Standing outside the casino
Discussion
Groat said:
My friend has a continually growing bag of cash he has no use for.
Is he better to give it to a spread of investment management companies, or just stick to one, or doesn't it really matter?
How big a bag, and how much of his assets is it? The larger either of those is, the more argument there is for having the hassle of multiple accounts.Is he better to give it to a spread of investment management companies, or just stick to one, or doesn't it really matter?
Greater importance is to make sure the underlying investments are decently diverse, and the fee structure isn't unreasonable
Simpo Two said:
A boat is a good way to get rid of surplus cash. Plus you get a new interest, exercise and fresh air.
Years ago he went to live in Spain. He declared his intention to buy a boat to his Spanish mate who said "Don't. Just use mine for free - apart from the obligation to look after it and carry its costs". This arrangement lasted less than a year until he became fed up with the not inconsiderable hassle, and that ended his interest in owning a boat other than the type of boat he can't afford.
He does not want a new interest, or exercise, and fresh air is not in short supply, although as you mentioned, it's certainly one way to get rid of (surplus) cash.
Your friend should buy the equity market via cheap index trackers, ideally through a tax efficient wrapper. Putting all their money with one manager or one investment style/philosophy is inherently more risky, even if they are brilliant/lucky.
But if your friend really has money he/she has no use for I'd say investing to make a return is a rather moot point and investing to preserve his/her capital is actually the goal, so really only targeting to match inflation, in which case there is other ways of doing it.
I have to say I find there is something quite perverse about the rich gambling with money they can afford to lose just so they have something to do or looking for returns they'll never spend.
But if your friend really has money he/she has no use for I'd say investing to make a return is a rather moot point and investing to preserve his/her capital is actually the goal, so really only targeting to match inflation, in which case there is other ways of doing it.
I have to say I find there is something quite perverse about the rich gambling with money they can afford to lose just so they have something to do or looking for returns they'll never spend.
xeny said:
How big a bag, and how much of his assets is it? The larger either of those is, the more argument there is for having the hassle of multiple accounts.
Greater importance is to make sure the underlying investments are decently diverse, and the fee structure isn't unreasonable
Seven figure big and at a guess about 1/5th of his lump. Greater importance is to make sure the underlying investments are decently diverse, and the fee structure isn't unreasonable
Don't all the investment management companies do the diversifying for you?
The issue is, do they all do things that are so broadly similar that it becomes pointless to use several of them rather than just one?
Names 'on the table' just now being Blackrock, Fundsmith, Vanguard, IM.
What would be the advantage of using several rather than just the one?
Groat said:
xeny said:
How big a bag, and how much of his assets is it? The larger either of those is, the more argument there is for having the hassle of multiple accounts.
Greater importance is to make sure the underlying investments are decently diverse, and the fee structure isn't unreasonable
Seven figure big and at a guess about 1/5th of his lump. Greater importance is to make sure the underlying investments are decently diverse, and the fee structure isn't unreasonable
Don't all the investment management companies do the diversifying for you?
The issue is, do they all do things that are so broadly similar that it becomes pointless to use several of them rather than just one?
Names 'on the table' just now being Blackrock, Fundsmith, Vanguard, IM.
What would be the advantage of using several rather than just the one?
At this point I'm going to say my non professional, non advice is going to cost you a very competitive 2% pa recurring fee plus 5% upfront.
BobsPigeon said:
No they're not all the same, although some of those do offer products similar to other products offered by others and one of those is a particularly risky concentrated fund with only a handful of equity holdings.
At this point I'm going to say my non professional, non advice is going to cost you a very competitive 2% pa recurring fee plus 5% upfront.
That seems to indicate a split between them would be best. Thanks for that. At this point I'm going to say my non professional, non advice is going to cost you a very competitive 2% pa recurring fee plus 5% upfront.
However I'm hoping it's not nonsense given your idea of 2%/5% as 'competitive' in the fee structure. Only StJP would think those terms 'competitive', no-one else.
Pothole said:
Groat said:
My friend has a continually growing bag of cash he has no use for.
Is he better to give it to a spread of investment management companies, or just stick to one, or doesn't it really matter?
If it's continually growing anyway, what's the issue?Is he better to give it to a spread of investment management companies, or just stick to one, or doesn't it really matter?
The advantages of holding it with one manager would be that most private banks or investment houses charge on a tiered basis so potential cost benefit of holding in one place.
If it’s his first time handing over big sums to someone else to manage then people often split provider to compare performance against the two and settle with the one they are most comfortable with after a couple of years.
He may get an element more concentration risk as both manager could be putting him into similar assets though.
You would get more lunches having more providers if that’s your thing.
If it’s his first time handing over big sums to someone else to manage then people often split provider to compare performance against the two and settle with the one they are most comfortable with after a couple of years.
He may get an element more concentration risk as both manager could be putting him into similar assets though.
You would get more lunches having more providers if that’s your thing.
btdk5 said:
The advantages of holding it with one manager would be that most private banks or investment houses charge on a tiered basis so potential cost benefit of holding in one place.
If it’s his first time handing over big sums to someone else to manage then people often split provider to compare performance against the two and settle with the one they are most comfortable with after a couple of years.
He may get an element more concentration risk as both manager could be putting him into similar assets though.
You would get more lunches having more providers if that’s your thing.
Thanks for this reply. The bold bit was almost exactly the current thinking and probably the way it'll go although there's something about it that seems a bit pointless given how performance things can vary from one year to another. So year 1 A beats B. But then year 2 B beats A. etc etc.If it’s his first time handing over big sums to someone else to manage then people often split provider to compare performance against the two and settle with the one they are most comfortable with after a couple of years.
He may get an element more concentration risk as both manager could be putting him into similar assets though.
You would get more lunches having more providers if that’s your thing.
(lunches neither wanted nor offered
)Groat said:
That seems to indicate a split between them would be best. Thanks for that.
My rationale for a split at that level is that if one firm is unavailable (IT glitch or terrorist bomb for example) then you can still get at a reasonable fraction of your money.You list Blackrock, Fundsmith, Vanguard, IM. - there are different things there:
Blackrock offer a variety of collective investments - 3177 - some are broad trackers (so very diverse), some are themed (Technology or Health for example)
Fundsmith offer one fund - it's a pretty good fund, but it typically contains around ~30 different shares - but ones that are very consciously picked - definitely not a lot of diversification there, but the founder argues enough (well he would say that wouldn't he, and it seems to work OK so far).
Vanguard is rather like Blackrock
IM offers a mix of managed and index tracking funds, but I would guess a smaller range than Vanguard or Blackrock.
The first three are available via a variety of platforms.
As an example, I own some Fundsmith and some themed Blackrock funds, but I own them both on two different platforms, essentially the same proportions but in two different places.
xeny said:
Fundsmith offer one fund - it's a pretty good fund, but it typically contains around ~30 different shares - but ones that are very consciously picked - definitely not a lot of diversification there, but the founder argues enough (well he would say that wouldn't he, and it seems to work OK so far
Warren Buffet's Berkshire Hathaway only holds 40 & he seems to be doing alright.Gassing Station | Finance | Top of Page | What's New | My Stuff