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30% portfolio allocation, Fundsmith or..?
King Lodos
Posted: 13 February 2018 18:22:46(UTC)
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Well my perspective would be that if you like the approach – if it makes sense to you; if you'd buy in a down market; if you'd buy when the manager underperforms for a few years – then go all in on it.

No one can tell you whether Fundsmith or LT will do better over the next 5 or 10 years, but by owning both you get the same likely return as betting on either one, but halve the risk of either manager making a mistake
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Aminatidi on 13/02/2018(UTC), Tim D on 13/02/2018(UTC), Luca Brasi on 13/02/2018(UTC)
Aminatidi
Posted: 13 February 2018 18:27:28(UTC)
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Well when I say I like the style I may be a little naive but it seems simple vs. "invest in so many things you end up with a glorified tracker" which is something I found when I looked at lots of funds (either mixes or multi-asset) and graphed them against index trackers over the past 10 years.

I'm reading a little on a new one to me which is the UK Buffettology fund.

OCF is quite high but I never know if that's a fuss about nothing when performance is net of that. I guess that's an issue when there's a bad year.
King Lodos
Posted: 13 February 2018 19:21:13(UTC)
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The advantage of a global index tracker is that they always hold more of what's doing better .. So if a company like Alibaba took over the world, you can guarantee you'd be holding a lot of it .. It's a challenge for any manager to beat a system like that.

So if at some point you had to find a replace for Fundsmith or LT, a tracker would be an easy choice.

I like the Buffettology fund a lot – I held it for a while .. I sold almost all UK funds when we voted for Brexit, just on uncertainty .. Marlborough Special Situations and UK Micro-caps are also exceptional, with incredible long-term returns .. But I do think of the UK as a niche, and the difficulty with niches is knowing when to stick with them and when to let them go .. I should've stuck with Buffettology, but if we're in a bad recession next year, then I might be thankful I didn't .. There are only a handful of funds I really consider easy decisions, and it's very easy to start collecting funds, and giving yourself tough decisions and opportunities to make mistakes
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Aminatidi on 13/02/2018(UTC), Keith Cobby on 14/02/2018(UTC)
Aminatidi
Posted: 13 February 2018 19:54:02(UTC)
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I think the point on "collecting funds" is a very salient one.

I've watched and read quite a few Terry Smith videos and articles and he makes a very good point that often one of the hardest things to do is to do nothing at all.
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Keith Cobby on 14/02/2018(UTC), Guest on 14/02/2018(UTC)
King Lodos
Posted: 13 February 2018 21:25:09(UTC)
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It is .. Although I find what him and Warren Buffett do a lot easier when you know the companies you're investing in
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Aminatidi on 13/02/2018(UTC)
Aminatidi
Posted: 13 February 2018 21:59:53(UTC)
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King Lodos;57112 wrote:
It is .. Although I find what him and Warren Buffett do a lot easier when you know the companies you're investing in


Well I did the same amount with Fundsmith so for now the plan is do 50/50 between that and LT global.

At some point I'll think about when to balance it out but given my fortunate situation with cash in the bank the way I look at it, and it may be misguided, is that if the equities drop they'll drop, a defensive proportion doesn't alter that fact it just smooth out the whole ride,

So whilst the cash is there and my nerve holds if I see a hefty loss I should focus on the equities for a short while (kind of what you said on the £180k thread).
King Lodos
Posted: 13 February 2018 22:12:35(UTC)
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Well I'm a big long-time advocate of diversification and defence .. It's just with market valuations where they are, I'm not sure defensive funds can do much .. in which case they might just act as a drag and unnecessary fee.

I'd think of pure stock plays (like LT Global) as the engine, and cash as petrol you keep pumping in.

A lot of defensive funds have made nothing over the past year, with 30-50% stock exposure .. If you'd just had 30-50% stocks and cash you'd have done a fair bit better
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Fell Walker on 13/02/2018(UTC), Aminatidi on 14/02/2018(UTC), Tim D on 14/02/2018(UTC)
Simon Owen
Posted: 13 February 2018 22:34:47(UTC)
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That’s exactly the conclusion I came to last week when I watched my defensives (PNL etc.) follow the market down!
The only issue is the large cash holding in my SIPP (& that’s where the largest proportion of my assets are) earns nothing. I can’t access NS&I in my SIPP sadly.
4 users thanked Simon Owen for this post.
King Lodos on 13/02/2018(UTC), Aminatidi on 14/02/2018(UTC), Bellabeck on 14/02/2018(UTC), Michael Grimes on 14/02/2018(UTC)
King Lodos
Posted: 13 February 2018 23:00:57(UTC)
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I've got the same problem with too much cash in ISAs.

It's just when you really break a defensive fund down (even some really complicated ones) they tend to reduce to some quite simple combination of long stock, bond and commodity market exposure.

There was a controversial critique of Standard Life GARS from an analyst group a while back, when everyone was buying it, pointing out that despite all the complex strategies, it had really only tracked corporate bonds .. It was quite likely most of the strategies had simply cancelled each other out.

I miss BlueCrest AllBlue.

I think that was a genuinely useful diversifier and cash alternative

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Aminatidi on 14/02/2018(UTC)
tinca tinca
Posted: 13 February 2018 23:54:57(UTC)
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@KL

I bought shares in RICA and CGT last year as long term buy and holds. In addition to a good deal of cash and a gold ETF, they were meant to act as core diversifiers in my portfolio. But with bond yields increasing and the threat of rising interest rates and infation, I've watched them both underperform during that time period, especially over the last couple of weeks. Most frustrating.

Do you think they're still worth holding on to for the long term?
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Aminatidi on 14/02/2018(UTC), john brace on 14/02/2018(UTC), Guest on 18/02/2018(UTC)
King Lodos
Posted: 14 February 2018 00:51:47(UTC)
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It's so tricky to say..

I don't think anyone came through the recent hiccup unscathed, because it was so unusual .. What Ruffer and CGT are positioned for is surprise inflation and presumably stagflation – which we haven't seen since the 70s.

There are very smart people, like Ray Dalio, who'd say you do want some exposure to the kind of things those funds hold – because we get complacent, and forget things like rates and inflation do tend to mean revert (whether they will or not, I haven't a clue) .. 10% in hedge funds has tended to improve portfolios.

But my own doubts with these funds are whether we get inflation, whether rate hikes null the protective qualities of inflation-linked bonds, and fees – because I think fees are a real drag when returns on most assets are likely to be so low.

In Aminatidi's situation – where he's going to be accumulating investments for a while – I'd say there's much less point diversifying, because all the cash you're likely to pay in is a diversifier, and means you've always got purchasing power .. For someone with a lot of capital to protect, I'd say the arguments for inflation hedges and defensive funds gets stronger .. But I'd probably just hold more cash and gold cheaply, and maybe Vanguard Inflation-linked gilts, maybe Royal London Short Durection Inflation-linked, if someone could convince me they'll perform well in inflation (against rate hikes).
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tinca tinca on 14/02/2018(UTC), Aminatidi on 14/02/2018(UTC), Tim D on 14/02/2018(UTC)
sandid3
Posted: 14 February 2018 04:49:53(UTC)
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King Lodos;57119 wrote:
I don't think anyone came through the recent hiccup unscathed
It turns out some funds did. The following is the result of a Trustnet filter for funds with a positive return over the past month, positive YTD and a 10% return over the past year.



The problem is they are funds that are not generally available; only one appears on my James Hay SIPP list. Still, it shows the Trustnet filter is useful.
4 users thanked sandid3 for this post.
Aminatidi on 14/02/2018(UTC), Mickey on 14/02/2018(UTC), Tim D on 14/02/2018(UTC), King Lodos on 14/02/2018(UTC)
banjofred
Posted: 14 February 2018 06:59:08(UTC)
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Hi,I have been well into Troy Trojan for years, and was fortunate enough to dip out then back in in the two years when it had lower performance (more form intuition than anything else, but I was annoyed as he sat on gold as it dropped form usd1900 to usd1275 - he could have been out then in and made a lot.

But Sebastian doesn't gamble much. He actually has a lot sat in near cash and of course the main reason i got into him - Gold!.

Trying to stand back from a fund which has 15% of my money i look at the relatively low return and poor dividends, and of course this advisors crap that a fund is defensive just means you still lose money a correction. but a bit less then some other round.

Overall i stick with Troy Trojan and its hight charges as i sleep better.

I have been big in Terry Smith up to 20%+ of my dosh, and done quite well. in recent months, even before the dip his exposure to the dollar cost me at times. Every time the pound went up against the dollar it cost me a few hundred quid. Not happy about PayPal either but i have just reduced my holding a little bit and plug on with Terry.

Fundsmith , Try trojan, and Lindsell Train are the three that still hold some profit in a month of big losses across the funds

i got out of Neil Woodford a good while ago after years of doing well.. thankfully

Rock on

Banjo

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Aminatidi on 14/02/2018(UTC)
Aminatidi
Posted: 14 February 2018 07:45:48(UTC)
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banjofred;57122 wrote:

Fundsmith , Try trojan, and Lindsell Train are the three that still hold some profit in a month of big losses across the funds



@Banjofred those are the three I intend to stick with. Trojan seems the most obvious "defensive" fund that still appears to give some reasonable return.

Ratios and when to add some defensive money is still up in the air but as I said I'm fortunate, there is plenty of time there.

@King Lodos you mentioned CGT and I must admit I've read lots of articles but I'm still slightly puzzled what something like that would bring? I say that going off the 10 year plots as it's clearly ahead of Trojan but I've never honestly got how an Investment Trust seems to be viewed as "better" than funds for defensive long term growth?
Simon Owen
Posted: 14 February 2018 08:01:30(UTC)
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Taking a little comfort from the fact that others find themselves facing the same dilemmas.
Sometimes from reading these threads I think I’m of one of a very small minority who has been too defensive & got it completely wrong!
I have 15% in PNL & RICA & 7.5% in property (TRY & BBOX). A small % in gold (Blackrock - big mistake should have been SGLN) & a large cash holding which I am looking to reduce as I can’t make a return on this in the SIPP).
No bonds. SIPP value £260k. Contributions circa £2k pm.

The lack of negative correlation provided by the defensives, coupled with the fact I’m in accumulation phase, makes me wonder whether I should simply hold cash equivalent to say 2 years required income in retirement (est) & invest the rest in ITs / funds (the former being cheaper to hold on my platform).
If we did get a crash, I could run the cash down & build up again.

I’m sure you will have a view KL. Just off to get my run hat 😀

Simon
Keith Cobby
Posted: 14 February 2018 08:55:16(UTC)
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The trouble with PNL, Ruffer etc is that when markets rise you don't make any money and then when they fall you are fretting about them falling as well. PNL is stuffed full of cash, gold, gilts and baccy. I want my funds to rise so that when markets (inevitably) fall, there is a cushion of gains.
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dyfed on 14/02/2018(UTC), Micawber on 14/02/2018(UTC)
Mickey
Posted: 14 February 2018 09:43:16(UTC)
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Aminatidi;57124 wrote:
@King Lodos you mentioned CGT and I must admit I've read lots of articles but I'm still slightly puzzled what something like that would bring? I say that going off the 10 year plots as it's clearly ahead of Trojan but I've never honestly got how an Investment Trust seems to be viewed as "better" than funds for defensive long term growth?

Not so long back you would find Capital Gearing on a large premium touching +20%. The point of CGT back then was that it had returned a positive return year after year. They introduced a discount control process to rein the premium in and make the trust more attractive. Over 10 years CGT has outperformed RIT Capital Partners but has not done so well in recent years as like Sebastian Lyon they have long been waiting for a downturn.
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Aminatidi on 14/02/2018(UTC)
Aminatidi
Posted: 14 February 2018 09:50:39(UTC)
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Mickey;57127 wrote:
Aminatidi;57124 wrote:
@King Lodos you mentioned CGT and I must admit I've read lots of articles but I'm still slightly puzzled what something like that would bring? I say that going off the 10 year plots as it's clearly ahead of Trojan but I've never honestly got how an Investment Trust seems to be viewed as "better" than funds for defensive long term growth?

Not so long back you would find Capital Gearing on a large premium touching +20%. The point of CGT back then was that it had returned a positive return year after year. They introduced a discount control process to rein the premium in and make the trust more attractive. Over 10 years CGT has outperformed RIT Capital Partners but has not done so well in recent years as like Sebastian Lyon they have long been waiting for a downturn.


Thank you and this is where I have to admit I don't know what you mean by "on a large premium touching +20%"?

I'm not sure if I have an amount of money and I want to put it into "something defensive" what the thought process should be between an OEIC v an IT.

So whether Troy Trojan or CGT are "safer" may be one question but I'm not clear how one being an IT is "better"?
Tim D
Posted: 14 February 2018 10:50:33(UTC)
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Aminatidi;57128 wrote:
Thank you and this is where I have to admit I don't know what you mean by "on a large premium touching +20%"?


The premium (or discount) expresses the ratio between the share price a trust is actually trading at and what the NAV (Net Asset Value) of the trust is (the NAV being what'd be expected to be raised if the trust liquidated itself and disposed of all its assets. When buying (or selling) a trust, it's a good idea to have some idea of if it's on an unusually large premium or discount (vs both its own record, and other comparable trusts) and if it is, why that might be and what the implications for future price moves could be.

Click on the first few entries in this FAQ for more details.
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Aminatidi on 14/02/2018(UTC)
Mickey
Posted: 14 February 2018 10:57:41(UTC)
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Aminatidi;57128 wrote:
Thank you and this is where I have to admit I don't know what you mean by "on a large premium touching +20%"?

I'm not sure if I have an amount of money and I want to put it into "something defensive" what the thought process should be between an OEIC v an IT.

So whether Troy Trojan or CGT are "safer" may be one question but I'm not clear how one being an IT is "better"?

Hi,
Investment Trusts are shares and as such can trade at a discount or premium to their net assert value. When CGT was at around +20% that meant you paid 20% above the value of the underlying assets for each share, same as when an IT is on a discount, you are getting it cheaper than the worth of the holdings.

OEIC vs IT doesn't really come into it. The likes of CGT can and do hold funds, you often see this type of Flexible Investment hold a variety of things such as Treasuries, Bonds, IT's, Funds and ETF's. In their last report the largest holding was Vanguard FTSE Japan ETF.

https://www.theaic.co.uk/companydata/215

IT's are not necessarily better than OEICS. The reasons I prefer IT's vary but in general there are far fewer of them to choose from so things are not so complicated for me, I enjoy their history and as I use Hargreaves Lansdown I pay just £45 for an ISA whilst my Fund & Share account is free, whereas if I held funds I would be charged 0.45% a year so pay more to hold them.

I wouldn't let the tail wag the dog though, if you prefer funds, they offer a larger universe and more options, then that is great and you should go with them. Many investors mix & match IT's & OEICS, there is no need to limit your options to one or the other type of collective investment. I do but that's my choice as it makes life simpler for me.

Perhaps holdings such as Capital Gearing, Personal Assets etc, are for people who want to preserve capital, generally have 'made it' or want lower risk., if you are on a growth path then CGT etc may not be the right thing for you to hold.
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Aminatidi on 14/02/2018(UTC), Tim D on 14/02/2018(UTC), Keith Cobby on 14/02/2018(UTC)
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