That's very interesting that you have that background. Respect.
I've seen a number of articles highlighting research which questions the effectiveness and VFM of active funds, I know it's an active debate. I'm tending towards your view, because of what I've seen of the industry in action, most recently Woodford and Hargreaves Lansdowne. But that said, it seems that in the last few years I picked some active funds for solid reasons, and they seem to have paid back. I went into the two tech funds (Polar and Allianz) as a way of tapping into blockchain without getting involved in all the crypto hype; and into "sustainable" funds, well, because of all the hype, if you like. But that is hype that I expect to last, in business terms. It has to. Anyway those funds delivered 30-40% this year. But then again, I am one of the Woodford mugs, waiting to see how little I get back...
That's really interesting. I think a sector based fund approach can be very rewarding, especially because the fund managers will presumably have more information on the sector than us.
More importantly like you said, it's much better to be invested in the crypto industry than it is in a crypto currency!
Sustainable is definitely a way forward with the way the world is going too.
Shame there's no decent returns on cash in the bank right now. I'm pretty full on Stocks & Shares, where would the wise men (or women) of CL suggest.......
Shame there's no decent returns on cash in the bank right now. I'm pretty full on Stocks & Shares, where would the wise men (or women) of CL suggest.......
Come on, you know we will all end up with a return of about 1% on Ernie But each month we dream...
You could perhaps allocate a small amount to P2P? Admittedly I have cut back a lot on my initial investment, and Funding Circle is to be avoided like the plague, but they won't all go bust overnight, surely?
All I will say on the debate between active & passive (and by passive I mean tracker funds) is that in my 30 year experience in fund management/selection/ advising a active fund will outperform a passive fund, even taking charges onto account.
A lot of people take stock by Vanguard (mainly due to cost) & they do what it says on the tin.....but no way would I choose one of their funds over an active fund run by Baillie Gifford, JPM, or any number of top investment management houses. I subscribe to Investment Week & weekly I am checking funds over all sectors. Cant say that a passive fund is ever in the top decile of funds that I am researching.
Just checked my pension. It returned 20.4% in 2019. It is invested around 65% - 70% in equities & yes, the year just gone experienced a great 3 months at the start & a great 2 weeks at the end, but I dont think a passive portfolio would have returned that.
Shame there's no decent returns on cash in the bank right now. I'm pretty full on Stocks & Shares, where would the wise men (or women) of CL suggest.......
Come on, you know we will all end up with a return of about 1% on Ernie But each month we dream...
You could perhaps allocate a small amount to P2P? Admittedly I have cut back a lot on my initial investment, and Funding Circle is to be avoided like the plague, but they won't all go bust overnight, surely?
I came out of P2P over the last few years, was in Funding circle and Zopa, just don't trust it these days.
All I will say on the debate between active & passive (and by passive I mean tracker funds) is that in my 30 year experience in fund management/selection/ advising a active fund will outperform a passive fund, even taking charges onto account.
A lot of people take stock by Vanguard (mainly due to cost) & they do what it says on the tin.....but no way would I choose one of their funds over an active fund run by Baillie Gifford, JPM, or any number of top investment management houses. I subscribe to Investment Week & weekly I am checking funds over all sectors. Cant say that a passive fund is ever in the top decile of funds that I am researching.
Just checked my pension. It returned 20.4% in 2019. It is invested around 65% - 70% in equities & yes, the year just gone experienced a great 3 months at the start & a great 2 weeks at the end, but I dont think a passive portfolio would have returned that.
On the first bit: A Passive fund should never be in the top decile, it is passive. What I am saying is that there will be say, 30% that are better, and 70% that are worse, this proportion varies, but the point is that the weighting of the active portfolios will obviously improve the returns of some, but will make many worse.
Second: It may well not have, but I would be interested to see your pension performance over 10 years vs a passive tracker. 10 years is reliable, 1 year is just a snapshot.
My sources inform me that on average, active investing will not outperform the index for large caps. It only really works for other sectors. The key is finding the right manager.
My sources inform me that on average, active investing will not outperform the index for large caps. It only really works for other sectors. The key is finding the right manager.
All I will say on the debate between active & passive (and by passive I mean tracker funds) is that in my 30 year experience in fund management/selection/ advising a active fund will outperform a passive fund, even taking charges onto account.
A lot of people take stock by Vanguard (mainly due to cost) & they do what it says on the tin.....but no way would I choose one of their funds over an active fund run by Baillie Gifford, JPM, or any number of top investment management houses. I subscribe to Investment Week & weekly I am checking funds over all sectors. Cant say that a passive fund is ever in the top decile of funds that I am researching.
Just checked my pension. It returned 20.4% in 2019. It is invested around 65% - 70% in equities & yes, the year just gone experienced a great 3 months at the start & a great 2 weeks at the end, but I dont think a passive portfolio would have returned that.
On the first bit: A Passive fund should never be in the top decile, it is passive. What I am saying is that there will be say, 30% that are better, and 70% that are worse, this proportion varies, but the point is that the weighting of the active portfolios will obviously improve the returns of some, but will make many worse.
Second: It may well not have, but I would be interested to see your pension performance over 10 years vs a passive tracker. 10 years is reliable, 1 year is just a snapshot.
Is the correct answer.
When I was a FA, I rarely/never recommended funds in the top decile.
The reason being that funds in the top decile one year, would quite possibly be bottom decile in a year or two. If you invest in a fund that has undergone exceptional growth, you have probably missed the boat.
All I will say on the debate between active & passive (and by passive I mean tracker funds) is that in my 30 year experience in fund management/selection/ advising a active fund will outperform a passive fund, even taking charges onto account.
A lot of people take stock by Vanguard (mainly due to cost) & they do what it says on the tin.....but no way would I choose one of their funds over an active fund run by Baillie Gifford, JPM, or any number of top investment management houses. I subscribe to Investment Week & weekly I am checking funds over all sectors. Cant say that a passive fund is ever in the top decile of funds that I am researching.
Just checked my pension. It returned 20.4% in 2019. It is invested around 65% - 70% in equities & yes, the year just gone experienced a great 3 months at the start & a great 2 weeks at the end, but I dont think a passive portfolio would have returned that.
On the first bit: A Passive fund should never be in the top decile, it is passive. What I am saying is that there will be say, 30% that are better, and 70% that are worse, this proportion varies, but the point is that the weighting of the active portfolios will obviously improve the returns of some, but will make many worse.
Second: It may well not have, but I would be interested to see your pension performance over 10 years vs a passive tracker. 10 years is reliable, 1 year is just a snapshot.
Is the correct answer.
When I was a FA, I rarely/never recommended funds in the top decile.
The reason being that funds in the top decile one year, would quite possibly be bottom decile in a year or two. If you invest in a fund that has undergone exceptional growth, you have probably missed the boat.
100%
There is absolutely a reason why adverts have to say "past performance is no guarantee of future results."
All I will say on the debate between active & passive (and by passive I mean tracker funds) is that in my 30 year experience in fund management/selection/ advising a active fund will outperform a passive fund, even taking charges onto account.
A lot of people take stock by Vanguard (mainly due to cost) & they do what it says on the tin.....but no way would I choose one of their funds over an active fund run by Baillie Gifford, JPM, or any number of top investment management houses. I subscribe to Investment Week & weekly I am checking funds over all sectors. Cant say that a passive fund is ever in the top decile of funds that I am researching.
Just checked my pension. It returned 20.4% in 2019. It is invested around 65% - 70% in equities & yes, the year just gone experienced a great 3 months at the start & a great 2 weeks at the end, but I dont think a passive portfolio would have returned that.
On the first bit: A Passive fund should never be in the top decile, it is passive. What I am saying is that there will be say, 30% that are better, and 70% that are worse, this proportion varies, but the point is that the weighting of the active portfolios will obviously improve the returns of some, but will make many worse.
Second: It may well not have, but I would be interested to see your pension performance over 10 years vs a passive tracker. 10 years is reliable, 1 year is just a snapshot.
Is the correct answer.
When I was a FA, I rarely/never recommended funds in the top decile.
The reason being that funds in the top decile one year, would quite possibly be bottom decile in a year or two. If you invest in a fund that has undergone exceptional growth, you have probably missed the boat.
I disagree to a point. There are many funds around that have been top decile over the past 1,3,5 & 10 years. There are also funds that can be top decile 1 year & bottom decile the next. Just look at Manek growth.
And sticking my neck out I would say that my pension (and many portfolios that I look after for my clients) beat the average over the long term (5 years plus). Average being average in their own particular sector or against a set benchmark.
Seeing as my "fee" is 0.5% pa & the extra fund charge for running a fully actively managed portfolio rather than a passive one is less than 1%pa I think the outperformance is worth it.
My sources inform me that on average, active investing will not outperform the index for large caps. It only really works for other sectors. The key is finding the right manager.
No, the key is having a well balanced portfolio. Large, mid & small cap stocks from around the world as well as government & corporate bonds.
My sources inform me that on average, active investing will not outperform the index for large caps. It only really works for other sectors. The key is finding the right manager.
No, the key is having a well balanced portfolio. Large, mid & small cap stocks from around the world as well as government & corporate bonds.
So a good mix of passive funds. Which I have. Luckily I haven't paid you 0.5% for that!
My sources inform me that on average, active investing will not outperform the index for large caps. It only really works for other sectors. The key is finding the right manager.
No, the key is having a well balanced portfolio. Large, mid & small cap stocks from around the world as well as government & corporate bonds.
That’s a given, but the conversation wasn’t about portfolio construction, it was passive/active. And even if you have a well balanced portfolio (accounting for both sector and institutional risk) you still want to find the right manger.
If it helps, my fidelity SIPP that i've had I think since Feb 2010 has averaged 10.97% annual return.
And a blackrock fund (energy and resources) has lost an average of 7.7% a year over 10 years.
Go to a casino and put it all on black. Otherwise, passive funds. I'll charge you 0.5% if you want and tell you to invest in more than one, and use the word "diversify" a couple of times.
It's behind the paywall, but I think everyone gets access to a few articles per month. In which case use another freebie to read this belter of a Lunch with the FT, with our old friend Alisher Usmanov.
As the ads used to say in the times before @Huskaris was born, "No FT, no comment" :-)
It's behind the paywall, but I think everyone gets access to a few articles per month. In which case use another freebie to read this belter of a Lunch with the FT, with our old friend Alisher Usmanov.
As the ads used to say in the times before @Huskaris was born, "No FT, no comment" :-)
Also used the slogan after I was born!
Reminds me of my uni days though, we would get quite a few delivered and people would walk around with them under their arm, but never read them, so cringey.
If it helps, my fidelity SIPP that i've had I think since Feb 2010 has averaged 10.97% annual return.
And a blackrock fund (energy and resources) has lost an average of 7.7% a year over 10 years.
Go to a casino and put it all on black. Otherwise, passive funds. I'll charge you 0.5% if you want and tell you to invest in more than one, and use the word "diversify" a couple of times.
My invoice is in the post.
We can all pick out a fund that has done well or badly and say "told you so".
The reason why I advise active rather than passive funds is because the fund manager earns his corn analysing markets, trends & upcoming events to decide where best to invest (or not as the case may be). All a passive fund does is follow whichever market or sector it's in. If it's a fully fledged tracker then any new stock entering its "sector" it has to buy to replicate the index it tracks. Similarly if a stock falls out of that sector. I (and my clients) would prefer someone watching that sector to decide if it's worth buying or not.
I get it. You dont want to pay me or a fund manager that bit extra to make that choice. You dont think its worth it. Your research had shown that passives will outperform some fund managers & are happy not to take the risk of paying extra for (possibly) mediocre performance. Thats your choice. All I know is that from my research there are many active funds that outperform the passive ones. Consistently.
As they say.......you pays your money & you takes your choice.
If it helps, my fidelity SIPP that i've had I think since Feb 2010 has averaged 10.97% annual return.
And a blackrock fund (energy and resources) has lost an average of 7.7% a year over 10 years.
Go to a casino and put it all on black. Otherwise, passive funds. I'll charge you 0.5% if you want and tell you to invest in more than one, and use the word "diversify" a couple of times.
My invoice is in the post.
I'm juts going to weigh up my two options there........ hhhhmmmm....... Casino Roulette all on black........ or passive funds.
Or I could just stick with what's served me well for the last couple of decades.
I initially joined a few years ago (through Quidco for a handsome sign up bonus) where they managed £12k for free, which when they stopped doing that, they extended to existing users for life. Plus for every person you refer both you and they get £5k managed for free for a year.
But as an example, £20k would be 0.99% including all fund fees and management fees, which is pretty good I would say, it then goes down in % terms from there.
They ask you a questionnaire to determine your risk profile, which you can then change if you wish, but then it will give you a portfolio mix based on that.
I have been impressed by the diversification etc, and quite like it I have to say, the platform is slick and works nicely. Plus makes it clear all the specific things you are invested in. For example, my top performer is US Equities (S&P500) Sterling hedged, up 9.06%, and my worst is US Investment Grade Credit at -4.41%, luckily I have 7x as much in the former!
So not that cheap then for a new user, at 0.99% thats dearer than some of my managed funds! Isn't the 0.7% Moneyfarm money management fee and .29% other charges no different really to an active fund managers charge and a platform charge?
If you choose your own passive funds you can do it a lot cheaper elsewhere.
Thanks a lot for that advice @Rob7Lee. I think that might end up being exactly what I do, once I get to a point where I am starting to pay fees more than £1 or £2 a month.
.2% for the funds, and .09% for the spread, so .29% if I were to do it myself sounds a lot more appealing.
Do you have any knowledge on where I could get funds like this? And what the costs are for trading?
@golfaddick, thing is Golfie, your argument has swerved around the real issue on active managers. There is no doubt that some of them produce good long term results, such as Lindsell Train and Fundsmith, both of which I am in, as are your clients too, I believe. The real problem is that there are literally thousands of funds offered to retail UK and US customers, and 90% of them are not outperforming the passive/index funds, yet they all gleefully charge %s of 0.7-1.5%, and thus you have an entire industry of people paying themselves handsome salaries, based on very dodgy KPIs.
Now doubtless you are going to say that you are paid to seek out the 10%. And I reckon you may do a decent job in that respect for clients who have neither the time nor the inclination to research and stay on top of their own portfolio. But for example above you were listing your current favourite fund managers as your key discriminator. But I am not sure that bears scrutiny. When BestInvest do their Spot the Dog analysis each year, you see Dogs from well respected fund managers, and quite often you see fund managers who have both a Dog, and a Star Performer, in the same year!
That's what the passive guys are going after, mate. The 90% of funds that are basically stealing a living.
@Huskaris you should take a look at Vanguard, who are leading the passive assault on the market. I am very happy with the funds I have with them.
Agree 100% with everything you have said there @PragueAddick. It always reminds me of a quote that Eisenhower ripped off where he said "I would rather have a lucky general than a smart one."
@Huskaris I use Fidelity, I don't pay a platform fee anymore due to the amount my wife and I hold (predominantly SIPP's but also ISA's and a general investment account), so just the fee's on the funds.
They charge a flat £45 if you have less than £7,500, 0.35% if you have a regular savings plan, it drops to 0.2% if you have over £250k and free over £1m from the 2nd year on. So I guess geared to the investor with a large fund/SIPP.
Not saying they are the best or cheapest but i'm used them for years now and very happy with the service and access to funds. You can invest in just about any fund going, they have negotiated discounts on a lot of funds, have quite a good fund finder as well and you can sort by fee's if you so wish. You can also buy individual shares within SIPP/ISA/Inv Account.
A few examples; Vanguard S&P 500 ETF has a fund charge of 0.07%. iShares US or UK Equity Index is 0.05%, lots of L&G funds or their own Fidelity one's at 0.1%.
@PragueAddick I've not used Vanguard as a platform but they are quite cheap, 0.15% I think under £250k platform fee, but from memory they aren't whole of market and only their own funds? (which of course have a fee).
This is Vanguard's fee page. I like the plain simple language used, it's part of their brand positioning, but I like it. They are market disrupters, and @Huskaris is partial to a bit of disruption :-)
If Huskaris chose a fund supermarket such as Fidelity he could also trade Vanguard funds there, and pay the same fund fees as if he bought them directly. I have Vanguard funds within my SIPP which is on Hargreaves Lansdowne.
Comments
More importantly like you said, it's much better to be invested in the crypto industry than it is in a crypto currency!
Sustainable is definitely a way forward with the way the world is going too.
I seem to be the poor relation with the bonds,
Shame there's no decent returns on cash in the bank right now. I'm pretty full on Stocks & Shares, where would the wise men (or women) of CL suggest.......
You could perhaps allocate a small amount to P2P? Admittedly I have cut back a lot on my initial investment, and Funding Circle is to be avoided like the plague, but they won't all go bust overnight, surely?
A lot of people take stock by Vanguard (mainly due to cost) & they do what it says on the tin.....but no way would I choose one of their funds over an active fund run by Baillie Gifford, JPM, or any number of top investment management houses. I subscribe to Investment Week & weekly I am checking funds over all sectors. Cant say that a passive fund is ever in the top decile of funds that I am researching.
Just checked my pension. It returned 20.4% in 2019. It is invested around 65% - 70% in equities & yes, the year just gone experienced a great 3 months at the start & a great 2 weeks at the end, but I dont think a passive portfolio would have returned that.
I came out of P2P over the last few years, was in Funding circle and Zopa, just don't trust it these days.
Second: It may well not have, but I would be interested to see your pension performance over 10 years vs a passive tracker. 10 years is reliable, 1 year is just a snapshot.
When I was a FA, I rarely/never recommended funds in the top decile.
The reason being that funds in the top decile one year, would quite possibly be bottom decile in a year or two.
If you invest in a fund that has undergone exceptional growth, you have probably missed the boat.
There is absolutely a reason why adverts have to say "past performance is no guarantee of future results."
And sticking my neck out I would say that my pension (and many portfolios that I look after for my clients) beat the average over the long term (5 years plus). Average being average in their own particular sector or against a set benchmark.
Seeing as my "fee" is 0.5% pa & the extra fund charge for running a fully actively managed portfolio rather than a passive one is less than 1%pa I think the outperformance is worth it.
So a good mix of passive funds. Which I have. Luckily I haven't paid you 0.5% for that!
Given my risk appetite, I consider this quite a nice mix. I can go into more depth, but that is my mix.
Go to a casino and put it all on black. Otherwise, passive funds. I'll charge you 0.5% if you want and tell you to invest in more than one, and use the word "diversify" a couple of times.
My invoice is in the post.
Active managers pray for turnaround as exodus continues
It's behind the paywall, but I think everyone gets access to a few articles per month. In which case use another freebie to read this belter of a Lunch with the FT, with our old friend Alisher Usmanov.
As the ads used to say in the times before @Huskaris was born, "No FT, no comment" :-)
Reminds me of my uni days though, we would get quite a few delivered and people would walk around with them under their arm, but never read them, so cringey.
The reason why I advise active rather than passive funds is because the fund manager earns his corn analysing markets, trends & upcoming events to decide where best to invest (or not as the case may be). All a passive fund does is follow whichever market or sector it's in. If it's a fully fledged tracker then any new stock entering its "sector" it has to buy to replicate the index it tracks. Similarly if a stock falls out of that sector. I (and my clients) would prefer someone watching that sector to decide if it's worth buying or not.
I get it. You dont want to pay me or a fund manager that bit extra to make that choice. You dont think its worth it. Your research had shown that passives will outperform some fund managers & are happy not to take the risk of paying extra for (possibly) mediocre performance. Thats your choice. All I know is that from my research there are many active funds that outperform the passive ones. Consistently.
As they say.......you pays your money & you takes your choice.
Or I could just stick with what's served me well for the last couple of decades.
What platform are you using @Huskaris
I initially joined a few years ago (through Quidco for a handsome sign up bonus) where they managed £12k for free, which when they stopped doing that, they extended to existing users for life. Plus for every person you refer both you and they get £5k managed for free for a year.
But as an example, £20k would be 0.99% including all fund fees and management fees, which is pretty good I would say, it then goes down in % terms from there.
They ask you a questionnaire to determine your risk profile, which you can then change if you wish, but then it will give you a portfolio mix based on that.
I have been impressed by the diversification etc, and quite like it I have to say, the platform is slick and works nicely. Plus makes it clear all the specific things you are invested in. For example, my top performer is US Equities (S&P500) Sterling hedged, up 9.06%, and my worst is US Investment Grade Credit at -4.41%, luckily I have 7x as much in the former!
If you choose your own passive funds you can do it a lot cheaper elsewhere.
.2% for the funds, and .09% for the spread, so .29% if I were to do it myself sounds a lot more appealing.
Do you have any knowledge on where I could get funds like this? And what the costs are for trading?
Now doubtless you are going to say that you are paid to seek out the 10%. And I reckon you may do a decent job in that respect for clients who have neither the time nor the inclination to research and stay on top of their own portfolio. But for example above you were listing your current favourite fund managers as your key discriminator. But I am not sure that bears scrutiny. When BestInvest do their Spot the Dog analysis each year, you see Dogs from well respected fund managers, and quite often you see fund managers who have both a Dog, and a Star Performer, in the same year!
That's what the passive guys are going after, mate. The 90% of funds that are basically stealing a living.
@Huskaris you should take a look at Vanguard, who are leading the passive assault on the market. I am very happy with the funds I have with them.
And thanks! I will take a look at Vanguard!
They charge a flat £45 if you have less than £7,500, 0.35% if you have a regular savings plan, it drops to 0.2% if you have over £250k and free over £1m from the 2nd year on. So I guess geared to the investor with a large fund/SIPP.
https://www.fidelity.co.uk/services/charges-fees/#399838
Not saying they are the best or cheapest but i'm used them for years now and very happy with the service and access to funds. You can invest in just about any fund going, they have negotiated discounts on a lot of funds, have quite a good fund finder as well and you can sort by fee's if you so wish. You can also buy individual shares within SIPP/ISA/Inv Account.
A few examples; Vanguard S&P 500 ETF has a fund charge of 0.07%. iShares US or UK Equity Index is 0.05%, lots of L&G funds or their own Fidelity one's at 0.1%.
@PragueAddick I've not used Vanguard as a platform but they are quite cheap, 0.15% I think under £250k platform fee, but from memory they aren't whole of market and only their own funds? (which of course have a fee).
If Huskaris chose a fund supermarket such as Fidelity he could also trade Vanguard funds there, and pay the same fund fees as if he bought them directly. I have Vanguard funds within my SIPP which is on Hargreaves Lansdowne.