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30% portfolio allocation, Fundsmith or..?
King Lodos
Posted: 24 February 2018 13:52:53(UTC)

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Balvenie;57788 wrote:
Jim S;57778 wrote:

Was it the +19.7% annualised rate of return which put you off? There's always Hansa...


+13.77% year on year for FUNDSMITH. Plus I think the fees are quite high compared to LT & most BG funds


Just averaging the past 5 years annual returns, I do get 20%.

There have been higher performing funds – and for most of the past 5 years I've been largely out of Fundsmith, and in things like Henderson European Smaller Cos, Baillie Gifford Pacific, SPDR Financials, TB Amati UK Smaller, etc. that have had periods of very strong performance.

I think LT's likely just as good as Fundsmith – and their performance through the financial crisis, with the LT Investment Trust, is impressive .. That's something Fundsmith's approach isn't tested through yet.

It's the BG funds I'm more skeptical of – as much as I really like the companies they're in..

Historically, the kind of companies SMT's in (Tech giants, AI, robotics, etc) have always suffered from unrealistic expectations .. Even as computers, chips, software and the internet have transformed our economy, tech's still the worst performing sector since the 60s, as we've always priced in too much growth rather than too little (maybe the same phenomena as people thinking we'd have had space hotels by 1999), and disruptive companies have a habit of being easily disrupted themselves .. I don't know whether that will be the case this time – it could be that the tech giants are the economies of the future

King Lodos
Posted: 24 February 2018 14:09:04(UTC)

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Aminatidi;57800 wrote:
I've never got why anyone even considers HL for funds.

0.45% is brutal, a bit like their new website.


Free fund dealing .. and if you happen to pick funds that have an equivalent 0.2% or more discount on their platform.

Really you're best off going straight with Vanguard, or individual shares, and avoiding fees as much as possible .. But depending on how actively you're managing a portfolio, HL can be quite reasonable, and alternatives can sometimes be slightly false economies
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Aminatidi on 24/02/2018(UTC)
Mickey
Posted: 24 February 2018 14:14:43(UTC)

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King Lodos;57802 wrote:
Aminatidi;57800 wrote:
I've never got why anyone even considers HL for funds.

0.45% is brutal, a bit like their new website.


Free fund dealing .. and if you happen to pick funds that have an equivalent 0.2% or more discount on their platform.

Really you're best off going straight with Vanguard, or individual shares, and avoiding fees as much as possible .. But depending on how actively you're managing a portfolio, HL can be quite reasonable, and alternatives can sometimes be slightly false economies

I agree with that. Some time ago a contributor did some cost analysis of x-number of fund trades per year and portfolio values. I remember being surprised how well HL came out of that test. Didn't convince me to switch to OEICS but it was surprising to see the figures.
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Aminatidi on 24/02/2018(UTC), King Lodos on 24/02/2018(UTC)
Aminatidi
Posted: 24 February 2018 15:01:53(UTC)

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Fair enough, can only speak for myself but I've run a lot of combos through various cost comparison calculators and all I know is HL have never been even vaguely competitive.
Keith Cobby
Posted: 24 February 2018 16:38:28(UTC)

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King Lodos;57801 wrote:
Balvenie;57788 wrote:
Jim S;57778 wrote:

Was it the +19.7% annualised rate of return which put you off? There's always Hansa...


+13.77% year on year for FUNDSMITH. Plus I think the fees are quite high compared to LT & most BG funds


Just averaging the past 5 years annual returns, I do get 20%.

There have been higher performing funds – and for most of the past 5 years I've been largely out of Fundsmith, and in things like Henderson European Smaller Cos, Baillie Gifford Pacific, SPDR Financials, TB Amati UK Smaller, etc. that have had periods of very strong performance.

I think LT's likely just as good as Fundsmith – and their performance through the financial crisis, with the LT Investment Trust, is impressive .. That's something Fundsmith's approach isn't tested through yet.

It's the BG funds I'm more skeptical of – as much as I really like the companies they're in..

Historically, the kind of companies SMT's in (Tech giants, AI, robotics, etc) have always suffered from unrealistic expectations .. Even as computers, chips, software and the internet have transformed our economy, tech's still the worst performing sector since the 60s, as we've always priced in too much growth rather than too little (maybe the same phenomena as people thinking we'd have had space hotels by 1999), and disruptive companies have a habit of being easily disrupted themselves .. I don't know whether that will be the case this time – it could be that the tech giants are the economies of the future



Isn't it usually the case throughout history that only a handful of stocks lead to real out-performance. At the moment it is the FANGs and BATs.

Probably the most disruptive company has been Microsoft and they are still going strong. I shall be sticking with the BG trusts.
King Lodos
Posted: 24 February 2018 16:47:50(UTC)

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The Moneysavingexpert expert lot seem to think HL's so expensive it'll send you to the poorhouse.

Playing around with fund ISAs here – doing 100 trades a year holding 20 funds – it's median expensive (£2,000), but not much more than the cheapest .. and in this case it beats the usual favourites – iWeb (£24,600 charges), AJBell, Interactive Investor – by a long way.

http://www.comparefundplatforms.com/

HL's great for long-term buy-and-hold shares/trusts .. I'm generally building positions on my trading platform, and then moving them over to HL when they're large enough – I'm always tempted to go for share certificates in real long-term positions though .. Nice to feel like you actually own something – plus it'll be harder for Corbyn to get his hands on them.

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gillyann on 24/02/2018(UTC)
King Lodos
Posted: 24 February 2018 17:04:00(UTC)

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Keith Cobby;57808 wrote:
Isn't it usually the case throughout history that only a handful of stocks lead to real out-performance. At the moment it is the FANGs and BATs.

Probably the most disruptive company has been Microsoft and they are still going strong. I shall be sticking with the BG trusts.


All the more impressive for me, Fundsmith and LT have beaten the US without being in the FANGs and BATs .. Among US hedge funds, not being in those stocks has almost guaranteed underperformance.

Microsoft and Apple are different from other tech giants imo .. They're much more established – in fact both tend to show up near the top of US Value indexes .. So they're not really priced like growth stocks.

With Tencent on a PE around 47, vs Apple's 17, you need almost a tripling of EPS to get it down to Apple's valuation .. Such a great company, with huge untapped opportunities in advertising – it's just historically, we've tended to overestimate that growth .. I think the opportunity in Microsoft was that people wrote it off when Apple reemerged – there's no great Microsoft story .. It's almost a surprise the company's still as profitable as it is

chubby bunny
Posted: 24 February 2018 17:07:35(UTC)

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Do HL only have good discounts on their Wealth 150 funds? Going through that list and comparing the total cost of holding through HL versus the lowest percentage fee platforms (Cavendish/Charles Stanley/AJ Bell), 19 funds would be cheaper, 5 the same and 66 more expensive.
King Lodos
Posted: 24 February 2018 17:36:41(UTC)

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I get HL discounts on some quite obscure funds .. But I wouldn't make the case it's a cheap platform, unless you trade a lot – which often isn't practical on other platforms as deals tend to take longer to go through.

The most interesting thing for me is that average retail investor returns are 2.6% these days – and that's in stocks and fixed income funds – and that's mainly down to bad market timing, but fees (including hidden) could easily be knocking 2% off that.

That's (apparently) much lower than it was for previous generations .. I'd have to think the biggest cost impact of funds is that they make all the worst behaviours – over-diversification, performance chasing, jumping in and out of the market, speculating (on managers) – far too easy .. and that's probably true of index funds too .. You should see the amount of coaching Bogleheads need to stay on track
Mickey
Posted: 24 February 2018 19:55:35(UTC)

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King Lodos;57812 wrote:
The most interesting thing for me is that average retail investor returns are 2.6% these days – and that's in stocks and fixed income funds – and that's mainly down to bad market timing, but fees (including hidden) could easily be knocking 2% off that.

That surprises me, I wonder what time period that is for? Our own returns are a lot higher, portfolios of IT's and holding between 7-12 usually. To get down to 2.6% must be difficult.
King Lodos
Posted: 24 February 2018 20:57:16(UTC)

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Mickey;57813 wrote:
King Lodos;57812 wrote:
The most interesting thing for me is that average retail investor returns are 2.6% these days – and that's in stocks and fixed income funds – and that's mainly down to bad market timing, but fees (including hidden) could easily be knocking 2% off that.

That surprises me, I wonder what time period that is for? Our own returns are a lot higher, portfolios of IT's and holding between 7-12 usually. To get down to 2.6% must be difficult.


It comes from the Dalbar study:

10 yr average returns to 2013: 2.6%
20 yr average returns to 2013: 2.5%
30 yr average returns to 2013: 1.6%

And: "The QAIB states the average investor refers to “the universe of all mutual fund investors whose actions and financial results are restated to represent a single investor.”"

https://www.forbes.com/sites/advisor/2014/04/24/why-the-average-investors-investment-return-is-so-low/


So it is specifically fund investors – there's a figure somewhere of what retail investors on phone brokering platforms used to make, and that was market-matching or even beating if I remember right.

I think it factors in big mistakes, like selling at the bottom of a crash (and of course just as many shares are sold at the bottom of the market as are bought), and not getting back in .. and performance chasing .. Add a 2% fee (platform + fund + charges), and it's conceivable
philip gosling
Posted: 25 February 2018 10:33:36(UTC)

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Dalbar study also examined the difference in returns from active versus passive investing and came up with

..."
The annualized performance difference for active funds vs. passive funds over the 15-year period ending Dec. 31 2016 is 1.2%, (in favour of active funds) according to Dalbar research.

This spread drops to 0% for a 10-year annualized average, but stands at 0.4% over a 5-year time horizon.

In shorter periods, like the 3-year range, passive funds top active by 1.7%. They also outperform on a 1-year basis at an annualized rate of 2.7%..."


One main reason the study identified for long term advantage of active is that investors tend to stick at those investments for a long time as we always say best returns come from "Time in the Market".

Anyway Thanks KL for pointing me to some interesting research that can be applied by ordinary investors..
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King Lodos on 25/02/2018(UTC)
Fell Walker
Posted: 25 February 2018 11:47:56(UTC)

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philip gosling;57825 wrote:


Dalbar study also examined the difference in returns from active versus passive investing and came up with

..."
The annualized performance difference for active funds vs. passive funds over the 15-year period ending Dec. 31 2016 is 1.2%, (in favour of active funds) according to Dalbar research.

This spread drops to 0% for a 10-year annualized average, but stands at 0.4% over a 5-year time horizon.

In shorter periods, like the 3-year range, passive funds top active by 1.7%. They also outperform on a 1-year basis at an annualized rate of 2.7%..."


One main reason the study identified for long term advantage of active is that investors tend to stick at those investments for a long time as we always say best returns come from "Time in the Market".

Anyway Thanks KL for pointing me to some interesting research that can be applied by ordinary investors..


The thing is what active funds do they compare to the passives? Is it global or UK? The main point is though do they just use the index benckmark average of all the funds in that sector, in which case you have all the dog funds going in to the equation. The should look at the top rated funds and see how it comes out. There are 100's of consistently under performing funds no one on this forum would dream of buying that are probably bunched into the active funds category.
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Guest on 25/02/2018(UTC), laang lee on 25/03/2018(UTC)
philip gosling
Posted: 25 February 2018 12:11:43(UTC)

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Fell Walker

have a read
Aminatidi
Posted: 25 February 2018 13:20:36(UTC)

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Quick follow up question:

At some point fees will matter. iWeb are miles cheaper than anyone else but their fund range is limited, IT's make sense with them.

Lindsell Train Global Equity is the thorn in my side there as iWeb don't carry them.

Now if LT make me a couple of hundred quid a year it's a false economy to do anything, but with 25% of "quite a bit over time" planned to be in LT is there any IT option you'd consider in its place?

Finsbury is the natural one if I like Nick Train's approach but I lose the global element.

The LT IT is trading at 19% premium which seems absurd.
King Lodos
Posted: 25 February 2018 14:09:13(UTC)

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I think the global aspect is more important than ever given current risks to our economy.

LT really don't trade much – they're very buy-and-hold .. It would cost a bit in dealing fees, but you could buy LT Japanese (as a fund holding) then buy pretty much all the other individual shares in the Global fund (with a capped fee).

I like that as a long-term solution, as I like quarterly dividends and lower fees – you just have to see how much dealing costs are going to add up to .. Then again, LT Global + HL's fee is only the same as Fundsmith as cheap as you can get it (1%)
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Aminatidi on 25/02/2018(UTC), gillyann on 25/02/2018(UTC)
Aminatidi
Posted: 25 February 2018 14:20:51(UTC)

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King Lodos;57837 wrote:
I think the global aspect is more important than ever given current risks to our economy.


Yes I'm being vary careful not to focus on the UK as I see many people doing (too many in my very novice opinion).

I suspect the answer is as simple as "If LT Global returns £50 more than any IT equivalent it makes sense to stick with it".

Any when you look at it in those terms why am I even giving a toss :)
Peter Dixon
Posted: 25 February 2018 14:45:22(UTC)

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Aminatidi;57834 wrote:
Quick follow up question:

At some point fees will matter. iWeb are miles cheaper than anyone else but their fund range is limited, IT's make sense with them.

Lindsell Train Global Equity is the thorn in my side there as iWeb don't carry them.

Now if LT make me a couple of hundred quid a year it's a false economy to do anything, but with 25% of "quite a bit over time" planned to be in LT is there any IT option you'd consider in its place?

Finsbury is the natural one if I like Nick Train's approach but I lose the global element.

The LT IT is trading at 19% premium which seems absurd.

The choice of platform depends on many factors but the most significant is the size of portfolio. An ad valorem fee structure, as with HL, can be good value for very small portfolios but poor value for large ones.

But you don't have to have just one, and with more than one you can use each to your advantage. I still have about 25% of my investments with HL and 60% with IWeb. Fees to IWeb are just a tiny fraction of the fees I pay to HL despite the larger size and the saving is huge (even though I only pay HL 0.25%, not 0.45%). Funds I have with HL are those unavailable on IWeb, those that have an OCF discount, and those I expect to trade a lot. (BTW, IWeb also have some funds not available on HL.)

Would be a disadvantage to someone who uses the platform to track their holdings, but I don't.

The 19% premium on LTI is absurd - unless you believe the 40% weighting to unlisted Lindsell Train Ltd is massively undervalued; but not as absurd as when the premium was at 70%. You're really putting 60% of your investment in a IT and 40% in an investment company.
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Aminatidi on 25/02/2018(UTC)
King Lodos
Posted: 25 February 2018 16:58:49(UTC)

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Aminatidi;57838 wrote:
King Lodos;57837 wrote:
I think the global aspect is more important than ever given current risks to our economy.


Yes I'm being vary careful not to focus on the UK as I see many people doing (too many in my very novice opinion).

I suspect the answer is as simple as "If LT Global returns £50 more than any IT equivalent it makes sense to stick with it".

Any when you look at it in those terms why am I even giving a toss :)


Of course the short-term impact of fees is negligible – it's a steak in a mid-priced restaurant, or switching to a cheaper brand of sunflower spread .. The amount you're able to invest is going to have a far greater impact .. Compounding over decades is where fees add up – 11% compounds a lot higher than 10%.

The other thing is you can't buy past returns .. There's no point buying LT Global because you expect it to return higher than an IT or an index fund over the next 5-10 years – then being disappointed when it doesn't.

That will be determined by the chaos of the markets .. If we're in a hiking cycle, it's traditionally Financials, Industrials and Materials that do best, and a bit of Consumer Discretionary .. So it could be completely different funds doing well over the next stretch (I'd say it's very likely).

But the question is do you bet on a binary outcome, or do you find a strategy that makes sense and stick with it?

I think what you buy with a fund like LT is a rational investment philosophy .. You'd hope that over 20-30 years, you're rewarded with higher returns – but it's a lot easier looking back, and picking out the 2 funds out of 5,000 that would've been best to be in .. If it were ever that easy going forwards, we wouldn't need the other 4,998 funds.
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geoffrey Walton on 25/02/2018(UTC), Aminatidi on 25/02/2018(UTC)
Aminatidi
Posted: 25 February 2018 17:17:09(UTC)

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No all fair, and the reason for going with LT is Train's approach hence the mention of Finsbury, I'm not about to go put 25% in a random basket of global things.

12.% will be global and right now that's between FRCL and Mid Wynd, not sure which and as others have hinted it's easy to overthink :)

Then I'm done other than waiting for my cash ISA to transfer across or April 7th whichever comes first.
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