Intelligent Money - your investment questions answered

[Intelligent Money]

Vol 2 continuation thread is here https://www.pistonheads.com/gassing/topic.asp?h=0&...

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Hello from Intelligent Money. We are an investment provider, ISA plan manager and Pension/SIPP provider.

Established in 2002 we are FCA Authorised & Regulated and have been entrusted to run £2bn of client money.

Our Private Client services offers fully managed ISAs and Pensions (with SIPP commercial property functionality) without the added expense of platform and adviser fees, whilst still providing full financial support from your Private Client Manager.

PHers can remove our initial charge and minimum investment requirement by inserting the code PH2607 in the ‘Notes’ box when setting an account up online.

We sponsored this thread to give definitive answers to investment questions and explain industry jargon in plain English.

Our aim is to make this into a reference source on all investment and investing matters to the collective PH.

Of course we welcome input from the other informed PHers who help so much in the Finance forum.

So any questions please ask and we will respond. If a question requires you giving personal information you do not want to share publicly then please contact us on 0115 94 84 200 or at [e-mail].

Thanks

Disclosure

JulianPH here is the CEO of Intelligent Money

Nik (who posts under Intelligent Money) runs Private Clients

CoopsIM is a Private Client Relationship Manager who works closely with Nik

Intelligent Money

[Big Al.]

Please note-: THIS IS AN APPROVED SITE SPONSOR!

Site moderator.

[MWM3]

I'll start...

Passive or Active?

[Derek Chevalier]

MWM3 said:

I'll start...

Passive or Active?

Look at the evidence

[MWM3]

Derek Chevalier said:

Look at the evidence

Didn't realise you worked for Intelligent Money.

[Intelligent Money]

MWM3 said:

I'll start...

Passive or Active?

Thank you MWM3, a very good (and difficult) first question to answer!

Statistically Passive wins. Buy (and sell) the right Active funds (and you have to be right all the time) and Active will always outperform though, by default of you holding the best performing funds at the right times.

Active funds mainly work on stock selection. Passive funds represent a particular market as a whole.

If you invest in a market (Passive) then, tracking error aside, you will get very close to the market returns. If you spend more money investing in a stock picker (Active) then you are paying more money for someone to pick the stocks that will beat the market. Most don't, but some do. Of those who do even fewer do so consistently.

If you use your head you would select Passive (trackers). Your heart may go for Active stock picking though.

William Littlewood, Neil Woodford, Anthony Bolton, Michael Lindsell, Nick Train and Terry Smith are some of the best stock pickers. But they don't always outperform the markets they invest in, miss huge growth opportunities and still lose money during market falls.

If you catch any of these at the right time you should outperform markets, but you have to sell at the right time too.

Equally, picking the best stocks in a dead market is a waste of time. Tracking the best performing markets will give a far higher return.

Another myth is that Active management can reduce losses in falling markets. There is no statistical evidence that supports this.

So... We go for Active asset allocation into Passive investment funds (Trackers). Going forward we may be right or maybe wrong, but historically it has worked very well for our clients.

I am sorry that was such a long winded response, I just wanted to cover everything.

Regards

Nik

Intelligent Money

[selmahoose]

Intelligent Money said:

Going forward we may be right or maybe wrong, but historically it has worked very well for our clients.

Intelligent Money

If an investor-for-income client handed you £100k to do with as you thought fit, how much income (historically based) do you think you'd be giving them a year later whilst retaining the original £100k to invest again the following year?

Edited by selmahoose on Friday 11th January 19:12

[rfisher]

Bookmarked.

This is going to get messy.

[Intelligent Money]

selmahoose said:

Intelligent Money said:

Going forward we may be right or maybe wrong, but historically it has worked very well for our clients.

Intelligent Money

If an investor-for-income client handed you £100k to do with as you thought fit, how much income (historically based) do you think you'd be giving them a year later whilst retaining the original £100k to invest again the following year?

Edited by selmahoose on Friday 11th January 19:12

Our balanced Income Portfolio has returned an average over 7% a year after charges over the last 5 years - on top of capital preservation.

Obviously our Growth Portfolio has delivered more and our cautious portfolio has delivered less.

We are awaiting our next quarterly results, which we expect to give smaller annual returns due to global markets falling and hitting everyone over the last quarter. We do, however, expect our asset allocation models to have mitigated much of this. I'll post them next week.

Best regards,

Nik

(Intelligent Money)

[Brads67]

Rolex or Lambretta ?

[Intelligent Money]

Brads67 said:

Rolex or Lambretta ?

Rioja or Lambrini?

[anonymous-user]

We know the routine,

Intelligent Money said:

Our balanced Income Portfolio has returned an average over 7% a year after charges over the last 5 years

Claim the glory.

Intelligent Money said:

We are awaiting our next quarterly results, which we expect to give smaller annual returns due to global markets falling and hitting everyone

Blame the markets.

[Intelligent Money]

Intelligent Money said:

We do, however, expect our asset allocation models to have mitigated much of this. I'll post them next week.

You forgot this bit!

[Intelligent Money]

rfisher said:

Bookmarked.

This is going to get messy.

That would be a great shame.

We have set aside team members with over 100 years of combined knowledge, experience and qualifications to honestly and openly answer any investment related questions people have.

We have no agenda to push our services (but will happily answer questions on this too) and no desire to get into arguments.

We are simply providing a free resource to PHers to enable greater understanding of investments, pensions, ISAs, SIPPs, taxation (and so on) to enable people to make more informed decisions, take more control and save money.

[selmahoose]

Intelligent Money said:

selmahoose said:

Intelligent Money said:

Going forward we may be right or maybe wrong, but historically it has worked very well for our clients.

Intelligent Money

If an investor-for-income client handed you £100k to do with as you thought fit, how much income (historically based) do you think you'd be giving them a year later whilst retaining the original £100k to invest again the following year?

Edited by selmahoose on Friday 11th January 19:12

Our balanced Income Portfolio has returned an average over 7% a year after charges over the last 5 years - on top of capital preservation.

Obviously our Growth Portfolio has delivered more and our cautious portfolio has delivered less.

We are awaiting our next quarterly results, which we expect to give smaller annual returns due to global markets falling and hitting everyone over the last quarter. We do, however, expect our asset allocation models to have mitigated much of this. I'll post them next week.

Well that tells me that over a specific 5 year time period I would have AVERAGED a certain amount.

And also tells me that you have different portfolios that would have delivered me different results.

And also suggests that recent market downturns indicate that the current year will be lower than that 5 year average despite some mitigatory effort.

But, Nik, what I'm asking is how much income you think you'd be giving me next year if I give you 100k to invest for me in any way you choose?

I might be wrong, but as an investor for income I think it's quite reasonable to ask how much income I should expect from an investment.

If the answer is "I don't know. It largely depends on market conditions but could possibly be very little, zero, or even a loss" then simply say so.

Alternatively, if 100 years of experience tell you that it would be somewhere between, say, £2k and £20k (or whatever other figures experience tells you are possible) then simply say that.

[Derek Chevalier]

Intelligent Money said:

William Littlewood, Neil Woodford, Anthony Bolton, Michael Lindsell, Nick Train and Terry Smith are some of the best stock pickers.

I think you'd need to clarify if by "stock picker" you meant the ability to generate alpha. Numerous studies have been done on this and all that I've seen point to alpha being statistically insignificant once adjusted for factors in almost all cases (although to be fair to the older generation of fund managers those factors weren't common knowledge at the time).

[Derek Chevalier]

selmahoose said:

Intelligent Money said:

Going forward we may be right or maybe wrong, but historically it has worked very well for our clients.

Intelligent Money

If an investor-for-income client handed you £100k to do with as you thought fit, how much income (historically based) do you think you'd be giving them a year later whilst retaining the original £100k to invest again the following year?

Edited by selmahoose on Friday 11th January 19:12

Ach groak, yer bum's oot the windae. This is a typical question (IMO) asked by someone with a tilt towards property investing (I've had similar before and it's very hard not to answer with a flippant response).

1. You shouldn't be investing in the markets if your time horizon is a year (and you know this ).
2. But as you ask.....could be an enormous range of outcomes depending on what your risk appetite is and what the markets have in store for us (which no one knows, and if someone says they do, tell them to awa' n bile your head)

[Intelligent Money]

selmahoose said:

Well that tells me that over a specific 5 year time period I would have AVERAGED a certain amount.

And also tells me that you have different portfolios that would have delivered me different results.

And also suggests that recent market downturns indicate that the current year will be lower than that 5 year average despite some mitigatory effort.

But, Nik, what I'm asking is how much income you think you'd be giving me next year if I give you 100k to invest for me in any way you choose?

I might be wrong, but as an investor for income I think it's quite reasonable to ask how much income I should expect from an investment.

If the answer is "I don't know. It largely depends on market conditions but could possibly be very little, zero, or even a loss" then simply say so.

Alternatively, if 100 years of experience tell you that it would be somewhere between, say, £2k and £20k (or whatever other figures experience tells you are possible) then simply say that.

With respect, you asked me:

selmahoose said:

If an investor-for-income client handed you £100k to do with as you thought fit, how much income (historically based) do you think you'd be giving them a year later whilst retaining the original £100k to invest again the following year?

Edited by selmahoose on Friday 11th January 19:12

This is the question I answered.

Asking how much income you could expect to receive from a diversified portfolio over the next year is akin to asking how much growth could you could expect to receive.

It is not that I am unable to answer this, it is that nobody is able to answer - as it is an impossible question (and therefore not quite reasonable).

I trust you do not consider this answer to be evasive, but if anyone tells you they can predict this you should run a mile.

So, the answer to your current question is that I, nor anybody else, knows what future market returns will be.

What I can say with great certainty however, is that if your focus is on a 12 month window of return then none of our investment portfolios would be suitable for you.

You would be better off looking at deposit accounts or potentially AAA rated corporate bonds that you held until redemption. However, the capital value of both of these would be eroded by inflation so you would have to take this into account. You may still have £100k, but it won't be worth the same as £100k today.

I hope this address your question. Please let me know if there is anything else I can assist with.

Regards

Nik

[selmahoose]

Derek Chevalier said:

Ach groak, yer bum's oot the windae. This is a typical question (IMO) asked by someone with a tilt towards property investing (I've had similar before and it's very hard not to answer with a flippant response).

1. You shouldn't be investing in the markets if your time horizon is a year (and you know this ).
2. But as you ask.....could be an enormous range of outcomes depending on what your risk appetite is and what the markets have in store for us (which no one knows, and if someone says they do, tell them to awa' n bile your head)

Regarding '1)', some people definitely invest in the markets for income and this isn't done with any horizon. It's done to generate an earner to live on. So IMO it's perfectly reasonable to want an idea of how much of a living the investment will provide.

2) Well assuming Nik/IM agrees then as I said that's one possible direct answer. ie there is no answer, and this type of investment has no accurately predictable outcome. And I accept that.

But in this case it doesn't depend on my risk appetite because my question involved dumping the money on Nik and leaving it to him to decide what to invest in. Leaving it to the expert, as it were.

As to "flippant responses", apart from 'I saaay, Rupert' efforts at music hall Scottish accents (it's 'bile yer heid', btw) I'd love to see you try to do 'flippant'. Come on! Geez yir a-gemme staun-up ya bammy fanny!

[Intelligent Money]

Derek Chevalier said:

I think you'd need to clarify if by "stock picker" you meant the ability to generate alpha.

Hello Derek

I didn't actually.

For clarity, I consider a 'stock picker' as being an investment/fund manager who picks stocks with the aim of outperforming their respective market(s) (which is, of course, the definition of Alpha).

I do not remotely suggest they actually have the ability to do this though!