of 1.0% over 12 months. So for those who for whatever reason have £50k cash to park for a year, maybe after an inheritance as was my case, they effectively pay £250 to chase the dream; because they should not expect more than £500 from Ernie, whereas at Marcus they will definitely get £750. I think that's worth knowing even if in the grand scheme of things it's not a lot of money.
The calculator also shows just how lucky @cazo has been.The chances of getting at least £200 in a draw are only 15.6%, and of getting £250, only 5.3%. And he got them in consecutive months.
There's an argument which says that it's better to invest in Premium Bonds, than to entrust your money to Goldman bloody Sachs. I'd like to buy that argument, but I don't know exactly how the money in NS&I is used for the greater good of the country, does anybody know? Either way, I think it suggests NS&I need a boost from the govt. Among other things it has lost its tax advantage it used to have over savings accounts.
The "tax advantage" is that the winnings are tax free. If you have savings that pay interest of more than £1,000 pa, then a basic rate tax payer would be liable to pay tax on any interest over the £1,000.
That's a strong point in favour of them. I had not thought of that and it's relevant to anyone like me who is temporarily nursing a fair bit of cash.
My other half wants to put a chunk of her savings into premium bonds. What's the maximum that you put in (per year/overall)? Is there any other easy access savings product that offers better returns and protection?
My other half wants to put a chunk of her savings into premium bonds. What's the maximum that you put in (per year/overall)? Is there any other easy access savings product that offers better returns and protection?
My other half wants to put a chunk of her savings into premium bonds. What's the maximum that you put in (per year/overall)? Is there any other easy access savings product that offers better returns and protection?
Comments
I think it'd be worth you seeing an advisor in general, as an example you have turned 50, when/what are your retirement plans, you may be better off not having an ISA and loading up the pension, taking the tax relief as you would be able to access in 5 years and earn minimum of 25% from the governments contribution, maybe more if a higher rate tax payer.
These are all general points, and your own personal circumstances need taking into account.
There is hardly a manager or fund which has beaten the tracker return over any ten year period and none that have beaten the market over twenty years.
To show statistics to fool the punters, managers close funds when they stop performing, and set up a new fund. So you will be lucky to find a fund which has been running for more than ten years. So the statistics are corrupted by hiding the failure of managers to beat the market and so massage active manager performance by removing the chance of capturing under-performance.
If you could foretell which of the 1% of managers are going to beat the market over the next ten years and when to move to one of the next 1% of managers whose turn is to beat the market for a few years, you would beat the market.
The fact is that the risks involved are not rewarded, statistics prove it. You can measure the return actually obtained by investors and compare to the published returns of fund managers. Guess what, investors get less than market returns and managers on average show higher than market returns by a smidgen.
And guess what, investors have paid 6 times what it would have cost to guarantee getting market returns and avoiding any manager risk.
It's an entirely theoretical position that an active fund manager beats a passive fund.
I have obtained a 5 year return of 12% p.a entirely in tracker funds at a cost of 0.075%. An active manager charging 6 times the price would need to obtain 14.23% p.a to match it, not beat it. The risks involved would expose you to a losses significantly below market returns.
Active funds are used as marketing candy using lies damned lies and statistics.
sounds like St James Place. Avoid them like the plaque.
Cant highlight text but most of this is total rubbish in my view, The are loads of active fund managers that beat the average year on year and usually beat trackers too. I do daily fund research & not many, if ever, does a tracker fund come out on top. The difference in performance far outways the difference in cost imo.
cant stop - just off to an investment seminar hosted by Invesco.
RDR, at the start of 2016, was supposed to get away from initial / front end charging. The "Retail Distribution Review" found that Investment Bonds may have been sold instead of some other product or scheme due to their charges & commission structure. Advisers could earn up to 8% commission where most pension & other plans would be 3%-5%. The idea around RDR was that investment schemes carried little or no charges (a max of around 1%) with the advisor getting his "commission" by charging a fee. Therefore there is no bias as the advisors fee (say 3% ) is the same no matter if he advises a pension, an ISA, an Investment Bond, a Structured Product or a VCT.
However, SJP have gone from a front end charge (initial) to a back end charge (exit fee). I believe its 5% for an investment & 6% for a pension - with SJP keeping 3% & the advisor getting the rest. All the products & schemes I listed above carry no exit fees & you could come out of them after 6 months or 6 years and it makes no difference.
PS - SJP advisors obviously only "advise" on SJP products. Its like the last 20 years hasn't happened.
However some people might read your remarks as suggesting that no active funds are worth holding, but I don't think that can possibly be true. As an example, my favourite fund is Lindsell Train Global Equity. I bought my first chunk in Oct 2014 at a price of exactly £1. The price today is £2.31. My biggest regret with this fund - and you are going to like this - is that I took some profits and sold a chunk at the end of July 2016, as i anticipated a Brexit -related fall in equity markets. I sold that chunk at £1.57...It's not an obscure fund by any means and its three biggest holdings are global FMCGs, including my beloved Unilever; but I also learnt that it had invested in both Celtic and Juventus football clubs!
The only way of beating the market through active managers over more than 20 years is either (i) being able to predict which handful of funds from the thousands out there is going to be the one to beat the market long term OR (ii) changing managers to continually capture short term out-performance. Option (i) is rarely attractive to short term investors because their short term performance looks dull when investors are looking year by year to shoot the lights out.
Most people, with the advice from advisers, who earn and justify their existence by churning, take option (ii) and review managers and try to consistently pick the winners. It can work for some but not for the majority, just like the lottery works for some people.
The point that confuses Golfie is that actual returns of punters are lower than actual returns of managers which sounds a bit odd. It's a fact because most people switch out of a manager after under-performing, just before he out-performs and invest with a manager who is about to under-perform. It's a fact borne out by statistics, it's not a 'view".
So what is theoretically the best option i.e invest in active managers because short term performance can beat the tracker, is based on driving by your rear view mirror when it's easy to pick the winners. It, doesn't work in practice looking forward because no one has yet been able to bring astrology to bear on predicting each manager's future performance.
Three random Google results reporting on research into fund manager performance:
FundExpert has analysed the track record of 1,087 funds across all the Investment Management Association sectors.The research, based on analysis of funds with at least seven to 10 year track records, reveals that over 91 per cent of funds are “mediocre at best”.
"However, the study concludes that this result is probably a reflection of survivorship bias, since it finds little evidence of performance persistence from year to year among these managers, and evidence to suggest that the risk-adjusted performance of these experienced managers actually declined over the ten year study sample period, that is, a decline in performance as experience increases!"On average, managers with lO-year track records at the samefund do not perform better than man- agers with shorter track records. Also, for these experienced managers, superior performance in onefive-year period is not predictive of superior performance over the next five years. However, inferior performance persists, particularly for funds with above average expense ratios."
I think Golfie your question above is aimed at Dippenhall, right?
But looking at my funds, I have 13% of my general savings portfolio in Standard Life UK Ethical. This illustrates another point. If you stick with trackers/ passive funds, you end up holding shares in Big Tobacco, arms manufacturers, etc. Specialist funds like this one help people balance that out a bit.
UK
Lindsall Train UK Equity
Liontrust UK special Situations
US
Baillie Gifford American
Europe
Jupiter European
Bonds
Royal London Sterling Extra Yield
Only tracker I think is in any portfolios is Vanguard Gilt.
As for Ethical funds. I have usually found if you drill down & find exactly where the fund manager is investing you'd be surprised....anyone with pure ethical reasons wouldnt touch most of them. And where do you stop ? Would you not invest in Sainsbury's because they sell tobacco? I have only one true ethical investor & selecting funds for him can be difficult due to the lack of diversity. He is a human rights lawyer & so has very ethical convictions.
So inspired by your post, I went to check mine. Nul, nic, nada.
Now here's the thing. Since May last year, having just received inheritance money after my Mum passed away, I have been near the top limit that you can hold. I worked out what I would need to earn over 12 months in order to achieve the 1.4% growth that is suggested you get. With one more month to go, I will have to earn £150 in the final draw, in order to clear that threshold. The max I got in any of the last eleven months has been £75. At the moment based on 11 months I am running at 1.22% return (which can be bettered in one or two savings accounts right now, notably Marcus)
The active manager risk is not rewarded and the cost of monitoring performance and the universe of alternative managers is too high.
Active manager stock picking contributes less than +/- 5% of the value from an investment, 90% is historically down to the asset class chosen. So why pay a 6X premium to a single manager for stock picking when it adds so little value. A premium paid for asset class picking e.g a diversified growth fund/multi asset fund has far higher potential to give an absolute return so that is the only exposure we have to active management. We use the L&G DGF for this.
It's all about crunching big data these days and then the ability to interpret it for structuring asset allocations. L&G have always been crap active managers but have the resources to crunch the data for asset class analysis and hire the best brains. Their scale means they are cheap.
I have watched pension schemes try and capture active manager performance for the last thirty years and they always end up losing their bottle when a few years under-performance creeps in, just like you or i would, and change managers only to see the same cycle repeat itself. The outcome is always average performance, same as they could have achieved with a passive manager at lower cost.
The emotional pressure to believe that it must be possible to beat the market by avoiding the dross in the index by choosing only good companies is compelling, and that's why everyone does it. But it only works in the way of Warren Buffett et al by buying and holding a handful of carefully selected companies for a long time. As is shown on this thread, everyone is looking for the next quick win. But few look back and evaluate if the horse they backed was better than a dull pony of a passive fund strategy.
Retail clients want to see a bang for their buck and you try and give it to them, it's what they demand, but it is not what they need. Unfortunately I have to consider what i think is needed and what risk is commensurate with the potential reward rather than a hopeful punt on one of thousands of funds selling the same promise.
That's your field not mine, but I know the science/theory behind investing does not change according to who is investing. Research proves people invest with their emotional side of their brain not their logical side which accounts for such a wide difference of approaches.
If the average is 1.4% and some win a million, then the vast majority will earn less than 1.4%.
https://www.moneysavingexpert.com/savings/premium-bonds/
The take out for this thread is that NS&I own use of 1.4% is disingenuous. If I get a run like @cazo above, I think I'd cut and run with my winnings and park them in Marcus or similar.
but of course there is the dream...
Buy a bond on 28 February it goes in the April draw. Buy it on 1 March you wait until May!
The calculator also shows just how lucky @cazo has been.The chances of getting at least £200 in a draw are only 15.6%, and of getting £250, only 5.3%. And he got them in consecutive months.
There's an argument which says that it's better to invest in Premium Bonds, than to entrust your money to Goldman bloody Sachs. I'd like to buy that argument, but I don't know exactly how the money in NS&I is used for the greater good of the country, does anybody know? Either way, I think it suggests NS&I need a boost from the govt. Among other things it has lost its tax advantage it used to have over savings accounts.
If you have savings that pay interest of more than £1,000 pa, then a basic rate tax payer would be liable to pay tax on any interest over the £1,000.