Drip feeding a s&s isa vs a etf

[JulianPH]

egor110 said:

So if it's worth getting a low cost product would a index tracker be better than say the vanguard life strategy fund ?

Usa - highly priced so wrong time to buy , economic slowdown on the cards and high government debt

Europe - flat lining

China - entering a slump and the trade war with America , although it seem's they can weather that as so much they produce stays in China.

So is Asia-Pacific worth looking at , such as Australia , Indonesia , Vietnam ?

The Vanguard Life Strategy funds are index trackers.

You seem to be running round the world looking at past performance. This is unlikely to end up well moving forward.

Derek Chevalier said:

"If clients can access global asset allocation portfolio for less than 25bps, what is the value add for paying any more than that?"

"If" being the big question.

You have stated many times that financial advisers add the greatest value (though have not provided any evidence whatsoever for this) but the reality is that financial adviser or not you are going to have to pay to access the markets. That is fund charges, dealing/transaction charges and platform charges.

All before you get to adviser charges.

Could you please explain how all of this can be achieved for 0.25% a year (particularly given you also cite 1.2% a year for this - which you still have not broken down)?

Cheers

[egor110]

Phooey said:

No offence meant OP, but I think you need to avoid trying to be too clever. Risk vs Reward and all that, but unless you already have a good degree of financial knowledge (I certainly don't!) I would avoid getting too technical. I'm sure the above links posted are informative, and nice of DC to offer PH members some free advice, but to me they may as well be in foreign, and are exactly the reason why I've chosen a low-cost fully managed ISA.

How come you picked a fully managed as opposed to passive ?

Reading reports today there's no proof the extra fees for the fund manager equal better performance opposed to a tracker which just smooths over the peaks and troughs as long as you leave the money in for a decent amount of time , which seems to be the problem most people have.

Reading various threads on here , time and time again people stick money in then panic after a year or 2 rather than treat it like a pension where you just pay the money in and forget about it.

Edited by egor110 on Friday 17th May 18:28

[Derek Chevalier]

Phooey said:

No offence meant OP, but I think you need to avoid trying to be too clever

Agreed

[egor110]

Derek Chevalier said:

Phooey said:

No offence meant OP, but I think you need to avoid trying to be too clever

Agreed

Like you said earlier just going for vanguard 80/20 or 60/40 seems to be easiest or this https://www.hl.co.uk/funds/fund-discounts,-prices-...

[Phooey]

egor110 said:

How come you picked a fully managed as opposed to passive ?

Reading reports today there's no proof the extra fees for the fund manager equal better performance opposed to a tracker which just smooths over the peaks and troughs as long as you leave the money in for a decent amount of time , which seems to be the problem most people have.

Reading various threads on here , time and time again people stick money in then panic after a year or 2 rather than treat it like a pension where you just pay the money in and forget about it.

Edited by egor110 on Friday 17th May 18:28

The underlying investments are passive

eta - I'm not saying you should follow my approach, or investment choice, but have a read of this ( https://www.intelligentmoney.com/private-clients/o... ) to understand an active-passive approach.

As will ANY investment - only time will tell if it's a wise one or not BUT, *I'm* currently paying too much in fees with my current provider - the last 10yrs performance has taught me this. I've not got the time to learn, understand, and monitor the fully DIY route. Admittedly I could pay for one-off advice for someone to tell me what or which funds and level of diversification I need BUT, again I will need to pay for this, so by the time you've added the cost of one-off advice to the platform/fund fees... you are probably over 1%.

Out of interest DC - how much would one-off advice cost (to the point of identifying which funds I will be buying) with an annual review each year, and maybe the odd phone call here and there?

Edited by Phooey on Friday 17th May 19:03

[Derek Chevalier]

JulianPH said:

Derek Chevalier said:

"If clients can access global asset allocation portfolio for less than 25bps, what is the value add for paying any more than that?"

"If" being the big question.

You have stated many times that financial advisers add the greatest value (though have not provided any evidence whatsoever for this) but the reality is that financial adviser or not you are going to have to pay to access the markets. That is fund charges, dealing/transaction charges and platform charges.

All before you get to adviser charges.

Could you please explain how all of this can be achieved for 0.25% a year (particularly given you also cite 1.2% a year for this - which you still have not broken down)?

Cheers

Financial adviser aren't relevant to this particular discussion - I was talking about DIY which, when you cut out the middle men is what you have.

You can buy a mix of Vanguard equity and bond funds for 24bps inc. transaction costs and other providers offer similar.

As for platform, in the retail space there are some charging as low as £5 a trade - on a £100,000 2 fund portfolio rebalancing once a year is 1bps

https://monevator.com/compare-uk-cheapest-online-b...

As I said previously, a great time to be a DIY investor, as long as they can remove themselves from the 24/7 news accessed over always on smart devices.

[Derek Chevalier]

egor110 said:

Reading reports today there's no proof the extra fees for the fund manager equal better performance opposed to a tracker which just smooths over the peaks and troughs as long as you leave the money in for a decent amount of time , which seems to be the problem most people have.

Reading various threads on here , time and time again people stick money in then panic after a year or 2 rather than treat it like a pension where you just pay the money in and forget about it.

Agree with both your points. As I've stated before, the "perfect" investor that can keep their emotions under control and invests in an evidence based portfolio is going to outperform the vast, vast majority of investors.

[egor110]

I watched a good documentary called ' how to win the loosers game' over the weekend , pretty much said what you've all been saying .

passive , hold for long term .

So tomorrow i'm going to set up either i.m optimum global growth or vanguard life strategy 80/20.

Vanguard fees are 0.22% and im are 0.87% so on the face of it sticking with the low fees mantra vanguard seem's obvious choice .

One last question , i was reading a article re investing modest amounts and they we're saying stick with the whole passive plan but push the risk so a lot more shares than bonds , the argument was you have the chance of building your money quicker but if you lose it you've still only lost a modest amount and once you've built it up then bring the risk down with a more balance shares to bonds.

Also say the ftse dropped into the 6000's again , if i dumped a load of cash into say my im optimum growth would that money then buy me more shares due to the low ftse or do i.m only reinvest like bi annually ?

Thanks for all your help .

[Helicopter123]

egor110 said:

So if it's worth getting a low cost product would a index tracker be better than say the vanguard life strategy fund ?

The vanguard has a 0.22% ongoing charge fee ( if i drip fed in once a month would i incur that fee monthly or is it a yearly fee ) , presumably a index tracker should be a lower fee because nobodies managing it , it's just tracking a market ?

Any thoughts on putting £20 week ( coffee money ) into something more risky , emerging markets ?

It's pretty hard to see any countries that are safe at present :

Usa - highly priced so wrong time to buy , economic slowdown on the cards and high government debt

Europe - flat lining

China - entering a slump and the trade war with America , although it seem's they can weather that as so much they produce stays in China.

So is Asia-Pacific worth looking at , such as Australia , Indonesia , Vietnam ?

When investing, I try and buy great stocks, not economies.

Also, some sectors tend to outperform at different points in the economic/market cycle.

If investing for 10 years, where we are today largely irrelevant. Indeed, the more "fear" around the better when deploying fresh capital.

Personally, I don't want to own the largest X number of companies in any given market, I want to own a basket of 40/50 stocks that have the potential to do better than average over the next 10 years. This means a little more in fees for a decent manager, but I can accept that as the potential additional returns can be very helpful.

If you are not confident in picking good managers, find a reliable Adviser who will guide you. Almost always money well spent.

[JulianPH]

egor110 said:

I watched a good documentary called ' how to win the loosers game' over the weekend , pretty much said what you've all been saying .

passive , hold for long term .

So tomorrow i'm going to set up either i.m optimum global growth or vanguard life strategy 80/20.

Vanguard fees are 0.22% and im are 0.87% so on the face of it sticking with the low fees mantra vanguard seem's obvious choice .

One last question , i was reading a article re investing modest amounts and they we're saying stick with the whole passive plan but push the risk so a lot more shares than bonds , the argument was you have the chance of building your money quicker but if you lose it you've still only lost a modest amount and once you've built it up then bring the risk down with a more balance shares to bonds.

Also say the ftse dropped into the 6000's again , if i dumped a load of cash into say my im optimum growth would that money then buy me more shares due to the low ftse or do i.m only reinvest like bi annually ?

Thanks for all your help .

I missed that, I'll have to find it and watch it.

Remember the Vanguard Life Strategy fee of 0.22% is only the headline fee. You also have to factor in the transaction fees and their platform fee. This brings you closer to 0.5% for an ISA.

If you wanted this in a pension/SIPP to get full tax relief you would have to use another platform. Hargreaves Lansdown, for example would bring the total fees up to 0.80%.

IM's 0.87% fee includes all fees and costs and also gives you unlimited access to your own Private Client Manager who can assist you in all financial matters.

Whilst IM Optimum and Vanguard Life Strategy both take the same approach in buy the markets and holding them there are two important differences to remember.

Vanguard holds the markets in line with their market capitalisation (so as the US market is nearly 10 times larger than the UK your portfolio would have 10 times the exposure to US stocks than UK ones).

IM holds the markets as it thinks is best to meet the aims of each Optimum portfolio with a domestic (UK) bias that UK investors generally feel more comfortable with (so its UK/US exposure if far more balanced).

IM also has the ability to change these weightings if some future unknown event requires this. Vanguard do not have this ability.

So, neither route is right or wrong, they are just slightly different approaches.

You need to factor these things into your decision making. Feel free to have a chat with Nik at IM who can help you with this (which is something else IM offer that Vanguard don't!).

Re your last point, if markets fall and you wanted to take this as a buying opportunity your money would indeed by you more shares than during higher markets. Your money would be switched from cash into your Optimum portfolio straight away.

I hope that helps and answers your questions.

Just give me a shout if there is anything else!

[Derek Chevalier]

Apologies, missed this.

Phooey said:

As will ANY investment - only time will tell if it's a wise one or not BUT, *I'm* currently paying too much in fees with my current provider - the last 10yrs performance has taught me this.

Fees would have been a drag on performance, but you'd also have to take into account whether you were taking the right amount of risk and how the portfolio had performed.

Phooey said:

I've not got the time to learn, understand, and monitor the fully DIY route.

I understand this, and it depends how much you value your time vs paying someone else to take of your investments for you. But you need to be very clear of the total costs (explicit fees and potential underperformance) should you let someone do it for you. As mentioned before, perhaps a thread on investing basics would be very useful to help people realise it's not difficult, and once setup, monitoring can take a few minutes a year.

Phooey said:

Out of interest DC - how much would one-off advice cost (to the point of identifying which funds I will be buying) with an annual review each year, and maybe the odd phone call here and there?

If all you were looking for was someone to select a portfolio for you I just don't think I would add sufficient value to engage as a financial planning client (which is all I currently offer). There are solutions that offer limited/restricted advice that might be more suitable if that was what you were looking for.

Edited by Derek Chevalier on Sunday 19th May 14:51

[Derek Chevalier]

Helicopter123 said:

This means a little more in fees for a decent manager, but I can accept that as the potential additional returns can be very helpful.

If you are not confident in picking good managers, find a reliable Adviser who will guide you. Almost always money well spent.

I'm not aware of any evidence that it's possible to pick future outperforming managers - I would suggest seeking an adviser following an evidence based investing approach will give you the best outcome.

[Derek Chevalier]

egor110 said:

I watched a good documentary called ' how to win the loosers game' over the weekend , pretty much said what you've all been saying .

passive , hold for long term .

That's great you've watched the documentary, and of course fund managers aren't going to admit they can't, in aggregate, beat the market.

"It is difficult to get a man to understand something, when his salary depends upon his not understanding it!"

There's plenty more evidence out there - in fact one could argue it's overwhelming.

Best of luck in whatever you decide to do.

[Derek Chevalier]

JulianPH said:

I missed that, I'll have to find it and watch it.

https://www.youtube.com/watch?v=SwkjqGd8NC4

Fair play to Robin - he's put himself out there.

JulianPH said:

Remember the Vanguard Life Strategy fee of 0.22% is only the headline fee. You also have to factor in the transaction fees and their platform fee. This brings you closer to 0.5% for an ISA.

If you wanted this in a pension/SIPP to get full tax relief you would have to use another platform. Hargreaves Lansdown, for example would bring the total fees up to 0.80%.

As mentioned above, with a bit of time on Monevator/reddit I think you'd get that closer to 0.25%

JulianPH said:

Vanguard holds the markets in line with their market capitalisation (so as the US market is nearly 10 times larger than the UK your portfolio would have 10 times the exposure to US stocks than UK ones).

That's not true for LifeStrategy, they have a UK skew. Article from 2016 - I'm not sure if it's changed much in the interim. Vanguard acknowledge that it's not optimal compared to a more global portfolio (although it beats most of the competition), but it's what customer prefer.

https://www.telegraph.co.uk/investing/funds/vangua...

[Derek Chevalier]

egor110 said:

I watched a good documentary called ' how to win the loosers game' over the weekend , pretty much said what you've all been saying .

The legend speaks

https://youtu.be/SwkjqGd8NC4?t=768

[JulianPH]

Derek Chevalier said:

I'm not aware of any evidence that it's possible to pick future outperforming managers - I would suggest seeking an adviser following an evidence based investing approach will give you the best outcome.

Hi mate, I'm a bit confused by this statement - so am guessing others will be.

On the one hand, you state that there is no evidence that it is possible to pick future out performance.

On the other hand, you state that 'evidence based investing' will give people the best outcome.

This sounds a bit slippery to me. Either there is evidence people can go on or there isn't. You can't have it both ways!

You are also suggesting only a financial adviser (such as your good self) can access such evidence, which is something I am sure you do not wish to infer.

No one needs to pay a financial adviser to track the markets, so I am guessing that this is also not something you were implying either?

I am completely with you when you say there is no evidence that it is possible to pick future outperforming managers BTW.

I just disagree that 'the best outcome' can only be achieved by using a financial adviser (particularly when they cite 'evidence' as the reason, but decry it in any other capacity).

The best outcome surely involves the level of risk and volatility taken, not just performance returns? Again, this does not necessitate paying for financial advice.

I'll end this by stating I am not trying to undermine the value of financial advice, just the cost of it in relation to any value.

Were you to charge by the hour for your advice then I could not argue with you. But you won't do this, you will only work on a percentage of the asset available (if it is high enough to warrant your attention) and with people who agree that what you say is the only way.

I have said many times on here that I think you are a good bloke and a good adviser, so please do not take this post as a dig. I genuinely am just trying to find out more.

Cheers

Julian

[egor110]

Derek Chevalier said:

egor110 said:

I watched a good documentary called ' how to win the loosers game' over the weekend , pretty much said what you've all been saying .

The legend speaks

https://youtu.be/SwkjqGd8NC4?t=768

It makes total sense to me .

You can invest bi polar style so you chase the highs and lows trying to buy cheap and sell for more making profits or the other alternative is the passive index tracker way so you smooth off all the peaks and troughs.

As this is pistonheads you end up with a nice linear torque curve

[Derek Chevalier]

JulianPH said:

Hi mate, I'm a bit confused by this statement - so am guessing others will be.

On the one hand, you state that there is no evidence that it is possible to pick future out performance.

On the other hand, you state that 'evidence based investing' will give people the best outcome.

This sounds a bit slippery to me. Either there is evidence people can go on or there isn't. You can't have it both ways!

Evidence based investing means investing in accordance with the scientific evidence, part of which means accepting that for the vast, vast majority of people, market outperformance isn't going to be achievable, be it by picking individual stocks, funds, regions whatever. The inefficiencies that fleetingly exist are hovered up by the eggheads. The next best choice is therefore to buy a low cost globally diversified portfolio.

JulianPH said:

You are also suggesting only a financial adviser (such as your good self) can access such evidence, which is something I am sure you do not wish to infer.

That's not what I am saying - as I've said previously a DIY investor has access to (almost) all the products/evidence that a typical adviser can access, and with some time studying (investment principles, market history, biases, psychology etc) can certainly obtain as good results as I could offer, if not better (as they could implement for a lower overall cost).

For example, Tim Hale consults for a number of the leading planning firms (it's a great book BTW)

https://www.amazon.co.uk/Smarter-Investing-Simpler...

JulianPH said:

No one needs to pay a financial adviser to track the markets, so I am guessing that this is also not something you were implying either?

I agree

JulianPH said:

I just disagree that 'the best outcome' can only be achieved by using a financial adviser (particularly when they cite 'evidence' as the reason, but decry it in any other capacity).

As above, for purely investing, it may not be the best choice for some people. For those with more complex needs it gets a bit more tricky to DIY. Not to say that people can't do it, but most choose not to.

JulianPH said:

The best outcome surely involves the level of risk and volatility taken, not just performance returns? Again, this does not necessitate paying for financial advice.

The best outcome involves achieving their objectives, and that's why it's hard to consider investments in isolation - a lot easier to work with someone approaching retirement (objectives are pretty concrete - e.g. can I stop working tomorrow without fear of running out of money) vs a 35 year old with £1k a month to save.

But to give an answer, in investment terms the main goal must surely be to take the minimum level of risk/vol required to achieve your objectives.

JulianPH said:

I'll end this by stating I am not trying to undermine the value of financial advice, just the cost of it in relation to any value.

Agreed - advice needs to more than cover the cost - and we've both seen cases where that isn't immediately obvious.

JulianPH said:

Were you to charge by the hour for your advice then I could not argue with you. But you won't do this, you will only work on a percentage of the asset available (if it is high enough to warrant your attention) and with people who agree that what you say is the only way.

It's becoming more common now to charge a fixed fee - especially for initial advice, and I'm seeing more fixed fee as ongoing as well. Irrespective of how the charging model is structured - as long as it's transparent and the client feels they are getting value I don't see the problem. As for having a high enough level of assets - it all comes down to a decency level and being able to add value. With increasing regulation it gets harder to service the smaller client - not something the community are happy with but out of our control to a large degree, unfortunately .

[Derek Chevalier]

egor110 said:

As this is pistonheads you end up with a nice linear torque curve

But maybe more rewarding than most modern petrol turbos!

[BlackG7R]

I have also been trying to be a bit more active about getting a return on not only my general savings, but also my pension.

After doing a fair bit of reading and watching the likes of Jack Bogle on Youtube, I have come to the conclusions that :-

1/ I can't beat the market (not consistently anyway, and not without taking silly risks)

2/ With index type funds it's very important to keep an eye on costs.

So to keep it fairly simple I have put most of my money into Vanguard Lifestrategy funds, Bond/Equity ratios depending on how soon I may need the money.

Also a smaller amount in something a little more adventurous, Fundsmith, and Lindsell Train. (I realise they are very similar, just fancied putting a bit in both to compare the two over the next 5 years or so)

Now I will try my best to just forget them, and not fiddle.