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Woodford Equity Income
Tyrion Lannister
Posted: 07 August 2017 00:36:09(UTC)
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I've held Woodford Equity Income since day one, it's currently just under 10% of my portfolio.

After a great start over the first year it's now the worst performing fund I have, by some margin.

I'm thinking of selling out completely and using the cash to invest in individual stocks as opportunities arise.

My question is, would this be a good move or am I giving up on him too early?



4 users thanked Tyrion Lannister for this post.
Keith Thomas on 09/08/2017(UTC), Guest on 09/08/2017(UTC), Mark Anderson on 09/08/2017(UTC), Lilly on 14/08/2017(UTC)
King Lodos
Posted: 07 August 2017 02:19:53(UTC)
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The good news is, in theory it doesn't matter.

If we say past prices don't predict future prices, and everything's priced correctly, then as long as you maintain your exposure to stocks, it really doesn't matter where they are .. You could happily switch that 10% to a FTSE World index, and it will still be a dice roll.

However .. there is an observation that goes against that theory, which is that people consistently buy and sell active funds at the wrong times.

Woodford's best moments have come when he's been willing to underperform in rallies (like the Tech rally), but then far outperformed when markets turned .. A quick look at Woodford's valuations on Morningstar shows PE ratios around 13.7, a PEGY ratio below 1 .. This is a lot cheaper than it was when I held it, and shows Woodford's getting back to a value bias – which can be a very sensible thing as markets get expensive.

What I wouldn't do is sell Woodford for a fund that's done better, and is on higher valuations (or just as a result of the fall in the pound), because that just means now Woodford's got a higher potential return than the fund you're going to be buying into – which is the mistake everyone makes.

There are basically two things that are slightly predictive in markets: momentum (sell as soon as they start underperforming, and keep rotating into winners), or value (sell when things get expensive, and buy things that are cheap) .. It's a dice roll now whether you'd be right or wrong from a momentum point of view (I sold Woodford about 7 months after launch, on momentum), but from value, you'd be slightly better odds sticking with it .. Currency is the unpredictable factor in this, and a lot of other fund's outperformance is just foreign currency exposure .. I'd stick with Woodford, but if you have any doubts, switch to a neutral fund: FTSE World index or Lifestrategy, and ignore how it does – it's the benchmark.
20 users thanked King Lodos for this post.
Harry Trout on 07/08/2017(UTC), Tim D on 07/08/2017(UTC), gillyann on 07/08/2017(UTC), dlp6666 on 07/08/2017(UTC), Tyrion Lannister on 07/08/2017(UTC), Lemanie on 07/08/2017(UTC), Guest on 07/08/2017(UTC), chazza on 08/08/2017(UTC), novicetrader on 09/08/2017(UTC), Guest on 09/08/2017(UTC), Law Man on 09/08/2017(UTC), Richard_L on 09/08/2017(UTC), Donald Chan on 09/08/2017(UTC), Guest on 09/08/2017(UTC), Guest on 11/08/2017(UTC), Guest on 12/08/2017(UTC), Philip K on 13/08/2017(UTC), Bit at a Time on 13/08/2017(UTC), Lilly on 14/08/2017(UTC), Guest on 15/08/2017(UTC)
Micawber
Posted: 07 August 2017 07:29:10(UTC)
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I'd take a different approach and look at the portfolio, where Woodford is admirably transparent month by month. https://woodfordfunds.co...lio/?chosenmonth=062017

It's a broad spread. To my mind it's too heavy in the top 4 holdings, particularly 8% in AZN. It's rather oriented towards domestic UK, but that is Woodford's explicit bet. I note that of the 135 holdings, we have only one in our own pfs, although another ten are on my watchlist and there are some good performers in there.

It's an interesting pf, but we're not in Woodford since discarding his old funds at Invesco Perpetual, which did us very well indeed from the 1990s onward. If I was in this one, I'd probably hold right now partly because it would expand my coverage elsewhere. But we're not buying.
8 users thanked Micawber for this post.
Jeff Liddiard on 07/08/2017(UTC), dlp6666 on 07/08/2017(UTC), Tyrion Lannister on 07/08/2017(UTC), Lemanie on 07/08/2017(UTC), chazza on 08/08/2017(UTC), Harry P on 09/08/2017(UTC), Guest on 11/08/2017(UTC), Lilly on 14/08/2017(UTC)
Tyrion Lannister
Posted: 07 August 2017 11:26:52(UTC)
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Thanks KL for an injection of common sense.
You've reminded me of my biggest weakness wrt investing, impatience!
4 users thanked Tyrion Lannister for this post.
Lemanie on 07/08/2017(UTC), King Lodos on 07/08/2017(UTC), Mark Anderson on 09/08/2017(UTC), Lilly on 14/08/2017(UTC)
GeneralZod
Posted: 07 August 2017 19:19:53(UTC)
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I feel slightly-qualified to answer this one. Just slightly.

A few years ago, I asked a parent of a student I tutor, a financial advisor, what might be the best place to invest some savings other than a rubbish cash ISA. A week or so later, he handed me a piece of paper which was, I now realise, a Morningstar sheet for Woodford Income. At the time, I had no idea what it was. Funds? Not the foggiest. Neil Woodford? The mechanic off Coronation Street wanit? He said to put some money in, leave it five years and resist keep checking it. Ok. I had to figure out the harder stuff for myself e.g. fund supermarkets - I think I consulted Martin Lewis for that. I sort-of did as he said, but, it was here I 'found' Citywire money and started doing my own research and chatting. I met people like Alan Selwood who opened up new doors to me and, suddenly, Neil W didn't seem quite as inviting.

For a long time, I kept a fair % of my savings in Woodford, seeing it as the sensible option and, on the side, dipped my toes into India and gold and so on. But, I was continuously disappointed with ole' Neil myself. It would go up a little and then down and then down again and so on and on whilst other funds I'd put £ into went on doing very well. So, I sympathise with the original poster. I also 'get' the detailed response one person has kindly given, but it also goes against the advice of others who (yeah, ole' Salty D!) who believe that once a fund is not delivering the goods, get rid and get out. THAT said, the OP could clear out of Woody, enter, say, some Romanian startup fund and find his £12k reduce by £4k in three months whilst ole' Woody has a turnaround and starts making dollar like he's hit the jackpot in Vegas. As someone says, it's rolling the dice time.

Anyway, here's my thoughts: If we're in some agreement that Woody is the man to go with when things are very grim, then surely he isn't the man you wanna be with at this exact moment when things are doing Ok?! So, I would pull the £ for the time being and invest it in something else - perhaps look at something more European/global focused and follow the lead that ole' General Zod has been taking. I ditched Woodford ages back and have seen my dollar increase far more than if I'd stayed. I'm also getting irritated by the amount of coverage he gets on Citywire news. I swear every time he scratches his arse, they write a double-page article about it.
2 users thanked GeneralZod for this post.
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King Lodos
Posted: 07 August 2017 20:24:40(UTC)
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Zod

The biggest mistake we make is jumbling up ideas and concepts – as if they'll lead towards a single correct way to invest .. If it were that easy, we'd all invest the same way – people would've worked that out by now .. As Derrida said: "There is nothing without context."

Salty Dog is strictly a trend-following system.

Now it's fine if you want to do that, but it's also dangerous, because it's going to draw you towards bubbles like a magnet – and bubbles can make you very poor .. Which means you have to keep moving and keep trading, and keep hoping you've got the timing right.

It works for me, but I wouldn't recommend it to a pension investor, and I wouldn't expect the rules to keep working as they are .. Now your portfolio looks nothing like a Salty D portfolio, so the advice you want to be following would look totally different.

1 user thanked King Lodos for this post.
Lilly on 14/08/2017(UTC)
Jon Snow
Posted: 08 August 2017 00:23:24(UTC)
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This is what you get with Vanguard Lifestrategy 80 (seems the most popular)

Allocation to underlying Vanguard funds as at date 30 June 2017 -

Vanguard U.S. Equity Index Fund Accumulation Shares 19.5%

Vanguard FTSE Developed World ex-U.K. Equity Index Fund Accumulation Shares 19.2%

Vanguard FTSE U.K. All Share Index Unit Trust GBP Accumulation Shares 18.3%

Vanguard Global Bond Index Fund Pound Sterling Hedged Accumulation Shares 14.2%

Vanguard FTSE Developed Europe ex-U.K. Equity Index Fund Accumulation Shares 6.7%

Vanguard Emerging Markets Stock Index Fund Accumulation Shares 5.8%

Vanguard Japan Stock Index Fund Accumulation Shares 3.6%

Vanguard S&P 500 UCITS ETF 3.2%

Vanguard U.K. Government Bond Index Fund Accumulation Shares 2.6%

Vanguard Pacific ex-Japan Stock Index Fund Accumulation Shares 1.8%

Vanguard U.K. Inflation-Linked Gilt Index Fund GBP Gross Accumulation Shares 1.8%

Vanguard FTSE 100 UCITS ETF 1.7%

Vanguard U.K. Investment Grade Bond Index Fund Accumulation Shares 1.6%

Vanguard U.K. Gilt UCITS ETF 0.0%

Total 100%

OCF 0.22%

That's got to be worth putting a bit aside every month.
5 users thanked Jon Snow for this post.
Mark Anderson on 09/08/2017(UTC), Vince. on 11/08/2017(UTC), Guest on 11/08/2017(UTC), James Bell on 11/08/2017(UTC), Guest on 12/08/2017(UTC)
GeneralZod
Posted: 08 August 2017 07:25:32(UTC)
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Yeah, and I'll add that a month in, my 'Vanguard-plus satellite' folder has made me well over £1500. God bless Vanguard and their little red boat.

I'm even thinking of doing this week's grocery shop in John Lewis.
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dlp6666 on 08/08/2017(UTC), Mark Anderson on 09/08/2017(UTC)
Micawber
Posted: 08 August 2017 07:30:33(UTC)
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Jon Snow;49613 wrote:
This is what you get with Vanguard Lifestrategy 80 (seems the most popular)

Allocation to underlying Vanguard funds as at date 30 June 2017 -

..........

OCF 0.22%

That's got to be worth putting a bit aside every month.

Somebody might like to look at the OCFs of all those underlying funds and weight them to add to the Life strategy fund-of-funds OCF, and then there's a platform charge for funds to be added, depending on your platform.

But still probably a fair deal for a hands-off saver.
2 users thanked Micawber for this post.
dlp6666 on 08/08/2017(UTC), James Bell on 11/08/2017(UTC)
Nigel G
Posted: 08 August 2017 09:45:12(UTC)
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Micawber;49617 wrote:
Somebody might like to look at the OCFs of all those underlying funds and weight them to add to the Life strategy fund-of-funds OCF.

By my reckoning, the weighted mean ongoing charge of the underlying funds comes to 0.133%.
chubby bunny;49626 wrote:
I believe that this is already included in the OCF. The annual report for 2016 says total operating charges of 0.24%, including 'synthetic element' charges of 0.13%, plus transaction costs of 0.05%

Further to chubby bunny's comment, this is a footnote from their report.
Vanguard Investments wrote:
The Ongoing Charges Figure (OCF) is the ratio of the Fund’s total disclosable costs (excluding overdraft interest) to the average net assets of the Fund. Because the Fund invests a
substantial proportion of its assets in other UCITS or Collective Investment Undertakings (CIU), it is required to disclose a synthetic OCF that accounts for the ongoing charges incurred
in the underlying CIUs.
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Micawber on 08/08/2017(UTC), Tim D on 08/08/2017(UTC)
chubby bunny
Posted: 08 August 2017 10:17:25(UTC)
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Micawber;49617 wrote:
Somebody might like to look at the OCFs of all those underlying funds and weight them to add to the Life strategy fund-of-funds OCF...


I believe that this is already included in the OCF. The annual report for 2016 says total operating charges of 0.24%, including 'synthetic element' charges of 0.13%, plus transaction costs of 0.05%
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Micawber
Posted: 08 August 2017 14:27:57(UTC)
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chubby bunny;49626 wrote:
Micawber;49617 wrote:
Somebody might like to look at the OCFs of all those underlying funds and weight them to add to the Life strategy fund-of-funds OCF...


I believe that this is already included in the OCF. The annual report for 2016 says total operating charges of 0.24%, including 'synthetic element' charges of 0.13%, plus transaction costs of 0.05%


Thanks.

Good for Vanguard.
markus
Posted: 08 August 2017 16:05:33(UTC)
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Jon Snow;49613 wrote:
This is what you get with Vanguard Lifestrategy 80 (seems the most popular)

<snip>

That's got to be worth putting a bit aside every month.




@ £185 a unit some people may need to find a platform willing to deal in fractionals.

Vanguards DIY platform allows fractional fund units; as does TD direct & AJ Bell. Suspect there are others but the old Barclays platform didnt.
Taffy
Posted: 09 August 2017 17:01:14(UTC)
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Joined: 24/08/2010(UTC)
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Retired 5 years and have pretty good pension but been revamping portfolio recently looking for more income investments with reasonable record of capital growth. Wife and I had a fair few quid in Woodford but been balancing out UK vs European and Global strategies. So I sold,Woodford and spread bets wider. Portfolio includes (not all from Woodford sale !!!) Artemis income, Artemis high income, Blackford European continental income, Evenload income, Fidelity money builder balanced, Invest perpetual monthly inc plus, Margetts Ardevora UK income, Premier multi asset monthly income, Schroder asia income, schroder oriental income,TB wise income Troy Trojan income, Schroder mixed distribution income. Almost all in isas but we have others such as IBT, Biotech Growth Trust, WWH, SMT,CTY, Stewarts asia pacific leaders and some fun with oil/gas shares. We are not looking for stellar capital growth but reasonable income and acceptable caporal growth to cover costs. Comments welcome.
Denis Goddard
Posted: 09 August 2017 17:06:28(UTC)
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I would seriously question Woodward's judgement of investing in AZN after reading
Terry Smith's negative analysis of the company seen on the Fundsmith website.
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Dennis . on 12/08/2017(UTC)
King Lodos
Posted: 09 August 2017 17:35:19(UTC)
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I'm sure Smith's absolutely right..

But the penalty for Smith's caution is that he's forced to hold companies on valuations over twice as high.

At some point, high valuations mean low future returns .. The question of whether Smith will be proven right for sticking to Quality, or Woodford for taking slightly more risk, is probably unanswerable .. But Warren Buffett's always done a bit of both (splitting his portfolio between quality consumer brands and the kinds of businesses (banks) Smith wouldn't touch with a bargepole)
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Paul Charter
Posted: 09 August 2017 18:09:30(UTC)
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I have been selling down my holding since April 2016 although I still retain about 5 %in my portfolio,

I have some concerns which are, in no particular order of importance:-
1. The fund is way too big so tthere are capacity issues
2. There has been a lot of trading and the portfolio is not exactly recognisable from the beginning,
3. It us not a purely income fund, and if you want an income fund, there are better funds out there,
4. He is now concentrating on mid caps but there are better, smaller boutique funds doing this
5. There are too many holdings (135) , the smallest holdings cannot effect the overallperformance unless they perform
6. There are a lot of punts on small pharma start ups,

All in all it's a mixed bag.



Ladysaver
Posted: 09 August 2017 20:03:47(UTC)
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I simply don't get this question. I can't think what this holder of Woodford Equity Income is complaining about.
I too have held it since day one. Over 2.6 years, the price has grown by 6% p.a. average, before dividends. Total shareholder return (TSR), namely including dividends, has been 9% p.a.average. The fund has so far yielded 3.3%, with another divi due this month which should boost the yield and the TSR.
Is this whinger in the "get rich quick" brigade? (i.e. not investors, but speculators). If so, do as you like. But if he is a sensible investor, he will hopefully view these figures (in today's economic environment!) as pretty damn good, and will wake up and smell the coffee.
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Mark Anderson on 09/08/2017(UTC), Michael Allan on 10/08/2017(UTC)
Freddy4Skin
Posted: 09 August 2017 20:29:50(UTC)
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and the roses too!
Tyrion Lannister
Posted: 09 August 2017 20:49:19(UTC)
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Ladysaver;49684 wrote:
I simply don't get this question. I can't think what this holder of Woodford Equity Income is complaining about.
I too have held it since day one. Over 2.6 years, the price has grown by 6% p.a. average, before dividends. Total shareholder return (TSR), namely including dividends, has been 9% p.a.average. The fund has so far yielded 3.3%, with another divi due this month which should boost the yield and the TSR.
Is this whinger in the "get rich quick" brigade? (i.e. not investors, but speculators). If so, do as you like. But if he is a sensible investor, he will hopefully view these figures (in today's economic environment!) as pretty damn good, and will wake up and smell the coffee.


Where did I complain???!

Where did I whinge???!

If you got out of the wrong side of bed this morning, then complain to someone you know rather than posting your keyboard warrior bull.

I posted a question for discussion, no more, no less. Either reply in that spirit or don't bother.
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