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Post by Fletchsmile on Aug 7, 2017 17:04:03 GMT 7
Was reading an article download from HL today entitled "Pension investment ideas: three of our favourites". As always there's a marketing angle for them, plus they were talking about investing in a pension rather than drawdown, but maybe worth a look. The 3 funds they looked at were: Schroder Small Cap Discovery Woodford Income both we've touched on here. I hold them and like them. The third is worth a thought. It's effectively a fund of funds. As a general rule I'm not a big fan of these, as they often add an extra level of charges without creating additional value. In HL's case though their Multi-Manager funds/ fund of funds are worth a look though. HL have a habit of identifying better than average funds. I've looked at them in the past and some of them have consistently outperformed sectors over 5/10 year periods. Fund of funds also provides nice diversification. HL Multi-Manager Fund Special Situations is the fund they recommend. Their list of funds of funds is at the following link. They have about 10. Worth a thought, as is looking at the actual funds and seeing which funds they actually buy. I don't hold any of them myself but have looked from time to time www.hl.co.uk/funds/hl-funds/multi-manager-fundsHere's the ink to the article that can be downloaded www.hl.co.uk/free-guides/thank-you?guide=https://www.hl.co.uk/__data/assets/pdf_file/0007/11986585/Pension-Investment-Ideas-three-favourites.pdf&pub=SPINV&name=pension%20investment%20ideas
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chiangmai
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Post by chiangmai on Aug 7, 2017 18:54:56 GMT 7
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Post by rgs2001uk on Aug 7, 2017 22:04:04 GMT 7
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Post by rgs2001uk on Aug 7, 2017 22:06:23 GMT 7
Fletch at post #105, , fund of funds, I wisened up to that years ago. Just checked out some of their funds, never heard of them. One was offering me a poxy 4%, marginally above bank rates, .
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chiangmai
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Post by chiangmai on Aug 8, 2017 1:34:44 GMT 7
I don't know if it's fake or not but if you read the article the logic stacks up- Sterling falls so that magnifies the value of foreign earnings, UK funds see outflows but fund prices hold up on the back of increased value of foreign currency content. So most funds are "steaming ahead", just that some are doing so more slowly than others, the question to consider is, what happens if the currency scenario reverses. Separately, I was trying to think if there's some way to measure the impact of Brexit on the FTSE and I don't think there is except at the macro level. I thought perhaps volumes would tell a story but they don't since investors simply switch out of high risk stock into lower risk ones. Whatever, all of this simply reinforces to me the need for increased geographic spread and asset balance, there' certainly nothing to loose from that and potentially much to gain. Lastly, I came across a brokers proposal for an investment portfolio for me dated three years ago, here's what he proposed: Attachment DeletedI's a low risk balanced portfolio which with hindsight, wasn't that stellar.
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chiangmai
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Post by chiangmai on Aug 8, 2017 6:57:30 GMT 7
Fletch post 105, HL Mixed Funds. It's a good idea but 5% charge is high for non-HL customers plus the return on their 20/60 split does not seem great. But the geographics are good and the volatility is nicely low, perhaps a good compromise product if I can get over the 5% charge.
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AyG
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Post by AyG on Aug 8, 2017 7:22:32 GMT 7
Fletch post 105, HL Mixed Funds. It's a good idea but 5% charge is high for non-HL customers plus the return on their 20/60 split does not seem great. But the geographics are good and the volatility is nicely low, perhaps a good compromise product if I can get over the 5% charge. Not 100% which fund you're referring to, but all HL funds are 0% initial on Transact
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chiangmai
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Post by chiangmai on Aug 8, 2017 7:31:34 GMT 7
Fletch post 105, HL Mixed Funds. It's a good idea but 5% charge is high for non-HL customers plus the return on their 20/60 split does not seem great. But the geographics are good and the volatility is nicely low, perhaps a good compromise product if I can get over the 5% charge. Not 100% which fund you're referring to, but all HL funds are 0% initial on Transact I never knew that, that's a much better picture. I actually like the diversity very much of the fund I looked at. HL Multi-Manager Equity & Bond Trust GB00B1434Z41
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AyG
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Post by AyG on Aug 8, 2017 7:32:55 GMT 7
Lastly, I came across a brokers proposal for an investment portfolio for me dated three years ago, here's what he proposed: I's a low risk balanced portfolio which with hindsight, wasn't that stellar. You don't want or expect low risk portfolios to be "stellar". You expect them to plod along slowly with not too much volatility. In fact, if one of the funds does perform strikingly well, you have to ask yourself whether the fund manager is taking on additional risk to boost performance. (He/she may well do that to get a bigger bonus at the end of the year.) As for the broker's proposal, it's a very traditional 60/40 portfolio in many ways. Of course, brokers aren't inclined to be innovative. Otherwise if their innovation doesn't pay off for a short period the clients may well complain. A couple of points you may care to note: - the 10% physical property is a good diversifier. Regular income, plus capital growth, with good defensive characteristics against inflation. You could consider doing the same. Personally I'd take it from the bond side of the 60/40, but the broker has taken it from the equity side. (But then, I don't believe conventional bonds are generally worth holding.) - (surprisingly) high allocation to international equities.
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chiangmai
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Post by chiangmai on Aug 8, 2017 7:44:21 GMT 7
I've been trying to quantify volatility and determine what is low/medium/high. V-Lab has done some useful analysis on this and they measure average FTSE250 volatility currently at 10.8% but forecast an increase to over 14% within one year. I currently classify anything over 14% as high and anything under 8 as low which is a useful measure when looking at fund risk. vlab.stern.nyu.edu/analysis/VOL.MCX:IND-R.GJR-GARCH. I think standard deviation and Beta scores are the two most useful measures of risk/performance and I've come to rely on them quite heavily. And by stellar I mean that it's not too difficult to find a low risk bond fund that will return 50% over five years hence I would have expected a blended fund to return a higher percentage, historically.
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AyG
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Post by AyG on Aug 8, 2017 7:57:57 GMT 7
And by stellar I mean that it's not too difficult to find a low risk bond fund that will return 50% over five years hence I would have expected a blended fund to return a higher percentage, historically. 50% over five years is something like 9%/year. That's definitely not "low risk".
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chiangmai
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Post by chiangmai on Aug 8, 2017 8:07:50 GMT 7
And by stellar I mean that it's not too difficult to find a low risk bond fund that will return 50% over five years hence I would have expected a blended fund to return a higher percentage, historically. 50% over five years is something like 9%/year. That's definitely not "low risk". I'm defining risk in this instance only as volatility, I'm not measuring, sector, distribution or regional risk although clearly they do form part of the risk equation, along with other factors. It would actually be quite useful to document the risk analysis process because I'm sure we all approach it slightly differently. The first thing I do when I look at a fund is to verify asset class and the second, look at standard deviation, the fund has to pass those two basic tests for me to want to look further. My third test and onwards is to check the Beta and then the regional allocation, followed by sector and distribution, if those test pass then I start to look at performance.
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AyG
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Post by AyG on Aug 8, 2017 14:54:17 GMT 7
I'm defining risk in this instance only as volatility, I'm not measuring, sector, distribution or regional risk although clearly they do form part of the risk equation, along with other factors. It would actually be quite useful to document the risk analysis process because I'm sure we all approach it slightly differently. The first thing I do when I look at a fund is to verify asset class and the second, look at standard deviation, the fund has to pass those two basic tests for me to want to look further. My third test and onwards is to check the Beta and then the regional allocation, followed by sector and distribution, if those test pass then I start to look at performance. Just curious, but are the figures for standard deviation and beta you're using based upon just 3 years' performance? And if so, do you think a 3 year statistic is actually valid over the whole economic cycle, which is more like 10 years? And given how thoroughly atypical markets have been in recent years, do you think they are reliable indicators of how things are going to be in the future when markets start to return (touch wood) to relative normality?
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chiangmai
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Post by chiangmai on Aug 8, 2017 15:50:08 GMT 7
I'm defining risk in this instance only as volatility, I'm not measuring, sector, distribution or regional risk although clearly they do form part of the risk equation, along with other factors. It would actually be quite useful to document the risk analysis process because I'm sure we all approach it slightly differently. The first thing I do when I look at a fund is to verify asset class and the second, look at standard deviation, the fund has to pass those two basic tests for me to want to look further. My third test and onwards is to check the Beta and then the regional allocation, followed by sector and distribution, if those test pass then I start to look at performance. Just curious, but are the figures for standard deviation and beta you're using based upon just 3 years' performance? And if so, do you think a 3 year statistic is actually valid over the whole economic cycle, which is more like 10 years? And given how thoroughly atypical markets have been in recent years, do you think they are reliable indicators of how things are going to be in the future when markets start to return (touch wood) to relative normality? You need a minimum of at least 30 periods to accurately measure standard deviation and the closest you can get to that using Trustnet etc is the one year calculation, the alternative is to calculate it yourself over the past 60 days. I use the one year measure which is more than a large enough sample, the three year calculation probably says more about the methods employed by the fund manager rather than the fund or the indices which can also be helpful. I think they are useful gauges which form part of a larger risk analysis and historically they have proven to be reliable, but they have to be taken as just one part on an overall view. I don't know if you read the Vlab link I posted but in there the site talks about volatility of indicies increasing in advance of a crash and that in every example in history investors have had the warning beforehand but have either not recognized it or have ignored it. I know for example that if you see a one and three year volatility score that is consistently 5.0 that it's a pretty low risk fund, the opposite is also true of a China fund that I looked at recently that scored a consistent scary 28! Whether or not a score of 15 is helpful is probably determined by other measures. I don't know about anyone else but I need something objective to help me determine whether a fund is low or medium risk and this helps achieve that, the alternative is to accept on face value that Morningstar for example says X is a medium risk fund without explaining how and why - I've seen too many examples in recent days where M/S, FT and Trustnet have all said wildly different things about the risk associated with a fund so it's good to have an independent measure to hand. The following helps explain things more accurately and eloquently! www.spauldinggrp.com/should-there-be-a-minimum-number-of-months-to-calculate-standard-deviation/One more thought: if you decide you're a balanced or moderate risk investor for example and all the tests confirm that, how are you going to ensure your portfolio matches your risk tolerance level unless you measure (and how) it objectively? It seems silly to want one thing and end up unwittingly with something at the opposite end of the scale.
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AyG
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Post by AyG on Aug 8, 2017 16:50:40 GMT 7
You need a minimum of at least 30 periods to accurately measure standard deviation and the closest you can get to that using Trustnet etc is the one year calculation, the alternative is to calculate it yourself over the past 60 days. I use the one year measure which is more than a large enough sample, the three year calculation probably says more about the methods employed by the fund manager rather than the fund or the indices which can also be helpful. I really don't know where you're getting your ideas from, but they are seriously misguided. Volatility varies dramatically from period to period, and just looking at a one year window is meaningless. Chose a different one year window and you may well come to completely different conclusions. Even a three year window is insufficient for any sort of reliable inference. Just have a look at the VIX index, which measures forecast volatility for the S&P 500 to see how much it's varied over the years. en.wikipedia.org/wiki/VIX#/media/File:VIX.png
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