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Fund Ideas and Questions
Cameron Jake
Posted: 11 December 2017 14:18:20(UTC)
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Having read "own the world" I am following the advice and making a start.

Chapter 10 in the book says, the easiest way to "own the world" is to gather some funds that make sense to you and leave them for a while.

Whilst funds make me think of Aston driving suits, maybe they also have an advantage, as they allow me to invest in a number of companies in one go, minimising risk.

I saw a fund yesterday for example

Estee Lauder, Paypal, Google, Amazon, and some medical tech.

My question is - where does a dimwit learn what funds actually are i.e. a book for simpletons that helps me understand some of my thoughts such as...

1. Do funds, simply just make fund managers run riot with my cash?

2. Why is one fund 11229.02p and another 113p if they are similar?

3. Should I just stick with what morning star rate as "five star" and keep that simple?

4. How can one find funds based on the companies that it has in its "holdings"?

I don't want free financial advise, I am just digging in here and seeing if there are any nice people who have been on my path and note some useful really simple guides or glossaries?

Tim D
Posted: 11 December 2017 15:48:39(UTC)
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I'm a bit surprised that a book called "Own the World" (I've not read it) doesn't point you straight in the direction of global index trackers. But a bit of googling reveals the author isn't a fan. Here I find him repeating this old active management myth (in the article comments):

Quote:
Q: I wonder Why there is no mention of global passive index trackers like the Vanguard FTSE All World or iShares MSCI World? Do you not think these are good funds?

A: A perfectly sensible question. I think that is certainly one way to go. Bear in mind, however, that these are 100% equity funds. They are also market cap weighted – i.e. inherently a momentum play (you always own more of companies that have gone up more already) – and heavily US weighted for the same reason – Vanguard is c. 54% US and expensive on a p/e of 22x – for the same reason. Because they are passive, they will also suffer v. badly in sell-offs like 2000 and 2008 with no mechanism to get you out before things really plummet. They are certainly an option if you’re investing every month regardless to average in over long periods of time but the above should be borne in mind and long sell offs (2007 – 2009 for e.g.) will hurt you psychologically – increasing the risk you might sell out as against other funds which mitigate against such things. Hope that helps.


Which leaves me wondering what asset classes/asset balance he does like if he doesn't like 100% equities funds, and whether his message is actually "own the world... but not the USA". Bit of a skim over the rest of the page shows him favouring actively managed multi-asset funds; some stuff from 7IM mentioned.

I'd suggest checking out Lars Kroijer's "Investing Demystified" instead for a simple, practical approach.

IMHO Vanguard's Lifestrategy funds (pick the equity/bond split you're happy with) are a good thing to start with; if Lifestrategy 100% had been around in the late'80s when I got started I might not have invested in anything else for a decade; as things were I had to use more regional index trackers. If you're uncomfortable with the US allocation L&G's multi-index funds (again, available in different risk profiles) may have a bit more home bias; but there are other similar things out there too. Beware of thinking things have to be more complicated than they actually need to be.
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King Lodos
Posted: 11 December 2017 16:28:26(UTC)
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I certainly feel more like I own what's in an index tracker.

I suppose my definition of a fund is a simple way of buying market exposure.

You can buy the whole market (a global index tracker), parts of it (a FTSE 100 or US index tracker), or an active fund (where someone's making decisions on which bits of the market you're exposed to and which bits you're underexposed to at any one moment).

Active funds as a whole (although different studies disagree on this) do slightly better than just buying the market, because they are doing research and getting some decisions right .. But the extra fees they charge (imagine 1% a year over 30 years) tend to negate that.

So the challenge of doing anything other than just buying a global index tracker is that you either need to make strategic bets on which parts of the market you're exposed to, or which managers and strategies are making those strategic bets for you .. And as a whole we tend to be extremely bad at this, because we've got very short memories, and are heavily influenced by what's worked over the past 5-10 years.

If I wanted to own the world, I'd either try and own as much of a Vanguard global index tracker as possible, or as much of the 6-8 best companies in the world – which is what I'd want to do eventually
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Cameron Jake on 11/12/2017(UTC), Alan M on 11/12/2017(UTC), Guest on 12/12/2017(UTC)
Alan Selwood
Posted: 11 December 2017 18:23:20(UTC)
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One angle with trackers v active is the extent to which one does better than the other over different time periods.

In periods when 'a rising tide lifts all boats', you might expect trackers to do well and save you fees.

When times get harder, it might be a case for being more stock-specific, since only the best holdings are likely to do well (or less badly) when an ebbing tide leaves boats stuck in the mud.

A director of Fidelity argues at the moment that 2018 is likely (in his opinion) to be a year when active stock pickers will outperform trackers to a greater extent.
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Mr Helpful on 11/12/2017(UTC), Cameron Jake on 11/12/2017(UTC), c brown on 13/12/2017(UTC)
Mickey
Posted: 11 December 2017 19:30:27(UTC)
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Cameron Jake;54154 wrote:
...
My question is - where does a dimwit learn what funds actually are i.e. a book for simpletons that helps me understand some of my thoughts such as...

1. Do funds, simply just make fund managers run riot with my cash?

2. Why is one fund 11229.02p and another 113p if they are similar?

3. Should I just stick with what morning star rate as "five star" and keep that simple?

4. How can one find funds based on the companies that it has in its "holdings"?

I don't want free financial advise, I am just digging in here and seeing if there are any nice people who have been on my path and note some useful really simple guides or glossaries?


I enjoyed reading a book by John Chatfeild Roberts who is a manager at Jupiter. If you can find it at a reasonable price or perhaps the library, then 'Fundology' is quite interesting about fund investing.

https://www.whsmith.co.u...-investing/9781897597774

HTH,
Mickey
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Cameron Jake on 11/12/2017(UTC)
Cameron Jake
Posted: 11 December 2017 19:31:33(UTC)
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I think the book refers to Owning the World: i.e a bit of everything including the USA. The premise is owning ( real ) inflation rather than being a victim of it.

He talks about passive and active funds yes. Again he really advises against financial advise, and champions doing your own research.

I already have a tracker or two with virgin, I was more discussing the types of funds that include companies, i.e. that which you refer to as exposure.

I am looking at this book you kindly recommend.

Thanks for jumping in and helping. Very encouraging.





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Mickey on 11/12/2017(UTC)
Cameron Jake
Posted: 11 December 2017 19:37:58(UTC)
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King Lodos;54161 wrote:
I certainly feel more like I own what's in an index tracker.

I suppose my definition of a fund is a simple way of buying market exposure.

You can buy the whole market (a global index tracker), parts of it (a FTSE 100 or US index tracker), or an active fund (where someone's making decisions on which bits of the market you're exposed to and which bits you're underexposed to at any one moment).

Active funds as a whole (although different studies disagree on this) do slightly better than just buying the market, because they are doing research and getting some decisions right .. But the extra fees they charge (imagine 1% a year over 30 years) tend to negate that.

So the challenge of doing anything other than just buying a global index tracker is that you either need to make strategic bets on which parts of the market you're exposed to, or which managers and strategies are making those strategic bets for you .. And as a whole we tend to be extremely bad at this, because we've got very short memories, and are heavily influenced by what's worked over the past 5-10 years.

If I wanted to own the world, I'd either try and own as much of a Vanguard global index tracker as possible, or as much of the 6-8 best companies in the world – which is what I'd want to do eventually



Also a very good post.

Great reading.

I am looking at funds with companies intact that I like one example was Estee lauder, as I feel that is a unique company. I like Buffets, would you buy the company adage.

The funds I was looking at were Vanguard ones and also Fidelity via the expensive HL site. I don't note if they are trackers or just general funds, I think the latter, trackers sadly I don't think even meet real inflation.

And having watched " The Big Short" I agree with the author's sentiments that "nobody cares about your money as much as you do'

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King Lodos on 11/12/2017(UTC)
Sara G
Posted: 11 December 2017 19:46:01(UTC)
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Two good beginner's guides are 'The DIY Investor' by Andy Bell and 'Effective Investing' by Mark Dampier. Both writers are associated with investment platforms, but don't let that put you off.

The Monevator website also has some great resources, along with examples of passive portfolios if you decide to go that way.

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King Lodos
Posted: 11 December 2017 19:50:47(UTC)
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Cameron Jake;54154 wrote:
1. Do funds, simply just make fund managers run riot with my cash?

2. Why is one fund 11229.02p and another 113p if they are similar?

3. Should I just stick with what morning star rate as "five star" and keep that simple?

4. How can one find funds based on the companies that it has in its "holdings"?

I don't want free financial advise, I am just digging in here and seeing if there are any nice people who have been on my path and note some useful really simple guides or glossaries?


I'll attempt these.

1. It depends on the manager .. Unit trusts generally have to operate within certain guidelines, so they can't go too crazy with your cash, and performance will usually resemble an equivalent index tracker .. Hedge funds are where you get higher fees and 'go anywhere' managers, but most unit trusts are fairly conservative and perform very similarly .. Fundsmith and Lindsell Train are well known for their conservative approach – holding a handful of great companies (like Buffett) and not buying or selling much.

2. If one fund launched 50 years ago at £1, and another launched this month, prices would be quite different .. It's mostly meaningless.

3. Star ratings might keep you out of really bad funds, but they're not very predictive of future returns (and more likely inversely predictive) .. I quite like Hargreaves Lansdown's selection of star funds .. Again, it should help avoid real pigs, but a lot of them are very index-like.

4. I'm not sure if there's a site that does this – but with an active fund, a manager can always choose to sell the stock without warning you .. I generally pick ETFs or trackers when I'm looking for specific stocks (so for Apple, Microsoft, Alphabet, etc. I buy L&G's Global Technology Index fund – rather than an active fund that might sell them)


6 users thanked King Lodos for this post.
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Cameron Jake
Posted: 12 December 2017 00:16:21(UTC)
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Wow

What can I do to repay you... ?

Those are amazing answers....

Generally really very good.

I will look at - L&G's Global Technology Index fund

I am also watching

http://www.hl.co.uk/fund...logy-w-gbp-accumulation

Am I correct to assume that as this has a manager that this is a "managed" fund.

And that the returns have been 25% that can't be true...
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King Lodos on 12/12/2017(UTC)
Tim D
Posted: 12 December 2017 01:04:24(UTC)
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Cameron Jake;54182 wrote:
I will look at - L&G's Global Technology Index fund

I am also watching

http://www.hl.co.uk/fund...logy-w-gbp-accumulation

Am I correct to assume that as this has a manager that this is a "managed" fund.

And that the returns have been 25% that can't be true...


Technology really has been on fire the last few years. That Fidelity tech fund is indeed actively managed and returned 25.00%/26.45%/16.83%/37.64%/26.42% in the last 5 years. The L&G Technology Index (a passive fund!) returned 20.50%/28.42%/7.40%/31.56%/28.38%. Fidelity would have doubled your money in 3 years and tripled it in 5. You'd be about 20% behind it with the L&G passive over the same timescales.

But beware of performance chasing. There's a reason for all that "past performance is no guide to future performance" stuff. Tech can't and won't outperform the rest of the market forever. Anyone investing in it now might be buying at the top. Or they might not.
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King Lodos on 12/12/2017(UTC), Micawber on 12/12/2017(UTC)
King Lodos
Posted: 12 December 2017 01:32:57(UTC)
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Yeah, and the problem with active funds in tech is you can't tell whether they've outperformed through skill or luck .. To an extent actives should've all done well, as the market's been driven by just a handful of stocks, which they could've all overweighted – while the index holds hundreds.

But I'm not convinced an office in Bristol can add much to the pricing of the most researched and scrutinised companies in the world.

Sectors do tend to mean revert – and all return about the same over the long-term .. But tech is an enigma .. If you look at valuations since 2000 (perhaps obviously), tech's one of the only sectors still significantly down from its highs .. There's also the size and scope of these companies going forwards, and how much they're going to usurp existing industries – when you buy Google, you're probably buying a chunk of the AI revolution .. So a fair few hedge funds think technology's underpriced, and that businesses like these would've been valued twice as high in the 60s
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Tim D on 12/12/2017(UTC)
Tim D
Posted: 12 December 2017 08:56:50(UTC)
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King Lodos;54184 wrote:
Sectors do tend to mean revert – and all return about the same over the long-term .. But tech is an enigma .. If you look at valuations since 2000 (perhaps obviously), tech's one of the only sectors still significantly down from its highs .. There's also the size and scope of these companies going forwards, and how much they're going to usurp existing industries – when you buy Google, you're probably buying a chunk of the AI revolution .. So a fair few hedge funds think technology's underpriced, and that businesses like these would've been valued twice as high in the 60s


IMHO it'll need the US to rediscover an appetite for antitrust legislation and breaking up monopolies to put some speed bumps in front of the tech giants. And that'll probably need those companies to get greedy and start annoying their users more than they seem to currently. Not holding my breath: for now they seem to be far too popular for a consumer revolt and calls to break them up. But maybe something will yet come out of the Trump-Bezos feud to get things rolling.

Interesting wired piece a few years ago.
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Mike L on 13/12/2017(UTC)
andy mac
Posted: 12 December 2017 10:21:38(UTC)
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Fundsmith has had a v good run but HL dont rate the manager or the fund it is however lots of peoples core holding

What is your timescale, and aim and also what is your view of risk
Cameron Jake
Posted: 12 December 2017 10:55:23(UTC)
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I am now looking at index, Sara pointed me to that website, which made a ton of sense and made me note that the main focus is index funds, - easy to remember if they say "index" after them :) I will check the companies within these and if I like them, I will be a baby and dip in slowly.

I still don't know how you see passive or active in the stats when you are buying but maybe I am not looking correctly.

Unlike the dot.com boom, technology is the new "air" as it re invents the world we live in, rather like science. neither can or will die, technology stocks that empower life's, industries or human development wont ever fail. The sex robot? That might.


P L
Posted: 12 December 2017 11:32:16(UTC)
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If you want a very good book that covers the basics of investing and using passive funds try.

Smarter Investing by Tim Hale
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Tim D
Posted: 12 December 2017 11:46:26(UTC)
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Cameron Jake;54191 wrote:
I still don't know how you see passive or active in the stats when you are buying but maybe I am not looking correctly.


Well you ought to at least be reading the "Fund Objective" for anything you're looking at, and that'll say something like (from the L&G Tech Index fund) "The objective of this fund is to provide growth by tracking the performance of those companies in the FTSE World Index which are engaged in Information Technology activities" so clearly an index tracker. I agree it's a bit surprising none of the various "fund screener" tools around seem (so far as I know) to provide a simple active/passive filtering option. Useful starting points for exploring what's available might be Trustnet's passives page or HL's info on passives. But most useful of all might be Monevator's periodically updated survey of the cheapest options in various important asset classes.

Passive index funds aren't necessarily automatically a good thing in themselves. The point is they tend to be much cheaper (e.g 0.1% or less OCF to own the FTSEAllShare compared with say 1% to have an active manager pick stocks from it) and over the long run - a career's worth of savings - those cost savings add up to significant returns if you can't pick a manager who can beat the market consistently by more than their increased cost (hint: picking which managers will outperform over the next decade or two is impossible). There are some enlightened actively managed funds/trusts out there which seem to be making genuine efforts to compete with passives on cost (SMT and CTY spring to mind, and Vanguard actually has a surprisingly large stable of cheap active funds alongside the passive stuff they're better known for).
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Cameron Jake on 13/12/2017(UTC)
Big boy
Posted: 12 December 2017 13:56:19(UTC)
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CJ be very carefull as you maybe being put into the market close to a high which you may not see again for some time. I would tend to buy investments that no one else wants and I am 100% invested at present.
Most investor work in the same way and you will be one of the last to go into the market which is looking overbought.

I favour Investment Trusts but the Shareprices over the last 18 months have outperformed as discounts narrow. They will widen as market declines and investors loose confidence. You may like to consider Unit Trusts for a bear market but they have to sell investments (ITs tend not to do this apart from funding Treasury buy backs) as holders liquidate.....sometimes they go onto a "bid" basis if lots of sellers.
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Tim D on 12/12/2017(UTC)
Julianw
Posted: 12 December 2017 16:24:19(UTC)
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Couple comments:

Morningstar fund star rating is purely based on past performance and is not very predictive of future out performance. Morningstar gold/silver/bronze rating also take into account other qualitative factors, but so far also not that successful in predicting future out performance!

A low cost index fund will out perform about 80 percent of active funds in all market conditions.

A low cost passive fund will give you the market return minus a small charge.
Active funds on average will give you the market return minus a big charge.

The above hold whether the market is going up, down or side way.

The best predictor of whether an active fund will out perform is the charge. (still far from guranteed)

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Cameron Jake
Posted: 13 December 2017 10:29:43(UTC)
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Good this isn't it.. Like having your own newspaper to read in the morning,

Eloquent balanced lighthearted bants.

I purchased 3 funds, an SnP, a Life Strategy 40% and a wild card Japan, ( cause Toyota have plans )

As I learn and look more, I will dip in and increase my averaging in, that website Monevator amazingly easy to understand.

As far as fund managers go, I can't get my head round them, I really can't but as I learn I may not think they are all bad. A nice Japanese man with glasses is what I am aiming for.

Was going to buy Netflix as they are going to take over the world, but I am prob too late, and their debt breaks the golden rule of investing. Would I buy the whole company with those debts. Missed that boat.

Same for Activision, missed that boat didn't I #Call of Duty.

Got royally ripped off by Coin-Base... beginners ignorance. Do you buy coin if so, not with coin base I hope... where can you buy them and ACTUALLY WITHDRAW your money back out?
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