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FTSE 100 vs 250 tracker....???
colin overton
Posted: 13 April 2018 12:21:20(UTC)
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Mark, I think the short answer is no, the FT250 looks better, unless one is looking at time frames of more than 20years. If there was a time period when the FT100 has beaten the 250 over a reasonable time-frame. let's hear about it?
The yield for a UT FT100 tracker will be higher (~3.5%) than the 250 (~2.6%). The costs of both are so very low as not be to differentiable. There are ETF that supposedly mirror these indices as well and may be cheaper than UTs, depending on your platform charge.
The FT250 is a more diverse index by sector and is not "dominated" by very large banks/oilers which are ~25% of the 100, so arguably not as subjected to banking scandals or the price of oil.
We are still being told that UK based companies will suffer under a true Brexit, yet the 250 has out performed the 100 over 3 and 1 years, although not by huge amounts. So the great multinationals haven't relatively prospered under the current "propaganda" barrage. If the threat of Brexit proves a paper tiger or the UK's Brexit is only a "half-Brexit" then perhaps the FT250 will do even better in the next 3-5 years?
I took a look at the FT350 and FT All Share indices over 5 years and the 250 was still the best, in fact all the other indices seemed to coalesce.
It's easy to forget that indices are somewhat self-selecting over time by definition, I'm unsure as to whether the FT250's component companies would change more than the 100, are the giants too large to "fail"?
I leave a relative analysis of any currency factors to others.
I would check that any tracker actually does track the index it's supposed to.
Thanks for the prompt to look again at indices, if I was convinced by the passive investment argument I may well buy a FT 250 tracker.

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George Muir on 13/04/2018(UTC)
Apostate
Posted: 13 April 2018 12:23:35(UTC)
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dlp6666;60551 wrote:
Joe Soap;60542 wrote:
... anyone trying to detract from Marlborough S S fund is deluding themselves. I have been invested in this fund for my kids from a very young age (almost 20 years now) and I can categorically assure any potential investors that the performance of the fund has been very real indeed


But do you think this excellent fund has now run out of puff [Giles Hargreave is now 70], or is currently just pausing for breath?


12.5 % up in the last 12 months - well above the FTSE Small Cap. Run out of puff?
Joe Soap
Posted: 13 April 2018 12:36:02(UTC)
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Apostate;60554 wrote:
dlp6666;60551 wrote:
Joe Soap;60542 wrote:
... anyone trying to detract from Marlborough S S fund is deluding themselves. I have been invested in this fund for my kids from a very young age (almost 20 years now) and I can categorically assure any potential investors that the performance of the fund has been very real indeed


But do you think this excellent fund has now run out of puff [Giles Hargreave is now 70], or is currently just pausing for breath?


12.5 % up in the last 12 months - well above the FTSE Small Cap. Run out of puff?

Exactly. I have been looking to make a case for selling out and reinvesting in similar vehicles but I am not convincing myself to do so. Many other funds have come and gone over the years but Marlborough S S is still there. Along with Fundsmith, Chelverton Growth and Buffetology. I fail see how being 70 has any bearing on being able to make money for your clients to be honest.
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Mickey on 13/04/2018(UTC), Guest on 14/04/2018(UTC)
Joe Soap
Posted: 13 April 2018 12:40:12(UTC)
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Tom Bards;60552 wrote:
Wouldn't all the investment trusts in the FTSE250 increase the charges substantially? A lot of the trusts in the FTSE250 are extortionate. I don't know how this affects the tracker so I'm genuinely asking.

I understand you can buy a FTSE 250 Excluding ITs index. I haven't a name because I am not interested in trackers but such an index does exist. Hence it is trackable.
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Tim D on 13/04/2018(UTC)
Apostate
Posted: 13 April 2018 12:43:47(UTC)
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Joe Soap;60556 wrote:
Tom Bards;60552 wrote:
Wouldn't all the investment trusts in the FTSE250 increase the charges substantially? A lot of the trusts in the FTSE250 are extortionate. I don't know how this affects the tracker so I'm genuinely asking.

I understand you can buy a FTSE 250 Excluding ITs index. I haven't a name because I am not interested in trackers but such an index does exist. Hence it is trackable.


L&G UK Mid Cap Index
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Joe Soap on 13/04/2018(UTC)
King Lodos
Posted: 13 April 2018 14:27:50(UTC)
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Harry Trout;60540 wrote:
King Lodos;60535 wrote:
Calculating one's own returns is a complex problem, for which there's no adequate solution ..

I don't find it difficult to calculate my returns. I calculate the compound annualised growth rate CAGR for every one of my investments (OEIC, IT, shares) in a separate spreadsheet which can cater for income. I also keep overall portfolio CAGRs. King Lodos, could you clarify please?

King Lodos;60535 wrote:
Marlborough Special Situations won't have made anything like the returns their chart shows, because those are hypothetical (time-weighted) returns .. And if you don't understand why that's a problem, you can't be relied upon to calculate your own returns ..

I don't understand what you are meaning here, again could you clarify please?

Many thanks

Harry

Harry Trout;60544 wrote:
philip gosling;60541 wrote:
Harry Trout

One explanation Time weighted returns is at

http://www.marottaonmone...internal-rate-of-return/

Thanks Philip. The Trustnet chart posted by King Lodos in this thread shows 281.7% return over 10 years. Is King Lodos saying that £1,000 invested 10 years ago now be worth something different to £3,817?


Marlborough Special Situations (and every unit trust)'s returns are hypothetical.

They're what a fund would return if it started with an initial investment (say £1,000) and never added or withdrew any money.

This is the 'time-weighted' return, and it shows how good the stock picking is .. What it doesn't show is how good (or not) their investors' market timing is – and this, in practice, has a much greater effect.

If investors kept buying Marlborough after strong performance, and selling after weak performance, the fund itself could be a huge loser in the market .. It might keep investing at the top, and keep selling at the bottom .. In fact this is often true for top funds – they can be shrewd stockpickers, but actually lose investors lots of money.

The alternative is the 'dollar-weighted' return .. This is just as useful – it's what endowment funds tend to favour – and this measures the impact of market timing .. So in this case, say your £100 investment is now worth £150 (50% return), and you sell £50 of the investment -> now your investment is £100 from an initial investment of £50 (100% return).

I prefer this (as it helps you see what your market timing is doing), but then the problem is someone drawing down (or spending from their investments at all) will be artificially pumping up their returns – likewise someone still accumulating would be lowering their returns .. So it's no good for comparing to other people.


There's really no good solution – that captures both stock picking and market timing – unless you NEVER add or withdraw any money .. In practice, retail investor market timing has a MUCH greater effect on returns than stock or fund picking (some say it accounts for over 100% of returns – as when you add fees, everything else is a net negative) .. This is one reason people are surprised by things like the DALBAR study, that shows the average retail investor only makes about 2% annually.

"Of course I make more than 2%!!!" Well, fund stats don't lie .. We know what retail funds are actually returning to the market .. But if you're calculating time-weighted returns (which most do), you won't see the impact of your timing decisions at all.

So the only solution I've found is to calculate your net worth regularly, as although it's swayed by spending and saving, it's the only way to capture whether you're actually getting wealthier (which is, in practical terms, what actually matters) .. My earnings and spending, these days, are are rounding error on my capital, so I can calculate how well I'm actually doing from investments just looking at net worth, with a reasonably low error
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Mr Helpful on 13/04/2018(UTC), antigricer on 14/04/2018(UTC), Harry Trout on 16/04/2018(UTC)
Harry Trout
Posted: 13 April 2018 16:34:06(UTC)
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Thanks KL, that does clarify.

Using CAGR I feel that my calculations are doing what I need them to and I don't find it a problem. No doubt we all have our own equally valid approaches.

What always gets my attention is that Tony Peterson is achieving 19% annualised returns from actively top slicing and bottom buying FTSE100 shares that don't generally achieve this in a straight line when left alone. He is adding quite a bit of "special source" !!!

Over the time this debate has motivated me to give Tony's approach a whirl myself albeit with different shares, some from the US markets.
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King Lodos on 13/04/2018(UTC)
King Lodos
Posted: 13 April 2018 16:55:30(UTC)
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Well 19-20% annualised (through bear and bull markets) is about the best return a trader or investor can make without taking above-market-levels of risk.

So without using leverage, or being very concentrated .. things that *can* wipe you out.

(Some do 30% returns for a while – e.g. Soros, Druckenmiller – but it tends to mean revert, as whatever you're doing is unlikely to work indefinitely.)


It *may* be theoretically possible to make 19% on Glaxo, selling in and out of the whole position perfectly .. And I'd err on the side of it not being possible (since 2000) .. But I know Tony's not doing that – he's top-slicing and dip-buying fractional amounts .. Which means Glaxo would be a significant drag on a portfolio returning 19%. (it's unlikely to have even kept up with the FTSE 100 this century.)



To get 19% returns, an investment like that is a big turd in the punchbowl .. Range trading or no range trading .. Micawber even tried Tony's method firsthand, and I don't know how it's doing now, but I think it did a zero return year (again: you can't have many of those and maintain 19% annually .. I doubt Glaxo and TP's stocks are doing a 40% return this year).

It's miscalculating your returns .. And with a strategy based on top-slicing, the potential to miscalculate is vast .. In fact there's no good way to calculate it, unless you're running a fixed sum of other people's money
Mr Helpful
Posted: 13 April 2018 17:47:56(UTC)
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Harry Trout;60561 wrote:
Using CAGR I feel that my calculations are doing what I need them to and I don't find it a problem. No doubt we all have our own equally valid approaches.
What always gets my attention is that Tony Peterson is achieving 19% annualised returns from actively top slicing and bottom buying FTSE100 shares that don't generally achieve this in a straight line when left alone. He is adding quite a bit of "special source" !!!

Also like to reduce on higher valuations and build on lower valuations.
So with book cost negative on some positions; does that mean their CAGR is infinite?
Seems a dubious conclusion! ~[:-)]
Mr Helpful
Posted: 13 April 2018 17:59:11(UTC)
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King Lodos;60559 wrote:
So the only solution I've found is to calculate your net worth regularly, as although it's swayed by spending and saving, it's the only way to capture whether you're actually getting wealthier (which is, in practical terms, what actually matters) ..

+1
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King Lodos on 13/04/2018(UTC)
Tony Peterson
Posted: 13 April 2018 19:54:17(UTC)
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Harry

I've never claimed 19% growth, but have exceeded 17% annualised since 1975, and also since 1992, and also since 2009 when I began posting on Citywire.

It amuses me that KL does not understand how this is possible. Perhaps I should offer him a beer at the Doves at the next solstice and bring enough paperwork to show that I do not make facts up.

As others do. But I have had a great fortnight partly as a result of our resident doom-mongers helping us find great bargains to stock up our new ISAs in full last week. One week into the new tax year and our tax returns are posted, our ISAs stuffed and growing, a double dividend haul yesterday (GSK and RT as it happens) pushing all of our majors out of bargain territory. On the flip side, our out-of-ISA tax free dividend band for the new year is more than used up already. Well I guess that somebody has to contribute to the NHS don't they? So not only have we enjoyed 5 digit dividends so far this tax year, our GSK holding has grown in value by over 20 grand.

No more hefty dividends until LBG next month. Bear market would be welcomed. Cue General Zod.
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Harry Trout on 13/04/2018(UTC)
Harry Trout
Posted: 13 April 2018 20:20:17(UTC)
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Mr Helpful;60566 wrote:
Harry Trout;60561 wrote:
Using CAGR I feel that my calculations are doing what I need them to and I don't find it a problem. No doubt we all have our own equally valid approaches.
What always gets my attention is that Tony Peterson is achieving 19% annualised returns from actively top slicing and bottom buying FTSE100 shares that don't generally achieve this in a straight line when left alone. He is adding quite a bit of "special source" !!!

Also like to reduce on higher valuations and build on lower valuations.
So with book cost negative on some positions; does that mean their CAGR is infinite?
Seems a dubious conclusion! ~[:-)]


Feel free to give an example - the way I calculate CAGR it could never be infinite.
King Lodos
Posted: 13 April 2018 20:29:22(UTC)
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To put this in context ..

This is Glaxo (one of TP's top holdings)'s Total Return over 23 years – against the FTSE100 and Marlborough Special Situations (a fund that HAS averaged 17%):

https://i.imgur.com/24fUO2U.png

Now, if you want to get 17% annualised, you need the AVERAGE holding in your portfolio to be doing 17% annualised – the average holding to match that green line.

Look at that brown worm, Glaxo, trailing below the FTSE100, averaging 6.8% annually, against a portfolio that's done 17%.

You really think you can top-slice that line to the same return as Marlborough SS? Does it look like taking 5% profits and adding them back could do that?

If not – the rest of the portfolio needs to be doing a WHOLE lot better than the Marlborough fund .. It needs to be beating Warren Buffett in his prime.

I don't come to these conclusions lightly, but if someone thinks they're matching the UK's best fund manager, with top holdings that average 6.8%, there's no mystery there .. There's a mistake
Mr Helpful
Posted: 13 April 2018 21:31:20(UTC)
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Harry Trout;60578 wrote:
Mr Helpful;60566 wrote:
Harry Trout;60561 wrote:
Using CAGR I feel that my calculations are doing what I need them to and I don't find it a problem. No doubt we all have our own equally valid approaches.
What always gets my attention is that Tony Peterson is achieving 19% annualised returns from actively top slicing and bottom buying FTSE100 shares that don't generally achieve this in a straight line when left alone. He is adding quite a bit of "special source" !!!

Also like to reduce on higher valuations and build on lower valuations.
So with book cost negative on some positions; does that mean their CAGR is infinite?
Seems a dubious conclusion! ~[:-)]


Feel free to give an example - the way I calculate CAGR it could never be infinite.

Quite so. That was very much the point.
We are straying into the world of dubious maths here.

With a current holding value of perhaps £25,000 and a book cost of say -£10,000; reflecting the various ins and outs of capital over time, Buzz Lightyear might say we are "beyond infinity".
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King Lodos on 13/04/2018(UTC)
King Lodos
Posted: 13 April 2018 21:53:46(UTC)
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The whole maths of calculating returns is dubious .. CAGR isn't an answer.

A hypothetical return from a fixed sum is useful for assessing fund managers; but completely useless for assessing yourself.

A dollar-weighted return is good for assessing yourself, but useless for comparing yourself to other people (as it's skewed by inflows and outflows).

What the Dalbar study shows is that most investors think they return about 8-9%, but actually return about 2% (below 2%, since the 80s).

Net worth is the only way I've found to get any sort of perspective on how well you're doing .. But it means factoring your job, any businesses you run, and even the funding of your own lifestyle as investments and liabilities, because any other approach where these things interact will skew your results, to make it seem like you're doing a lot better or a lot worse than you are
Harry Trout
Posted: 14 April 2018 06:29:42(UTC)
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If I invested £20,000 in a cash ISA for 5 years paying 2% interest guaranteed I would be making a CAGR of 2% and would have £22,081.62 at the end of 5 years if I roll the interest.

If I instead invest that £20,000 in a stocks and shares ISA I may then buy some shares, sell some shares, I may get some dividends and may reinvest those dividends. I have platform charges as well which are deducted. At the end of 5 years say my £20,000 has become £28,940.34 which now contains a mixture of cash and investments. This is a CAGR of 7.67% per annum over 5 years.

This is a simple mathematical example of a one-year investment but it works equally well for multiple cash injections.

Over time I have used this CAGR method to arrive at a way of assessing how my investment portfolios are doing. I also use it for individual investments (OEIC, IT and shares) to assess how they are doing as well, separate spreadsheets for each but using the same method.

I have not made any withdrawals from the portfolios in the 10 years I have been doing this and do not intend to. Cash for living is elsewhere, i.e. outside of my Hargreaves Lansdown investment portfolios.

I have three portfolios with Hargreaves Lansdown (ISA, SIPP and Fund & Share) and I target each portfolio to make a 10% CAGR after all platform charges and transaction costs using the above mathematics. I use VWRL as a benchmark. I calculate CAGR for each portfolio at every month end, each portfolio having a slightly different emphasis to try different themes.

I understand that the above may not work for everyone, especially if withdrawals are being made and certainly did not offer it up as a panacea for this forum. However, I don’t believe there is anything mathematically dubious about my calculations. I personally find them very worthwhile in assessing portfolio and individual investment performance but each to their own!!!

Thus when Tony states that his portfolios have increased at 17% per annum I presume he is talking about CAGR using something akin to the above method. What I don’t lose sight of is that he is doing something very interesting and noteworthy in an index that produces say 7% - 9% historically. That is the big point and I believe I can learn something from this.

I also keep net worth calculations annually which provide me with something else useful but that is by the by.
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dyfed on 14/04/2018(UTC), Mr Helpful on 14/04/2018(UTC), Mike L on 14/04/2018(UTC)
Aminatidi
Posted: 14 April 2018 07:44:42(UTC)
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So am I understanding this right?

http://www.hl.co.uk/shar...hkline-plc-ordinary-25p

Year high: 1,724.50p
Year low: 1,236.40p

Get the buying and selling timing right and you've made around 40%?

But of course, you've got to time it right.
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Tony Peterson on 14/04/2018(UTC)
Harry Trout
Posted: 14 April 2018 07:47:16(UTC)
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I may have thought of a way around Mr Helpful’s problem of the infinite CAGR. I imagine he is talking of a scenario where funds are withdrawn.

So, suppose I inject £10,000 into a new portfolio. Treat it as buying 10,000 £1 units in a fund called “Harry Trout’s Special Sauce”, ticker HTSS.

After 4 years HTSS has grown to £20,000, the 10,000 units now being worth £2 per unit. A CAGR of 18.92%. It is indeed special.

I need £15,000 so I sell 7,500 units. I now have 2,500 units worth £2 each and a portfolio worth £5,000 and on I go investing this from my luxury cruise holiday.

In terms of book cost I knock 7,500 units off my original cost, using the commonly adopted first in first out method. I now have an original investment in my spreadsheet adjusted for disposals of £2,500 which is now worth £5,000 being 2,500 units of £2 each. CAGR remains at 18.92%.

Does this work?
Tony Peterson
Posted: 14 April 2018 09:07:50(UTC)
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Aminatidi

Getting the timing not right, but almost right, does for me.

When GSK reached 1700 on the 19th June I sliced profitable shares out of my ISA every day of the week (at 1700, 1701, 1699,1712) and placed the proceeds in discounted repurchases in other companies which had become unpopular... Of course they have all been replaced since at 1281 in December, 1282, in February and 1296 in March, with the profitable proceeds and dividends from other companies . Works for me.

Found my 2007 tax papers while looking for a file for the new tax year. Noticed that our household investment income has more than quadrupled in 11 years. Wonderful world. I'm sure Loddy will play similar games when he actually manages to acquire some capital.

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Hank Elvis Dobbs (texan)
Posted: 14 April 2018 11:47:42(UTC)
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...IF...as yet again the window closes
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Tony Peterson on 14/04/2018(UTC)
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